Registration No. 333-70913
________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
AMENDMENT NO. 2 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
________________________________________
LCNB Corp.
(Exact name of issuer as specified in its Charter)
Ohio 31-1626393
(State of Incorporation) (I.R.S. Employer Identification No.)
P.O. Box 59, Lebanon, Ohio 45036, (513) 932-1414
(Address, including zip code, and telephone number, including area
code, of registrant's Principal Executive Offices)
_________________________________________
Stephen P. Wilson
President
LCNB Corp.
P.O. Box 59
Lebanon, Ohio 45036
(513) 932-1414
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
_________________________________________
Copy To:
Susan B. Zaunbrecher, Esq.
Dinsmore & Shohl LLP
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
(513) 977-8200
Approximate date of proposed commencement of sales hereunder:
As soon as practicable after the effective date of this
Registration Statement
If the securities being registered on this Form are being offered
in connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box:
___
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Securities Amount To Be Proposed Maximum Proposed Maximum Amount of
To Be Registered Registered Offering Price Per Share Offering Price Registration
Fee
<S> <C> <C> <C> <C>
Common Stock without
par value 1,760,000 $24.00(1) $42,240,000 $11,743.00*
</TABLE>
*previously paid
<PAGE>
(1) The transaction to be registered on this Registration
Statement on Form S-4 is the issuance of shares of the common
stock without par value of LCNB Corp. to the existing shareholders
of Lebanon Citizens National Bank ("Lebanon Citizens") pursuant to
the merger of Lebanon Citizens into a wholly-owned subsidiary of
LCNB Corp. As a result of the merger, each shareholder of Lebanon
Citizens will receive ten (10) shares of LCNB Corp. Common stock
in exchange for each share of Lebanon Citizens common stock.
Although there are transactions in the common stock of Lebanon
Citizens from time to time, trading has been extremely limited.
As of January 20, 1999, the estimated book value of Lebanon
Citizens common stock was approximately $240 per share. Since ten
(10) shares of LCNB Corp. common stock are to be issued for each
of the presently outstanding shares of Lebanon Citizens common
stock, the per share book value of Lebanon Citizens common stock,
or $24.00 per share of LCNB Corp. common stock, is the amount on
which the above registration fee is based.
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date
until the Registrant shall file a further amendment which
specifically states that this Registration Statement shall
thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933, as amended, or until this Registration
Statement shall become effective on such date as the Securities
and Exchange Commission, acting pursuant to said Section 8(a), may
determine.<PAGE>
LEBANON CITIZENS NATIONAL BANK
P.O. Box 59
Lebanon, Ohio 45036
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
Lebanon Citizens National Bank is providing to its shareholders this
notice that a Special Meeting of Shareholders of Lebanon Citizens
National Bank will be held on _______________, 1999 at 10:00 a.m.,
local time, at the main office of Lebanon Citizens, located at 2
North Broadway, Lebanon, Ohio, for the following purposes:
1. To consider and act upon a proposal for the reorganization of
Lebanon Citizens into a one-bank holding company structure, all as
described in the accompanying Proxy Statement/Prospectus.
2. To transact such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors of Lebanon Citizens has unanimously
approved the foregoing reorganization proposal and recommends
its approval by the shareholders.
The Board of Directors has fixed the close of business on
______________, 1999, as the record date for the purpose of
determining the shareholders entitled to notice of and to vote at
the Special Meeting and any adjournment thereof. Those who have
purchased Lebanon Citizens National Bank stock after that date will
not be entitled to vote at the Special Meeting.
You are cordially invited to attend the Special Meeting in person.
Whether or not you plan to attend, we urge you to complete,
date, sign and return the enclosed Proxy in the envelope provided
as soon as possible.
By order of the Board of Directors
Dated: ________, 1999 Stephen P. Wilson, President<PAGE>
PROXY STATEMENT/PROSPECTUS
LCNB CORP.
1,760,000 SHARES OF COMMON STOCK
OF LCNB CORP.
TO BE ISSUED IN CONNECTION WITH THE REORGANIZATION OF
LEBANON CITIZENS NATIONAL BANK INTO
A HOLDING COMPANY-SUBSIDIARY STRUCTURE
____________________________________________________________
This Proxy Statement/Prospectus constitutes the Proxy Statement of
Lebanon Citizens National Bank with respect to a special meeting
of its shareholders to be held on _________________, the _____ of
________________, 1999.
______________________________________________________
Neither the Securities and Exchange Commission nor any state
securities commission has approved or disapproved these
securities, or determined if this Proxy Statement/Prospectus is
truthful or complete.
_____________________________________________________
The securities offered hereby are not listed on any national
securities exchange or the NASDAQ Stock Market.
The approval of the Office of the Comptroller of the Currency
reflects only its view that the transaction does not contravene
applicable competitive standards imposed by law, and that the
transaction is consistent with regulatory policies relating to
safety and soundness. The approval of the Office of the
Comptroller of the Currency is not an opinion by the Office of the
Comptroller of the Currency that the proposed transaction is
favorable to the stockholders from a financial point of view or
that the Office of the Comptroller of the Currency has considered
the adequacy of the terms of the transaction.
The approval of the Office of the Comptroller of the Currency
is not an endorsement or recommendation of the reorganization.
The date of this Proxy Statement/Prospectus is _____________,
1999
<PAGE>
______________________________________________
We have not authorized anyone to give any information or to make
any representations other than those contained in this Proxy
Statement/Prospectus, and, if you have received information or
representations, they must not be relied upon as having been
authorized by Lebanon Citizens or LCNB Corp.
This Proxy Statement/Prospectus does not constitute an offering
within any jurisdiction to any person to whom it is unlawful to
make such offer within such jurisdiction.
TABLE OF CONTENTS
Page
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION 4
SUMMARY 9
Description of Lebanon Citizens National Bank, its Properties and
Other Information 9
Description of LCNB Corp. and LC Interim National Bank 10
Regulatory Approvals Necessary to Complete the Reorganization 11
Voting and Revocation of Proxies 11
SUMMARY OF SELECTED FINANCIAL DATA 12
COMPARATIVE PER SHARE DATA 12
DESCRIPTION OF THE TRANSACTION - FORMATION OF
A ONE-BANK HOLDING COMPANY 13
Meeting to Approve Reorganization 13
How the Reorganization Will Be Effected 14
Summary of the Agreements Necessary to Effect the Reorganization 15
Expenses of Conversion 15
Rights of Dissenting Shareholders 16
Conditions of the Merger 17
Amendment or Abandonment of the Plan and Agreement of Merger 18
Conversion of Shares and Exchange of Certificates 18
Anticipated Accounting Treatment of the Reorganization 19
Material Federal Income Tax Consequences of the Reorganization 19
State Income Tax Aspects of a Holding Company 20
State Dividend Income Taxes for Ohio Shareholders 20
Capitalization of LCNB Corp., Lebanon Citizens and the Interim
Bank 21
DESCRIPTION OF LEBANON CITIZENS COMMON STOCK
AND LCNB CORP. COMMON STOCK 21
Description of Stock and the Differences between Federal and State
Laws Pertaining to the Stock 21
Dividends 22
Preemptive Rights 23
Cumulative Voting 23
Par Value 23
Stabilizing and Antitakeover Features Contained in LCNB Corp.'s
Governing Documents 24
INFORMATION CONCERNING LCNB CORP. 26
Information About the Bank Holding Company 26
Supervision and Regulation of the Holding Company 27
INFORMATION CONCERNING LEBANON CITIZENS 29
Information About the Bank 29
Selected Financial Data 29
Management's Discussion and Analysis of Financial Condition and
Results of Operations 30
Supervision and Regulation 35
MANAGEMENT OF LEBANON CITIZENS AND LCNB CORP. 35
Directors and Executive Officers 35
Executive Compensation 39
CERTAIN BENEFICIAL OWNERS 39
COMMON STOCK MARKET INFORMATION 40
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 41
LEGAL MATTERS 41
OTHER BUSINESS 41
INDEX TO FINANCIAL STATEMENTS 43
Appendices
Plan and Agreement of Merger Appendix A
Agreement of Merger Appendix A-1
Articles of Incorporation of LCNB Corp. Appendix A-2
Code of Regulations of LCNB Corp. Appendix A-3
12 U.S.C. Section 215a and Banking Circular 259 Appendix B
QUESTIONS AND ANSWERS ABOUT THE TRANSACTION
1. Question: Why is Lebanon Citizens restructuring itself into a
holding company system?
Answer: Because, by reorganizing, Lebanon Citizens, whose activities
currently are governed by the National Bank Act, can take advantage
of a holding company structure. The activities of the holding
company, once the reorganization is complete, will be governed by
Ohio General Corporation Law and The Bank Holding Company Act of
1956. A bank holding company is a corporation that owns 25% or more
of the voting securities of a bank. A holding company corporate
structure will enhance the Lebanon Citizens' ability to compete
under the laws and conditions prevailing in the banking field today.
As a result of the proposed holding company structure, Lebanon
Citizens will have:
- -- greater flexibility in carrying on Lebanon Citizens' business
activity;
- -- greater ability to respond to future needs and opportunities to
expand the financial services currently offered and the market
currently served;
- -- greater opportunity for diversification, either through newly-
formed subsidiaries or acquisition of established companies;
- -- greater flexibility to meet future financing needs through
issuance of additional common stock without regulatory approval;
and
- -- greater authority to redeem its shares, subject to regulatory
limits, without prior regulatory approval.
In addition, because Lebanon Citizens, at the end of 1998, had
over 500 shareholders, it is now required to register under the
Securities Exchange Act of 1934. Lebanon Citizens' filings with the
Securities and Exchange Commission in connection with the holding
company reorganization will register LCNB Corp. with the Securities
and Exchange Commission in accordance with the Securities Exchange
Act of 1934. If Lebanon Citizens does not reorganize into a holding
company, the bank, at this time, would be required to become a
Securities Exchange Act of 1934 reporting company but it would
report to the Comptroller of the Currency rather than the Securities
and Exchange Commission. Following the completion of the proposed
reorganization, LCNB Corp., as a holding company, will be a public
company which will make the required periodic reports to the
Securities and Exchange Commission.
2. Question: What are the differences between shareholders
rights and protections under Ohio state law and federal banking
law which we may see in the reorganization?
Answer: In summary, dividend policy under state law is more
liberal than under federal banking law; cumulative voting rights
under Ohio law are somewhat more restrictive than those under
federal banking law and an Ohio corporation, unlike a national
bank, can issue no par value stock, can repurchase its shares to
hold as treasury shares and can impose supermajority voting
requirements in certain situations. Below is an outline of the
differences between the federal and state laws pertaining to the
stock of a national bank versus that of an Ohio corporation:
FEDERAL BANKING LAW OHIO CORPORATE LAW
Dividends Payable only Payable from surplus,
from net profits. provided that no dividend
is payable if the
corporation is insolvent
or if there is reason to
believe that payment of a
dividend would render it
insolvent.
Preemptive Rights Permitted by law, Permitted by law, but LCNB
but Lebanon Citizens Corp. will not provide
does not provide for preemptive rights under
preemptive rights its articles of
under the articles incorporation.
of association of
Lebanon Citizens.
Cumulative Voting Permitted under To be permitted
the articles of under the articles
association of of incorporation
Lebanon Citizens of LCNB Corp.
and exercisable Ohio law requires
without need for that a shareholder who
corporate action or desires cumulative voting
notice requirements. in the election of
directors give notice
to the President,
Vice President or
Secretary of his or her
desire to cumulatively
vote his or her shares at
least 48 hours before the
meeting of his or her
desire to and that the
chairman of the meeting
announce the giving of
such notice upon the
convening of the meeting.
Par Value Par value stock Par value stock is not
is required and is required. An Ohio
used to set the corporation can issue no
stated capital. par value stock and such
shares do not, by
themselves, increase
stated capital of the
corporation.
Repurchase of
Shares Repurchase of shares Repurchase of shares may
not permitted except be authorized by the Board
under limited of Directors without
circumstances. shareholder action so long
as, immediately
thereafter, the
corporation's assets are
not less than its
liabilities plus stated
capital, so long as the
corporation is not
insolvent and so long as
there is not reasonable
ground to believe that
corporation would be
rendered insolvent. A
bank holding company may
not expend more than 10%
of its net worth in any
12-month period for the
purpose of repurchasing
its stock.
Classified Board
of Directors Lebanon Citizens' The articles of
articles of incorporation of LCNB
association provide Corp. provide for a
for the annual classified Board of
election of the Directors consisting of
entire Board of three classes of directors
Directors. with overlapping three-
year terms of office.
3. Question: Will I notice any change in the business/operations
or management of LCNB?
Answer: No. After the consummation of the transaction, Lebanon
Citizens National Bank will continue to operate as before and
there will be no change in its business or operations.
Additionally, the Board of Directors and management of Lebanon
Citizens National Bank after the transaction will be the same as
prior to the reorganization.
4. Question: Is Lebanon Citizens being sold?
Answer: No. Lebanon Citizens is not being sold. Lebanon Citizens
simply is reorganizing into a holding company structure, with the
end result being that the operating bank will be a wholly-owned
subsidiary of a new holding company, LCNB Corp. All of the
shareholders of Lebanon Citizens, unless they exercise dissenters'
rights, will become shareholders of LCNB Corp., which, in turn,
will own Lebanon Citizens.
5. Question: Will my stock ownership change?
Answer: No. After the reorganization, you will own the
same percentage of LCNB Corp. as you owned of Lebanon Citizens
prior to the transaction. As part of the transaction, there will
be a 10 for 1 stock split and an exchange of shares of Lebanon
Citizens for shares of LCNB Corp. For example, if you currently
hold 100 shares of Lebanon Citizens, you will hold 1,000 shares of
LCNB Corp. following the reorganization. As the end result,
however, your percentage share ownership will not change. For
example, if you own 2% of the outstanding shares of Lebanon
Citizens prior to the holding company conversion, you will, after
the reorganization, own 2% of the outstanding shares of LCNB Corp.
6. Question: What, if anything, will I, as a shareholder, be
required to do?
Answer: You will not be required to do anything in connection with
the reorganization, but Board of Directors urges you to complete
the proxy for the special meeting of shareholders provided with
this Proxy Statement/Prospectus, sign it and return it to Lebanon
Citizens in the envelope provided. The Board of Directors of
Lebanon Citizens has recommended that the shareholders vote upon
the reorganization and the Board is providing this Proxy
Statement/Prospectus to the shareholders to obtain their vote.
The Board of Directors recommends a vote FOR the proposed
reorganization.
There are, however, some actions you can take that will make the
implementation of the reorganization go more smoothly. First,
Lebanon Citizens asks that you return your proxy card,
appropriately completed, so that Lebanon Citizens can have as many
responses as possible in advance of the date of the Special
Shareholder Meeting. This small effort on your part will make the
determination of the voting results much easier.
Second, if the shareholders approve the transaction, and Lebanon
Citizens, LCNB Corp. and the Interim Bank consummate the
transaction, each share of Lebanon Citizen's stock will
automatically be converted, by operation of law, into ten shares of
LCNB Corp. However, LCNB Corp. will ask you to return your
certificates for Lebanon Citizens common stock to LCNB Corp. in
order to receive certificates representing LCNB Corp. common stock
in exchange for your Lebanon Citizens shares. If you directly hold
your Lebanon Citizens' shares, it may take some time for LCNB corp.
to issue your shares of LCNB Corp. This time period should be no
longer than 60 to 90 days, during which time you may not be able to
trade your LCNB Corp. shares. If you hold your shares through a
broker in "street name", you will not be required to return these
shares and will have instant credit to trade them upon the
consummation of the reorganization. Please do not return your stock
certificates until you are instructed by Lebanon Citizens to do so.
7. Question: How long will this whole process take?
Answer: Lebanon Citizens probably will complete the holding company
conversion by the end of May, 1999. Lebanon Citizens already
has filed applications to approve the transaction with the
Comptroller of the Currency and with the Federal Reserve Bank of
Cleveland. Lebanon Citizens anticipates that these applications
will be approved by mid-March, 1999. If the transaction is approved
by the shareholders of Lebanon Citizens on _____________, 1999, the
transaction can be consummated, and the shareholders of Lebanon
Citizens may begin to exchange their Lebanon Citizens stock.
8. Question: Will I have to pay extra taxes as a result of the
transaction?
Answer: No. You will incur no additional taxes as a result of
this transaction. You will recognize no gain or loss upon the
exchange of your shares for shares of LCNB Corp., and the tax
basis of the shares of LCNB Corp. common stock received by you
will be the same as the tax basis of Lebanon Citizens common stock
that you surrendered.
9. Question: If I disagree with the transaction, what are my
rights?
Answer: If you disagree with the transaction, you can become a
dissenting shareholder and have the right to be paid in cash the
value of your shares (as of the time the merger becomes
effective), if and when the merger is consummated, if you comply
with the following conditions:
(1) you must vote against approval of the merger at the Special
Meeting of LCNB shareholders or give written notice to Lebanon
Citizens at or prior to the Special Meeting that you dissent from
the proposed merger, which notice shall be addressed to Stephen P.
Wilson, President, Lebanon Citizens National Bank, P.O. Box 59,
Lebanon, Ohio 45036;
(2) you must at any time before 30 days after consummation of the
merger:
(a) make a written request for payment of the cash value of such
shares to Lebanon Citizens; and
(b) surrender your certificates representing such shares.
The value of your shares will be ascertained, as of the effective
date of the transaction, by an appraisal, which is further
explained in the Proxy Statement/Prospectus. See the section
entitled "Rights of Dissenting Shareholders" in the Proxy
Statement/Prospectus.
[THE BALANCE OF THIS PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
SUMMARY
Board of Directors Recommendation and Shareholder Vote Required
The Lebanon Citizens Board of Directors has determined that, due
to the greater business flexibility of a one-bank holding company
system, it is desirable for Lebanon Citizens to reorganize to
become a wholly-owned subsidiary of a bank holding company.
Accordingly, the Board directed the formation of LCNB Corp. and
the organization of Interim Bank as a wholly-owned subsidiary of
LCNB Corp. The Board also approved the terms of the Plan and
Agreement of Merger and the Agreement of Merger, which are
necessary documents to effect the reorganization, and directed
that the reorganization be presented to the Lebanon Citizens
shareholders for their consideration and approval. At the special
shareholders meeting, it will take the affirmative vote of two-
thirds (2/3) of the outstanding shares of the bank to adopt the
reorganization.
Description of Lebanon Citizens National Bank, its Properties and
Other Information
Lebanon Citizens is a national banking association which was
organized in 1877 and has been in continuous operation since that
date. It is engaged in the general commercial banking business
through its main office and 16 branch offices located in Warren,
Butler, Clinton, Clermont and Hamilton Counties, Ohio. The street
address of Lebanon Citizens' principal office is 2 North Broadway,
Lebanon, Ohio 45036; (513) 932-1414. The mailing address of
Lebanon Citizens' principal office is P.O. Box 59, Lebanon, Ohio
45036.
Lebanon Citizens, as a national bank, is regulated by the Office
of the Comptroller of the Currency under the National Banking Laws
which are found in Title 12 of the United States Code. Lebanon
Citizens engages in all banking activities permitted under the law
for national bank, including trust services. Among the services
provided are checking, savings, certificate of deposit and
individual retirement accounts. In addition, Lebanon Citizens
provides a full range loan and credit services to its customers,
including personal loans and commercial loans. The bank also
provides services such as automated teller machines, credit and
debit cards, telephonic banking, wire transfer, direct deposit and
electronic debit posting.
Description of LCNB Corp. and LC Interim National Bank
LCNB Corp. is a proposed bank holding company which was organized
on December 22, 1998 to facilitate the corporate reorganization of
Lebanon Citizens by establishing it as a subsidiary of a bank
holding company. When this transaction is complete, LCNB Corp.
will be the sole shareholder of the Interim Bank. The Interim
Bank will be formed when the Comptroller of the Currency directs
Lebanon Citizens to do so. It will be a non-operational "shell"
bank set up for the sole purpose of legally effecting the
reorganization. Neither LCNB Corp. nor the Interim Bank has
conducted any business, and, until the merger becomes effective,
neither will conduct any business. The business of the holding
company will be conducted from the principal office of Lebanon
Citizens at 2 North Broadway, Lebanon, Ohio 45036 (513) 932-1414.
If the conversion is approved by Lebanon Citizens' shareholders at
the special meeting of shareholders, and assuming the timely
receipt of the appropriate regulatory approvals, it is expected
that the conversion will be legally consummated by the end of May,
1999. The affirmative vote of the holders of at least two-thirds
of Lebanon Citizens common stock, or 117,334 shares, is necessary
to approve the conversion and adopt the Plan and Agreement of
Merger and the Agreement of Merger described below.
Regulatory Approvals Necessary to Complete the Reorganization
LCNB Corp. must be approved for formation as a bank holding
company by the Board of Governors of the Federal Reserve System,
which regulates bank holding companies. In addition, the merger
must be approved by the Comptroller of the Currency, the agency of
the federal government which regulates national banks. Lebanon
Citizens and LCNB Corp. will apply to both agencies for approval
to consummate the holding company conversion. As a result of this
regulation, the Special Meeting may have to be recessed from time
to time until the reorganization has been approved by the
Comptroller of the Currency, so that Lebanon Citizens'
shareholders can act on technical changes, if any, to the Plan and
Agreement of Merger or Agreement of Merger recommended by the
Comptroller of the Currency. However, it is not anticipated at
this time that the Special Meeting will require a recess.
Voting and Revocation of Proxies
The Board of Directors will vote all of the proxies received as
directed by the shareholders. If signed and unvoted ballots are
received, Lebanon Citizens will vote them in favor of the
resolution proposing the reorganization. Each person granting a
proxy may revoke it at any time before it is voted by giving
notice to Lebanon Citizens in writing or in open meeting or by
submitting a subsequently dated proxy.
DESCRIPTION OF THE TRANSACTION - FORMATION OF
A ONE-BANK HOLDING COMPANY
Meeting to Approve Reorganization
At the Special Meeting to be held on ______________, 1999, the
following proposed resolution regarding the reorganization of
Lebanon Citizens into a holding company structure will be
submitted for adoption by Lebanon Citizens' shareholders of the
reorganization of Lebanon Citizens into a holding company
structure. The affirmative vote of the holders of at least
two-thirds of Lebanon Citizens' common stock issued and
outstanding on _____________, 1999, the record date for the
Special Meeting, is required to approve and adopt the
reorganization and the agreements which will effect the
reorganization of Lebanon Citizens into a holding company
structure. The reorganization will be technically effected
through the statutory merger of Lebanon Citizens with and into the
Interim Bank. The Interim Bank will thereafter be a wholly-owned
subsidiary of LCNB Corp., the holding company.
Each of the 176,000 shares of Lebanon Citizens common stock
outstanding on ___________, 1999, the record date for the meeting,
is entitled to one vote on all matters coming before the meeting.
Only shareholders of record on the books of Lebanon Citizens at
the close of business on ______________, 1999 will be entitled to
vote at the meeting, either in person or by proxy. If you did not
own shares of Lebanon Citizens common stock on _______________,
1999, you will not be eligible to vote on this matter.
The shares represented by all properly executed proxies that are
sent to Lebanon Citizens will be voted as designated. Each proxy
that does not contain a designated vote will be voted "For" the
proposed merger. Proxies will be solicited principally by mail,
but may also be solicited by directors, officers and other regular
employees of Lebanon Citizens who will receive no compensation in
addition to their regular salaries for soliciting. Brokers and
others who hold stock in trust will be asked to send proxy
materials to the beneficial owners of the stock and Lebanon
Citizens may reimburse them for their expenses. The cost of
preparing, assembling and mailing this Proxy Statement/Prospectus,
the notice of meeting, and proxy, and any other costs of
soliciting proxies, will be paid by Lebanon Citizens.
Below are graphic illustrations of the corporate structure of
Lebanon Citizens before and after the completion of the holding
company reorganization.
Corporate Structure Corporate Structure
Before Holding Company After Holding Company
Conversion Conversion
Shareholder Shareholder
| |
| |
Lebanon Citizens LCNB Corp.
National Bank (Holding Company)
|
|
Lebanon Citizens
National Bank
The members of the Board of Directors of Lebanon Citizens will be
the Directors of the Interim Bank and will hold their qualifying
shares in shares of LCNB Corp.
The Board of Directors has declared the advisability of the
adoption of the following resolution and recommends a vote FOR the
resolution. Proxies received from Lebanon Citizens shareholders
will be voted in favor of this resolution unless otherwise
instructed by the shareholders.
The resolution states:
"RESOLVED, That Lebanon Citizens National Bank reorganize into a
holding company structure as described in the Proxy
Statement/Prospectus and the Appendices attached to the Proxy
Statement/Prospectus that the Lebanon Citizens National Bank sent
to the shareholders."
How the Reorganization Will Be Effected
The reorganization will be effected through the merger of Lebanon
Citizens with and into LC Interim National Bank, an interim
national bank in organization (the "Interim Bank"). The Interim
Bank will be the resulting bank in the merger and will be a
wholly-owned subsidiary of LCNB Corp. Concurrent with the merger,
the Interim Bank will change its name to "Lebanon Citizens
National Bank." As a result of the reorganization, the bank will
operate as a wholly-owned subsidiary of LCNB Corp.
Each share of common stock of Lebanon Citizens will be converted
through the reorganization into ten (10) shares of common stock of
LCNB Corp. and all shareholders of Lebanon Citizens will become
shareholders of LCNB Corp., retaining the same percentage
ownership of LCNB Corp. as he or she held in Lebanon Citizens.
The members of the Board of Directors will be the Directors of the
Interim Bank and will hold their qualifying shares in shares of
LCNB Corp. Following the merger, Lebanon Citizens' business will
continue unchanged under the name Lebanon Citizens National Bank
with the same management and employees.
Summary of the Agreements Necessary to Effect the Reorganization
The proposed reorganization into a holding company structure will
be effected through a merger of Lebanon Citizens in the Interim
Bank and there are certain operative agreements necessary to
effect the merger and, therefore, the reorganization. Copies of
these agreements, the Plan and Agreement of Merger, including the
Agreement of Merger, are attached as Appendices A and A-1 to this
Proxy Statement/Prospectus and are incorporated into it. The
following paragraphs provide a summary of the material aspects of
these agreements. However, for more complete information,
reference is made to the agreements attached to this Proxy
Statement/Prospectus attached as Appendices A and A-1 as well as
to Appendices A-2 and A-3 containing the articles of incorporation
and regulations of LCNB Corp. The proposed articles of
association of the Interim Bank, resulting bank in the merger, are
contained in the Agreement of Merger (Appendix A-1).
Lebanon Citizens and LCNB Corp. have entered into, and the Interim
Bank upon its formation will join in and become a party to, the
Plan and Agreement of Merger which sets forth the terms and
conditions of Lebanon Citizens' conversion to a holding company
structure. Under this agreement, Lebanon Citizens will be merged
with and into the Interim Bank, which will simultaneously change
its name to "Lebanon Citizens National Bank." Upon consummation
of the merger, each outstanding share of Lebanon Citizens common
stock, $60 par value, will be converted into ten (10) shares of
LCNB Corp. common stock without par value. Consequently, the
shareholders of Lebanon Citizens and their percentage of share
ownership, immediately prior to the consummation of the
reorganization will be identical to those of LCNB Corp.
immediately after consummation of the reorganization. A maximum
of 1,760,000 shares of LCNB Corp. common stock will be issued
pursuant to the merger. See "DESCRIPTION OF LEBANON CITIZENS
COMMON STOCK AND LCNB CORP. COMMON STOCK" for a discussion of the
rights of shareholders of Lebanon Citizens as compared to
shareholders of LCNB Corp.
As of the effective date of the reorganization, Lebanon Citizens
will cease to exist as a legal entity. The corporate identities
and business of both Lebanon Citizens and the Interim Bank will be
combined, and the business of Lebanon Citizens will continue to be
conducted under the name "Lebanon Citizens National Bank" after
the reorganization without any change.
The business of the resulting bank after the reorganization will
be identical to that of Lebanon Citizens prior to the
reorganization and will be conducted with the same offices,
properties and personnel as that of Lebanon Citizens. The
resulting bank initially will have the same directors and officers
as Lebanon Citizens. The resulting bank will continue to be
subject to regulation by the Office of the Comptroller of the
Currency, and deposits in the resulting bank will continue to be
insured by the Federal Deposit Insurance Corporation. In short,
the resulting bank will succeed to all of the rights and assets of
Lebanon Citizens and will be subject to all of Lebanon Citizens'
obligations and liabilities.
Expenses of Conversion
The expenses of the reorganization are estimated to be as follows:
Legal Expenses $40,000
Accounting and Financial Advisory Expenses $10,000
Application and Related Fees for the Securities and
Exchange Commission and Approval by
Regulatory Authorities $19,250
Postage, Photocopying, Long Distance Telephone Costs,
Supplies $7,500
Miscellaneous Expenses, including Blue Sky fees
and interest expenses $10,000
------
Total Estimated Expenses $86,750
======
No commissions of any kind and no remuneration to directors, other
than customary fees for attending meetings, will be paid as a
result of the conversion.
LCNB Corp. will borrow approximately up to $120,000 from an
unaffiliated bank to finance its subscription for all the shares
of the Interim Bank's common stock. The loan will be evidenced by
the promissory note of LCNB Corp. Upon the consummation of the
merger, the total equity capital of the resulting bank in the
merger will be essentially equal to that of Lebanon Citizens plus
that of the Interim Bank. The total equity capital of Lebanon
Citizens at December 31, 1998 was $42,199,000. The contemplated
total equity capital of the resulting bank in the merger on a pro
forma basis based upon the Statement of Condition of Lebanon
Citizens at December 31, 1998 and immediately after the merger
will be approximately $42,319,000. The increase of $120,000
represents the full subscription paid in for the shares of the
Interim Bank by LCNB Corp. The resulting bank in the merger will
thereupon declare and pay a dividend of approximately $120,000 to
LCNB Corp., which will be used to repay in full the loan plus
accrued interest thereon. Interest on the loan, which will be an
additional expense of the conversion, is estimated to be less than
$1,500. Thus, the total equity capital of the resulting bank
after the reorganization will essentially be the same as the total
equity capital of Lebanon Citizens immediately prior to the
reorganization.
Rights of Dissenting Shareholders
Pursuant to the provisions of Section 215a of Title 12 of the
United States Code, a copy of which is attached hereto as Appendix
B, you, as a shareholder of Lebanon Citizens, have the right to be
paid in cash the value of your shares (as of the time the merger
becomes effective), if and when the merger is consummated, only
upon compliance with the following conditions:
(1) You must vote against approval of the merger at the Special
Meeting of Lebanon Citizens shareholders or give written notice to
Lebanon Citizens at or prior to the Special Meeting that you
dissent from the proposed merger, which notice shall be addressed
to Stephen P. Wilson, President, Lebanon Citizens National Bank,
P.O. Box 59, Lebanon, Ohio 45036;
(2) You must at any time before 30 days after consummation of the
merger make a written request for payment of the cash value of
such shares to Lebanon Citizens; and
(3) The written request described in (2) immediately preceding
shall be accompanied by your surrender of the certificate(s)
representing such shares. Failure to comply with any of the
foregoing conditions may result in your loss of the rights
described in this Proxy Statement/Prospectus. If you vote against
approval of the merger, you will be notified of the effective date
of the merger so that you may exercise your dissenters' rights.
The value of the shares of any dissenting shareholder will be
ascertained, as of the effective date of the merger, by an
appraisal made by a committee of three persons, composed of one
selected by the vote of the holders of a majority of the stock,
the owners of which are entitled to payment in cash; one selected
by the directors of the receiving association, i.e., the Interim
Bank; and one selected by the two so selected. The valuation
agreed upon by any two of the three appraisers shall govern. If
the value so fixed shall not be satisfactory to any dissenting
shareholder who has requested payment, that shareholder may,
within five days after being notified of the appraised value of
his or her shares, appeal to the Comptroller of the Currency
("Comptroller"), who shall cause a reappraisal to be made which
shall be final and binding as to the value of the shares of such
shareholder.
If, within ninety days from the date of consummation of the
merger, for any reason one or more of the appraisers is not
selected as herein provided, or the appraisers fail to determine
the value of such shares, the Comptroller, upon written request of
any interested party, is required to cause an appraisal to be made
which shall be final and binding on all parties. The expenses of
the Comptroller in making the reappraisal or the appraisal, as the
case may be, must be paid by the resulting bank. The value of the
shares ascertained must be promptly paid to the dissenting
shareholders.
The foregoing constitutes a description of the material rights of
dissenting shareholders and does not purport to be a complete
statement of such rights or the procedures to be followed by
shareholders desiring to receive the value of their shares. Each
shareholder who may desire to receive the value of his or her
shares should consult Section 215a of Title 12 of the United
States Code and strictly adhere to all of the provisions thereof.
A copy of Section 215a of Title 12 of the United States Code is
appended hereto as Appendix B, and the discussion herein
concerning the rights of dissenting shareholders is qualified in
its entirety by reference to Section 215a of Title 12 of the
United States Code.
A copy of Banking Circular 259 is also included as part of
Appendix B. Banking Circular 259 summarizes the various methods
used by the Office of the Comptroller of the Currency in arriving
at a fair estimate of the value of the shares of a national bank.
Shareholders are advised to review Appendix B in its entirety
before the exercise of dissenter's rights.
Conditions of the Merger
Under the Plan and Agreement of Merger, the consummation of the
merger is conditioned, among other things, upon the following:
(a) The Plan and Agreement of Merger, including the Agreement of
Merger, shall have been duly adopted and approved by the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Lebanon Citizens common stock entitled to
vote on the proposal.
(b) The shares of LCNB Corp. common stock into which the shares of
Lebanon Citizens common stock will be converted upon the
consummation of the merger shall be validly issued and
outstanding, fully paid and non-assessable.
(c) The Plan and Agreement of Merger and the Agreement of Merger
as well as the respective terms thereof shall be duly approved by
all the bank regulatory agencies to which the same are submitted
for approval as provided by law.
(d) It is intended that the merger be a pooling of interests for
accounting purposes. Holders in the aggregate of more than five
percent (5%) of the outstanding shares of Lebanon Citizens common
stock shall not have voted against the merger at the Special
Meeting of shareholders or given written notice of dissent to the
merger prior to or at the Special Meeting. This condition may be
waived by LCNB Corp.
(e) The conversion will be a tax-free reorganization and no gain
or loss will be recognized by the shareholders of Lebanon Citizens
upon the exchange of shares of Lebanon Citizens for the shares of
LCNB Corp. pursuant to the merger.
Consummation of the merger is also subject to the accuracy in all
material respects of various representations and warranties of
Lebanon Citizens, LCNB Corp. and the Interim Bank with respect to
their financial conditions and other matters, and the performance
by the parties of various other requirements.
Amendment or Abandonment of the Plan and Agreement of Merger
The Plan and Agreement of Merger may be amended only by written
agreement of all the parties to it. The Plan and Agreement of
Merger provides that Lebanon Citizens and LCNB Corp. may amend the
Plan and Agreement of Merger, by action of their respective Boards
of Directors, either before or after the shareholders of Lebanon
Citizens have adopted the Plan and Agreement of Merger, in order
to facilitate the performance thereof or to comply with any
applicable law or order of any court, public agency or authority.
However, no such amendment may change, to the detriment of Lebanon
Citizens' shareholders, the ratio set forth in the Plan and
Agreement of Merger for converting Lebanon Citizens common stock
into LCNB Corp. common stock.
The Plan and Agreement of Merger will terminate and become void
and of no effect, notwithstanding prior approval by the
shareholders of Lebanon Citizens, if the respective Boards of
Directors of Lebanon Citizens, LCNB Corp. and the Interim Bank
adopt resolutions prior to the consummation of the reorganization
to the effect that it is not advisable under then existing
circumstances to effectuate the reorganization. Please note that
the members comprising the Boards of Directors of Lebanon
Citizens, LCNB Corp. and the Interim Bank are the same.
Conversion of Shares and Exchange of Certificates
At the closing of the reorganization, each outstanding share of
Lebanon Citizens common stock will automatically be converted, by
operation of law, into ten (10) shares of LCNB Corp. common stock.
After the merger is effected, you will be requested to return your
certificates for Lebanon Citizens common stock to LCNB Corp. in
order to receive certificates representing LCNB Corp. common stock
in exchange for your shares. In the event you are unable to
produce a certificate(s) representing your shares of Lebanon
Citizens common stock, you may instead deliver:
(i) evidence reasonably satisfactory to LCNB Corp. that such
certificate(s) has been lost, mislaid, wrongfully taken or
destroyed,
(ii) such security or indemnity as reasonably may be requested by
LCNB Corp. to hold it harmless, and
(iii) evidence reasonably satisfactory to LCNB Corp. that you are
the owner of the shares represented by the certificate or
certificates claimed to be lost, mislaid, wrongfully taken or
destroyed and that you are the person who had been entitled to
present each such certificate and to receive LCNB Corp. common
stock in exchange therefor pursuant to the Agreement of Merger.
If any certificate representing LCNB Corp. common stock is to be
issued in a name other than that in which the certificate(s) for
shares of Lebanon Citizens common stock surrendered for exchange
is registered, the certificate(s) so surrendered must be properly
endorsed or otherwise be in proper form for transfer, and the
person requesting such transfer must pay to LCNB Corp. or its
transfer agent any applicable transfer or other taxes required by
reason of the issuance of the certificate.
Even if you do not surrender your certificate(s) representing your
common stock of Lebanon Citizens as requested (or fail to satisfy
the requirements for lost, mislaid, wrongfully taken or destroyed
certificates), your common stock in Lebanon Citizens and your
certificates will be deemed for all purposes to be shares of LCNB
Corp. and will represent the number of shares of common stock of
LCNB Corp. into which your Lebanon Citizens common stock will have
been converted. Any dividends or other distributions payable to
you with respect to your LCNB Corp. common stock will be held by
LCNB Corp. until you have surrendered your Lebanon Citizens stock
certificates (or satisfied the conditions for lost, mislaid,
wrongfully taken or destroyed certificates), at which time they
will be paid to you in full without interest.
Please do not return your Lebanon Citizens common stock
certificates to Lebanon Citizens or LCNB Corp. until you are
specifically instructed to do so by LCNB Corp. After the merger
has been consummated, you will receive a letter containing all of
the instructions for the exchange of your certificates.
Anticipated Accounting Treatment of the Reorganization
It is anticipated that the merger will be accounted for as a
pooling of interests. Under pooling of interests accounting, as
of the effective date of the merger, the assets and liabilities
will be added to those of Lebanon Citizens at their recorded book
value and the stockholders' equity account of the Interim Bank
will be included on LCNB Corp.'s consolidated balance sheet.
Material Federal Income Tax Consequences of the Reorganization
This discussion regarding the federal tax consequences of the
reorganization transaction, including the merger of Lebanon
Citizens into the Interim Bank and the conversion of Lebanon
Citizens' common stock into LCNB Corp.'s common stock, is based upon
a tax opinion received from Dinsmore & Shohl LLP. The opinion
provides that the reorganization for federal tax purposes will
result in the following tax effects:
1. The proposed statutory merger will qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Internal Revenue Code of 1986.
Lebanon Citizens, the Interim Bank and LCNB Corp. will each be a
party to the reorganization within the meaning of Section 368(b)
of the Code.
2. No gain or loss will be recognized by Lebanon Citizens upon the
transfer of substantially all of its assets to the Interim Bank in
exchange for LCNB Corp.'s common stock, and the assumption of all
of Lebanon Citizens' liabilities by the Interim Bank.
3. No gain or loss will be recognized by either LCNB Corp. or the
Interim Bank upon the acquisition by the Interim Bank of
substantially all of the assets of Lebanon Citizens in exchange
for LCNB Corp.'s common stock.
4. The basis of the assets of Lebanon Citizens acquired by the
Interim Bank will be the same in the hands of the Interim Bank as
the basis of such assets in the hands of Lebanon Citizens
immediately prior to the merger. The holding periods of the
assets of Lebanon Citizens received by the Interim Bank will
include the periods for which such assets were held by Lebanon
Citizens.
5. No gain or loss will be recognized by the shareholders of
Lebanon Citizens upon the exchange of Lebanon Citizens common
stock into LCNB Corp. common stock.
6. The federal income tax basis of the shares of LCNB Corp. common
stock received by the shareholders of Lebanon Citizens will be the
same as the basis of Lebanon Citizens common stock surrendered
therefor.
7. The holding period of LCNB Corp. common stock received by the
shareholders of Lebanon Citizens will include the period during
which Lebanon Citizens common stock surrendered therefor was held,
provided that Lebanon Citizens common stock was a capital asset in
the hands of the shareholders of Lebanon Citizens on the date of
the consummation of the transaction.
8. The Interim Bank shall take into account as of the date of
the proposed merger the gain or loss carryover provisions for
certain corporate acquisitions found in the Code, subject to the
limitations set forth in the Code and the regulations promulgated
under the Code, for
- - net operating loss carryforwards and certain built-in losses
following ownership change
- - certain excess credits
- - the use of preacquisition losses to offset built-in gains.
The Plan and Agreement of Merger provides that Lebanon Citizens,
LCNB Corp. or the Interim Bank may terminate this Agreement prior to
the consummation of the merger in the event that the tax-free nature
of the conversion will not occur or there is some threat that it
will not occur.
State Income Tax Aspects of a Holding Company
Dinsmore & Shohl LLP has advised LCNB Corp. and Lebanon Citizens
that for purposes of calculating the net worth tax for the bank
holding company, only one-half of the bank holding company's net
worth is subject to Ohio franchise tax. The Ohio Supreme Court has
held that "quiescent holding companies", i.e. holding companies
which do not conduct any business of their own and are merely
conduits between the subsidiary and the shareholders, are not
considered to be engaged in business in the State of Ohio. As a
result, their net worth ratio for purposes of calculating the Ohio
franchise tax is reduced to 50% , even though the bank holding
company's entire activity is located within Ohio. If the bank
holding company is engaged in any business activities on its own
other than acting merely as a conduit between the shareholders and
the subsidiary, then the Ohio ratio would likely be increased to
100%. As a result, the holding company's Ohio franchise tax would
be doubled.
State Dividend Income Taxes for Ohio Shareholders
Dinsmore & Shohl LLP has also advised LCNB Corp. and Lebanon
Citizens that dividends on shares of Lebanon Citizens common stock
held by Ohio residents are currently subject to the Ohio income tax,
and that dividends on shares of LCNB Corp. common stock will also be
subject to the same tax.
Capitalization of LCNB Corp., Lebanon Citizens and the Interim
Bank
The following table sets forth the expected capitalization of the
Interim Bank upon its formation and prior to the merger, the
capitalization of Lebanon Citizens as at December 31, 1998, based
upon its Statement of Condition for such date, the anticipated
adjustments attributable to the merger, and the pro forma
capitalization of both the resulting bank in the merger and LCNB
Corp. as if the Interim Bank had been in existence and the merger
had been consummated on December 31, 1998:
<PAGE>
<TABLE>
<CAPTION>
(In Thousands)
Interim Bank Lebanon Adjustments Pro Forma Pro Forma
Citizens Resulting Bank Holding
Company
<S> <C> <C> <C> <C> <C>
EQUITY CAPITAL:
Common Stock $ 100 $10,560 $ (100) $10,560 $10,560
Surplus $ 20 $11,000 $ (20) $11,000 $11,000
Undivided Profits $ 0 $20,639 $ 0 $20,574(1) $20,639
------- ------ ------ ------ ------
Total Equity Capital $ 120 $42,199 $ (120) $42,134 $42,199
======== ====== ====== ====== ======
DEBT:
Long Term 0 0 0 0 0
Short Term 0 0 0 0 120
Total Debt(2) 0 0 0 0 120(2)
------- ------ ------ ----- -------
<FN>
1 Immediately after the merger is consummated, approximately
$120,000 will be paid by the resulting bank to LCNB Corp. from
the Undivided Profits of the resulting bank so that LCNB Corp.
will have funds available to repay the funds borrowed by it,
as described in Note 2 below. Consequently, immediately after
the declaration and payment of such dividend, the total Equity
Capital of the resulting bank will be essentially the same as
that of Lebanon Citizens immediately prior to the reorganization.
2 These funds will be borrowed in order to capitalize the Interim
Bank on an interim basis and will be repaid as soon as possible,
following the consummation of the reorganization and the receipt
of the dividend referred to in Note 1 above. The borrowing for
the same period of time, but occurring at the beginning of the
fiscal period, would have had an immaterial effect on net income.
</FN>
</TABLE>
<PAGE>
DESCRIPTION OF LEBANON CITIZENS COMMON STOCK
AND LCNB CORP. COMMON STOCK
Description of Stock and the Differences between Federal and State
Laws Pertaining to the Stock
Lebanon Citizens' authorized capital stock consists of 176,000
shares of common stock, $60 par value per share of which all
shares are presently outstanding. LCNB Corp.'s authorized capital
stock consists of 850 shares of common stock without par value of
which 100 shares are presently outstanding. Immediately prior to
the consummation of the reorganization, the articles of
incorporation of LCNB Corp. will be amended to increase the number
of shares authorized to 4,000,000. The 100 outstanding shares of
LCNB Corp. common stock will be repurchased for their original
sales price by LCNB Corp., and up to 1,760,000 shares will be
issued in exchange for the outstanding shares of Lebanon Citizens
common stock. The capitalization of Lebanon Citizens immediately
before the reorganization and of LCNB Corp. immediately after the
reorganization will therefore be substantially identical.
Because Lebanon Citizens is a national bank organized under
federal law while LCNB Corp. is a general business corporation
formed under the corporate law of the State of Ohio, there will be
certain minor differences in your respective rights as a
shareholder, which are described below. In addition, management
has elected to take advantage of the greater flexibility of Ohio
corporate law in comparison to that of the corporate law contained
in the national bank law to provide additional features of
corporate governance in the organizational documents of LCNB
Corp., which are also discussed below.
The Board of Directors of Lebanon Citizens considered the
differences in shareholder rights and protections under federal
law and under Ohio corporate law in arriving at their
determination that the reorganization is in the best interests of
Lebanon Citizens and its shareholders. The Board of Directors,
at meetings held on May 18, 1998, August 3, 1998, and August 31,
1998, discussed the advantages and disadvantages of the
reorganization and the various shareholder rights and protections
under both federal banking law and under Ohio corporate law. The
material advantages of the reorganization have been disclosed in
this Proxy Statement/Prospectus. The Board determined that the
importance of maintaining the independence of Lebanon Citizens as
well as the other advantages provided by the reorganization, which
include
- - the ability to raise capital using the banks common stock;
- - the ability to expand the services being offered;
- - the opportunity for diversification; and
- - the ability to redeem its shares
provided greater protection to the shareholders and their economic
investment in the bank. At a meeting held on September 28, 1998,
the Board of Directors unanimously approved the reorganization and
unanimously resolved to recommend that the shareholders of Lebanon
Citizens vote to approve the resolution approving the Plan and
Agreement of Merger, dated as of February 22, 1999 and the
Agreement of Merger appended thereto. In connection with this
decision, the Board of Directors received advice from the
management of Lebanon Citizens, from its legal advisor and its
accounting advisor.
Dividends
Under Ohio law, dividends may be declared by LCNB Corp. and paid
from the surplus of the corporation, provided that no dividend may
be paid at any time the corporation is insolvent or there is
reasonable ground to believe that by such payment it would be
rendered insolvent. Dividends which may be declared by Lebanon
Citizens are governed by federal law which limits the amounts
available for payment of dividends to net profits and, under
certain circumstances, requires that a certain percentage of net
profits must be transferred to surplus which is unavailable for
the purpose of paying cash dividends. The ability of the
resulting bank to pay dividends to LCNB Corp. following the
reorganization will be governed by the same considerations which
currently control the declaration of dividends by Lebanon
Citizens.
Subject to the foregoing discussion and to the discretion of the
Board of Directors, it is expected that cash dividends of LCNB
Corp. after consummation of the reorganization will be paid on
approximately the same basis as Lebanon Citizens presently pays
cash dividends. Funds for the payment of dividends by LCNB Corp.
will initially be obtained solely from dividends paid to LCNB
Corp. by the resulting bank.
Following consummation of the reorganization, no shareholder whose
shares of Lebanon Citizens common stock have been converted into
shares of LCNB Corp. common stock by reason of the reorganization
will be entitled to receive any dividends or other distributions
with respect to such LCNB Corp. shares until his or her Lebanon
Citizens stock certificates are exchanged for LCNB Corp. stock
certificates. However, when the exchange of certificates is made,
any dividends or other distributions withheld will be paid without
interest. Within a reasonable period of time after consummation
of the reorganization, materials will be furnished to assist
shareholders in effecting the exchange.
Preemptive Rights
The Holders of Lebanon Citizens common stock presently do not have
the right under Lebanon Citizens' articles of association, in the
event additional shares of Lebanon Citizens common stock are to be
sold, to subscribe for such additional shares in proportion to the
number of shares of Lebanon Citizens common stock then owned by
them, nor will the holders of LCNB Corp. common stock have
preemptive rights.
Cumulative Voting
Holders of LCNB Corp. common stock will have substantially the
same right to cumulatively vote their shares in the election of
directors as they possessed as holders of Lebanon Citizens common
stock. Under Ohio law, there shall be cumulative voting in the
election of directors if any shareholder gives written notice to
the President, Vice President, or the Secretary of LCNB Corp., not
less than 48 hours before the time fixed for holding the meeting,
that he or she desires that voting for the election of directors
shall be cumulative, and if the chairman or secretary announces
the giving of such notice upon the convening of the meeting by or
on behalf of the shareholder giving such notice. In such event,
each shareholder shall be entitled to cumulate such voting power
as he or she possesses and to give one nominee as many votes as
the number of directors to be elected multiplied by the number of
his or her shares, or to distribute such votes on the same
principle among two or more candidates, as the shareholder sees
fit. Cumulative voting rights applicable to LCNB Corp. under Ohio
law contain certain requirements that are not applicable to
national banks under the National Bank Act and regulations
promulgated thereunder by the Office of the Comptroller of the
Currency. Shareholders of Lebanon Citizens may exercise
cumulative voting rights without the need for any corporate action
or notification requirements prior to the applicable shareholder
meeting, whereas a shareholder of LCNB Corp. would have to meet
the requirements under applicable provisions of Ohio law before he
or she could exercise cumulative voting rights. Therefore,
cumulative voting rights under Ohio law are essentially the same
as those currently applicable to Lebanon Citizens, but are
slightly more restrictive because of the addition of certain
corporate and notification requirements on the part of
shareholders prior to their exercise.
Par Value
The Lebanon Citizens common stock is par value stock and LCNB
Corp. common stock is no par value stock. The par value of stock
serves to fix a minimum subscription or original issue price for
each share of par value stock. The law of the state in which the
national bank is located determines the attributes of par value
stock issued by a national bank. In the case of Lebanon Citizens,
Ohio law provides that any consideration paid for non-treasury,
original issue par value shares shall not be less than the par
value of the shares, provided that such shares may be sold and
paid for at such a discount from the par thereof as would amount
to or not exceed reasonable compensation for the sale,
underwriting or purchase of such shares. Par value is also used
to set the stated capital of a corporation. The stated capital of
a corporation with par value stock shall not be less than the par
value of each class of its outstanding shares times the total
number of shares of each class outstanding. In Lebanon Citizens'
case, its stated capital cannot be less than $10,560,000 ($60 par
value stock multiplied by 176,000 shares outstanding). On the
other hand, no par value stock may be issued by a corporation at
any price, with no stated minimum subscription or issuance price.
A share of no par value stock does not purport to represent any
stated proportionate interest in the capital of a corporation and
the issuance of such shares does not in itself increase stated
capital.
Stabilizing and Antitakeover Features Contained in LCNB Corp.'s
Governing Documents
LCNB Corp.'s articles of incorporation contain corporate
governance provisions which may have the effect of discouraging
attempts to change control of LCNB Corp. without the prior
approval of its Board of Directors. Lebanon Citizens' articles of
association do not contain any such provisions. The following is
a brief summary of such provisions and of their respective
advantages and disadvantages.
Classified Board of Directors. Under Lebanon Citizens' articles
of association and by-laws, all members of the Board of Directors
are elected at each Annual Meeting of Shareholders to serve for a
one year term which ends at the following Annual Meeting of
Shareholders.
LCNB Corp.'s articles of incorporation provide for a classified
Board of Directors consisting of three classes of directors each
with overlapping three-year terms of office. Each such class is
to have an equal, or as close to equal as mathematically possible,
number of members with no class having less than three members.
LCNB Corp., upon its incorporation, will have three classes of
directors: Class I to serve an initial one-year term, Class II to
serve a full two-year term. Class III to serve a full three-year
term. Thereafter, at the first annual meeting of shareholders of
LCNB Corp. after consummation of the reorganization, the first
class of directors will be elected for a three-year term; at the
second annual meeting of shareholders the second class will be
elected for a three-year term; and at each annual meeting
thereafter, one class will be elected to a three-year term.
Management believes that structuring LCNB Corp.'s Board of
Directors into three classes will insure a continuity of
experienced Board members, although there have been no problems
with respect to such continuity in the past. Also, under the
classified Board system, a shareholder or group of shareholders
possessing a majority of the voting power of LCNB Corp. will not
in any one year be able to replace a majority of the directors
since only one-third of the directors will stand for election each
year. Rather, at least two annual meeting elections will be
required to change a majority of the directors by the requisite
vote of the shareholders. By contrast, a shareholder or group of
shareholders could obtain control of Lebanon Citizens' Board of
Directors in a single year since Lebanon Citizens' entire Board is
subject to election each year. The classified Board of LCNB Corp.
may therefore have the effect of discouraging or making more
difficult an unfriendly attempt to take over LCNB Corp. It will
also make it more difficult for shareholders to change the
majority of directors even if the only reason for such a change is
the performance of incumbent directors.
Vote Required for Certain Extraordinary Corporate Actions. Under
applicable law, the affirmative vote of the holders of at least
two-thirds of the issued and outstanding capital stock of Lebanon
Citizens is required with respect to extraordinary corporate
actions including a merger or consolidation of Lebanon Citizens
with another bank or the sale of all or substantially all of
Lebanon Citizens' assets.
The articles of incorporation of LCNB Corp. provide for a special
"super-majority" voting requirement, subject to certain
exceptions, with respect to the following extraordinary
transactions:
(i) any merger or consolidation of LCNB Corp. with or into any
other corporation;
(ii) any sale, lease, exchange or other disposition of all or any
substantial part of the assets of LCNB Corp. to or with any other
corporation, person or other entity;
(iii) the issuance or transfer of any securities of LCNB Corp. to
any other corporation, person or other entity in exchange for
assets or securities or a combination thereof (except assets or
securities or a combination thereof so acquired in a single
transaction or a series of related transactions having an
aggregate fair market value of less than $250,000); or
(iv) the issuance or transfer of any securities of LCNB Corp. to
any other corporation, person or other entity for cash.
Any such extraordinary transaction must be approved by the
affirmative vote of the holders of at least eighty (80%) of the
outstanding shares of LCNB Corp.'s capital stock which are not
beneficially owned by the other corporation, person or entity with
which LCNB Corp. proposes to enter into such transaction ("other
party"), if the other party is then the beneficial owner, directly
or indirectly, of 10% or more of the outstanding shares of LCNB
Corp.'s common stock. However, there are certain exceptions to
the applicability of this "super-majority" vote requirement.
Specifically, it does not apply if:
- - the other party is a corporation and a majority of the
outstanding shares of all classes of such corporation's voting
capital stock are owned by LCNB Corp.;
- - if LCNB Corp.'s Board of Directors has approved a memorandum of
understanding with the other party substantially consistent with
the proposed transaction before the other party became the
beneficial owner of 10% or more of LCNB Corp.'s common stock;
or
- - if the transaction is approved by at least a majority of the
members of LCNB Corp.'s Board of Directors.
LCNB Corp.'s Board of Directors is expressly authorized to
determine, for the purpose of applying the super-majority voting
requirement, on the basis of information then known to it,
whether:
- - any other corporation, person or other entity beneficially owns,
directly or indirectly, 10% or more of the outstanding shares of
stock of LCNB Corp. entitled to vote generally in the election of
directors, or is an "affiliate" or an "associate" of another;
- - any proposed sale, lease, exchange or other disposition of part
of the assets of LCNB Corp. involves a substantial part of the
assets of LCNB Corp.;
- - assets or securities, or a combination thereof, to be acquired
in exchange for securities of LCNB Corp., have an aggregate fair
market value of less than $250,000 and whether the same are
proposed to be acquired in a single transaction or a series of
related transactions; and
- - the memorandum of understanding referred to above is
substantially consistent with the transaction to which it relates.
Any such determination by the Board shall be conclusive and
binding for all purposes.
Further, when evaluating any offer of another party to:
- - purchase or exchange any securities or property for any
outstanding equity securities of LCNB Corp.;
- - merge or consolidate LCNB Corp. with another corporation; or
- - purchase or otherwise acquire all or substantially all of the
properties and assets of LCNB Corp.,
the Board of Directors is required, in connection with the
exercise of its judgment in determining what is in the best
interests of LCNB Corp. and its shareholders, to give due
consideration not only to the price or other consideration being
offered but also to all other relevant factors, including without
limitation:
- - the financial and managerial resources and future prospects of
the other party;
- - the possible effects on the business of LCNB Corp. and its
subsidiaries and on the depositors, employees, and other
constituents of LCNB Corp. and its subsidiaries; and
- - the possible effects on the communities and the public interest
which LCNB Corp. and its subsidiaries serve.
In evaluating any such offer, the Board of Directors shall be
deemed to be performing its duly authorized duties and acting in
good faith and in the best interests of LCNB Corp. within the
meaning of applicable Ohio law.
The provision described above will have the general effect of
discouraging, or rendering more difficult, unfriendly takeover or
acquisition attempts. Consequently, such a provision would be
beneficial to current management in an unfriendly takeover attempt
but would have an adverse effect on shareholders who might wish to
participate in such a transaction. However, management believes
that such a provision is advantageous to shareholders in that it
will require a higher level of shareholder participation and
consent than currently would be required for Lebanon Citizens and
therefore would increase the discussion and understanding of any
such proposal.
The market for Lebanon Citizens' shares has been somewhat limited.
The most significant advantage of the ability of LCNB Corp. to
repurchase its own shares is that LCNB Corp. will be able to
facilitate the market for its shares. For example, LCNB Corp.
will be able to purchase shares from the estates of deceased
shareholders or to otherwise purchase shares in situations
management deems appropriate from shareholders who desire to sell
their shares but have been unable to locate purchasers. An
important disadvantage of this ability is that LCNB Corp.
management could purchase shares during or in anticipation of a
proxy contest or other hostile takeover attempt from shareholders
who might otherwise favor the proposed action and thus render the
proxy contest or other takeover attempt less likely to succeed,
thereby insulating incumbent management.
INFORMATION CONCERNING LCNB CORP.
Information About the Bank Holding Company
LCNB Corp. was incorporated under the laws of the State of Ohio on
December 22, 1998, at the direction of Lebanon Citizens' Board of
Directors, to engage in the business of a bank holding company.
The Interim Bank will be formed as a national bank subsidiary of
LCNB Corp. Both LCNB Corp. and the Interim Bank will remain
dormant from their respective formations and will not begin to
conduct business until the merger becomes effective. Immediately
following the merger, LCNB Corp.'s sole asset will be 100% of the
outstanding capital stock of the Interim Bank.
As a bank holding company, LCNB Corp. has broader corporate powers
than Lebanon Citizens. Specifically, LCNB Corp. may own the
capital stock of banks located in Ohio and, under certain
circumstances, in neighboring states; it may engage, either
directly or through one or more nonbank subsidiaries, in certain
nonbanking activities which are closely related to banking; and it
may own up to 5% of the voting capital stock of any corporation,
all subject to applicable law and regulatory provisions as
described below.
LCNB Corp. currently is not required to file reports with the
Securities and Exchange Commission, although it will become a
reporting company under the Exchange Act of 1934 after the
consummation of the transactions contemplated by the Plan and
Agreement of Merger and the Agreement of Merger. The public may
read and copy any materials that LCNB Corp. files with the SEC at
the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The public may obtain information on the
operation of the Public Reference Room by calling the SEC at 1-
800-SEC-0330. The SEC maintains an Internet site that contains
reports, proxy and information statements and other information
regarding issuers that file electronically with the SEC at
http://www.sec.gov.
Supervision and Regulation of the Holding Company
The following is a brief summary of certain general aspects of the
governmental supervision and regulation of bank holding companies.
This summary does not purport to be comprehensive and is qualified
in its entirety by reference to the actual laws and regulations
pursuant to which such supervision and regulation is carried out.
LCNB Corp. will, if the merger is consummated, be a bank holding
company within the meaning of the Bank Holding Company Act of 1956
(the "Act"). As such, it will be registered with the Board of
Governors of the Federal Reserve System (the "Federal Reserve")
and will be subject to regulation by that agency. LCNB Corp. will
be required to file various reports with, and will be subject to
examination by, the Federal Reserve. Before LCNB Corp. may become
a bank holding company under the Act, it must submit an
application to the Federal Reserve, and its application must be
approved. Approval of LCNB Corp.'s application is a precondition
to consummation of the merger.
The Act requires prior approval of the Federal Reserve before a
bank holding company may acquire more than five percent of the
voting stock or substantially all of the assets of any bank or
merge or consolidate with any other bank holding company. If the
effect of a proposed acquisition, merger or consolidation may be
substantially to lessen competition or tend to create a monopoly,
the Federal Reserve cannot approve the acquisition unless it finds
that the anti-competitive effects of the acquisition, merger or
consolidation are clearly outweighed by the convenience and needs
of the community to be served. The Act also provides that the
consummation of any acquisition, merger or consolidation must be
delayed until 30 days following the approval of the Federal
Reserve. The Attorney General of the United States may, within
this 30 day period, bring an action under federal anti-trust laws,
in which case the effectiveness of such approval is stayed pending
a final ruling of the courts.
The Act also provides that a bank holding company may acquire any
adequately capitalized and adequately managed bank in a state
other than the home state of the bank holding company, regardless
of whether such transaction is prohibited by the laws of any
state, so long as the bank to be acquired has been in existence
for the lesser of the minimum period of time specified in the
statutory law if its home state or five (5) years. For purposes
of the Act, pursuant to 12 U.S.C. 215(a)(d)(1)(C), a bank that has
been chartered solely for the purpose of, and does not open for
business prior to, acquiring control of, or acquiring all or
substantially all of the assets of, an existing bank, shall be
deemed to have been in existence for the same period of time as
the bank to be acquired.
Subject to certain exceptions, a bank holding company is also
prohibited from acquiring direct or indirect ownership or control
of more than 5% of the voting shares of any company which is not a
bank and from engaging directly or indirectly in activities
unrelated to banking or managing or controlling banks. One of the
exceptions to this prohibition permits activities by a bank
holding company or its subsidiaries which the Federal Reserve has
determined to be so closely related to banking or managing or
controlling banks as to be a proper incident thereto. In
determining whether a particular activity is a proper incident to
banking or managing or controlling banks, the Federal Reserve
considers whether performance of the activity by an affiliate of a
bank holding company can reasonably be expected to produce
benefits to the public, such as greater convenience, increased
competition or gains in efficiency that outweigh possible adverse
effects, such as undue concentration or unsound banking practices.
The Federal Reserve has adopted regulations prescribing those
activities which it presently regards as permissible for bank
holding companies and their subsidiaries. Some of the activities
are: servicing loans and other extensions of credit; performing
certain data processing services; engaging in certain personal and
real property leasing; making or acquiring loans and other
extensions of credit as would be made by a mortgage, finance,
credit card or factoring company; and under certain circumstances
acting as any or all of the following: investment or financial
advisor, insurance agent or broker, and underwriter for credit
life insurance and credit accident and health insurance.
The Act, the Federal Reserve Act and the Federal Deposit Insurance
Act also subject bank holding companies and their subsidiaries to
certain restrictions on any extensions of credit by subsidiary
banks to the bank holding company or any of its subsidiaries, or
investments in the stock or other securities thereof, and on the
taking of such stocks or securities as collateral for loans to any
borrower. Further, under the Act and the regulations of the
Federal Reserve, a bank holding company and its subsidiaries are
effectively prohibited from engaging in certain tie-in
arrangements in connection with any extension of credit, sale or
lease of any property or furnishing of services.
As a Securities and Exchange Commission reporting company, LCNB
Corp. will be required to file quarterly and yearly reports on
Forms 10-Q and 10-K, respectively, and to comply with the proxy
rules of the 1934 Act. In addition, certain "affiliates" of LCNB
Corp. (as that term is defined in the 1934 Act) also will be
required to make filings with the SEC.
There are various legislative enactments and regulations pending
which could affect the business of LCNB Corp. However, what other
legislation might be enacted or what other regulations might be
adopted, or if enacted or adopted the effect thereof, cannot be
predicted.
INFORMATION CONCERNING LEBANON CITIZENS
Information About the Bank
Lebanon Citizens was organized as a national banking association
in 1877 and has been in continuous operation since that date. It
is engaged in the general commercial banking business through its
main banking office located in Warren County, Ohio and through its
16 branch offices located in Warren, Butler, Clinton, Clermont and
Hamilton Counties, Ohio. In addition, Lebanon Citizens provides
normal retail banking services, including the acceptance of
demand, savings, money market and time deposits and the making of
various types of loans. Other services provided by Lebanon
Citizens include collection, safekeeping, investment, trust and
various other services to meet the public's banking needs. The
significant banking market for Lebanon, which encompasses portions
of Warren, Butler, Clinton, Clermont and Hamilton Counties,
includes approximately 65 other commercial banks, 60 thrift
institutions and 67 credit unions. The address of the main office
of Lebanon Citizens is 2 North Broadway, Lebanon, Ohio 45036;
telephone (513) 932-1414. No changes in control of Lebanon
Citizens have occurred within the past 36 months.
Lebanon Citizens conducts its business from the following offices:
Name of Office Address Owned/Leased
1. Main Office 2 North Broadway
Lebanon, Ohio 45036 Owned
2. Auto Bank 26 North Broadway
Lebanon, Ohio 45036 Owned
3. Columbus Avenue Office 730 Columbus Avenue
Lebanon, Ohio 45036
4. Goshen Office 6723 State Route 132
Goshen, Ohio 45122 Owned
5. Hunter Office 3878 State Route 122
Franklin, Ohio 45005 Owned
6. Loveland Office 615 West Loveland Avenue
Loveland, Ohio 45140 Owned
7. Maineville Office 7795 South State Route 48
Maineville, Ohio 45039 Owned
8. Mason/West Chester Office 1050 Reading Road
Mason, Ohio 45040 Owned
9. Middletown Office 4441 Marie Drive
Middletown, Ohio 45044 Owned
10. Okeana Office 6225 Cincinnati-Brookville Road
Okeana, Ohio 45053 Owned
11. Otterbein Office State Route 741
Lebanon, Ohio 45036 Leased
12. Oxford Office 4 N. College Avenue
Oxford, Ohio 45056 Leased
13. Rochester/Morrow Office Route 22-3 at 123
Morrow, Ohio 45152 Owned
14. South Lebanon Office 209 East Forrest Street
South Lebanon, Ohio 45065 Leased
15. Springboro/Franklin Office 525 West Central Avenue
Springboro, Ohio 45066 Owned
16. Waynesville Office 9 North Main Street
Waynesville, Ohio 45177 Owned
17. Wilmington Office 1243 Rombach Avenue
Wilmington, Ohio 45177 Owned
Each of the offices conducts all of the normal and standard
business of a national bank.
Lebanon Citizens is not a party to any material pending legal
proceedings in the conduct of their banking business or otherwise.
Selected Financial Data
The following selected financial data has been derived from
unaudited financial statements or call reports for the years ended
December 31, 1994, 1995, 1996, 1997 and 1998. The information is
based on financial statements provided by Lebanon Citizens
management that contain all adjustments believed to be required to
reflect financial condition and operating results fairly for the
periods indicated. This data should be read in conjunction with
Lebanon Citizens' financial statements and their related notes
contained in this Proxy Statement/Prospectus (see "INDEX TO
FINANCIAL STATEMENTS").<PAGE>
<TABLE>
<CAPTION>
For the Years Ended December 31,
1998 1997 1996 1995 1994
(In Thousands, Except Data Per Share)
<S> <C> <C> <C> <C> <C>
Total Interest Income $ 29,599 $ 27,777 $ 25,998 $ 24,750 $ 20,721
Net Interest Income 15,519 13,433 12,756 11,754 11,062
Provision For Loan Losses 191 291 288 281 257
Other Income 3,455 2,974 2,573 2,563 2,559
Other Expenses 10,910 8,903 7,851 7,443 7,015
Income Tax Expenses 2,426 2,178 2,195 1,997 1,942
Net Income 5,447 5,035 4,995 4,596 4,407
Data Per Share:
Net Income 30.95 28.61 28.38 26.11 25.04
Cash Dividends 14.00 12.00 9.50 7.50 6.50
Book Value 239.77 219.64 202.54 183.66 165.05
Total Assets (in Thousands) 432,159 421,027 369,476 351,117 328,117
</TABLE>
<PAGE>
The Interim Bank is being formed to facilitate the holding company
conversion and is not an operating bank; therefore, no financial
information has been provided for the Interim Bank.
Management's Discussion and Analysis of Financial Condition and
Results of Operations
The following discussion is presented to aid in understanding the
financial condition and results of operations of Lebanon Citizens
National Bank. This discussion should be read in conjunction with
the financial statements included in this Proxy
Statement/Prospectus. In addition to the historical information
contained herein, the following discussion contains forward-
looking statements that involve risks and uncertainties. Lebanon
Citizens' operations and actual results could differ significantly
from those discussed in the forward-looking statements. Some of
the factors that could cause or contribute to such differences
include changes in the economy and interest rates in the nation
and Lebanon Citizens' general market area, and the effect of Year
2000 on computer systems of Lebanon Citizens and its customers.
Results of Operations.
Net Income
The Bank's net income increased $412,000, or by 8.2%, in 1998 to
$5,447,000 or $30.95 per share compared to $5,035,000 or $28.61
per share in 1997. Performance ratios for 1998 included a return
on average assets of 1.30% and a return on average equity of
13.47%.
Net income for 1997 increased $40,000 from 1996, or .80%. In
1997, return on average assets was 1.29% and return on average
equity was 13.52%.
Net Interest Income
Net interest income increased $2.1 million, or 15.5%, from 1997 to
1998. The primary factor that led to the change is a 36 basis
points (bps) decrease in the average cost of funds, from 4.61% in
1997 to 4.25% in 1998. To achieve this reduction in the cost of
funds, the Bank was less aggressive in its pricing of IRA accounts
and certificates of deposit and, consequently, at year end 1998,
these deposits were $183.2 million compared to $204.1 million at
the end of 1997, a decrease of $20.9 million. At the same time,
lower-cost NOW, money fund, savings, and noninterest-bearing
demand deposits increased an aggregate of $30.5 million. From 1997
to 1998, the yield on average earning assets increased by 2 bps
from 7.69% to 7.71%.
Table 1, Average Balance Sheets and Analysis of Net Interest
Income, presents additional details regarding yields on average
earning assets and rates paid on average interest-bearing
liabilities. The average balances in 1998, and to a lesser extent
in 1997, are affected by the purchase of three KeyBank branches in
September, 1997. With the acquisition, the Bank received $33
million in cash, $10 million in loans, and $50 million in customer
deposits. Most of the $33 million in cash was immediately
invested in securities. Average earning assets and interest-
bearing liabilities increased $22.2 million and $20.7 million,
respectively, in 1998 from 1997.
Net interest income increased $677,000, or 5.3%, from 1996 to
1997. The increase is primarily due to average earning assets
increasing by $31.9 million while interest-bearing liabilities
increased by only $26.1 million from 1996 to 1997. This
relationship was reflected in the ratio of average loans to
average deposits which was 74.0% in 1997 compared to 68.4% in
1996. All the major categories of loans increased from year end
1996 to December 31, 1997. Rates were relatively stable during
1997 and 1996. The yield on average earning assets decreased from
7.90% in 1997 to 7.69% in 1998. The average cost of funds
decreased from 4.65% to 4.61% during the same period.
<PAGE>
<TABLE>
Table 1 - Average Balance Sheets and Analysis of Net Interest Income
<CAPTION>
Year ended December 31,
(Dollars in thousands)
1998 1997 1996
Average Average Interest/ Average Average Interest Average Average Interest
outstanding Yield/ earned outstanding Yield/ earned/ outstanding Yield/ earned/
balance rate paid balance rate paid balance rate paid
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Loans (1) $ 272,512 8.46% $ 23,047 $ 255,241 8.38% $ 21,385 $ 217,101 8.90% $19,322
Federal funds sold 14,677 5.42 796 16,896 5.43 918 21,981 5.40 1,187
Deposits in banks 4,347 6.65 289 4,000 5.98 239 656 5.95 39
Federal Reserve Bank stock 647 6.03 39 647 6.03 39 647 6.03 39
Investment securities:
Taxable 75,374 6.12 4,612 71,469 6.09 4,354 76,604 5.90 4,521
Non-taxable (2) 21,628 5.71 1,236 18,682 6.83 1,276 18,037 7.47 1,348
---------- ------- --------- ---------- -------- --------
Total earning assets 389,185 7.71 30,019 366,935 7.69 28,211 335,026 7.90 26,456
Non-earning assets 30,570 -------- 19,495 ---------- 21,559 --------
Allowance for loan losses (2,100) (2,100) (1,900)
----------- ---------- ---------
Total assets $ 417,655 $ 384,330 $ 354,685
=========== ========== =========
Savings deposits 64,064 2.76 1,769 53,753 3.24 1,741 48,710 3.24 1,576
NOW and money fund 73,727 2.31 1,706 64,367 2.51 1,616 57,776 2.55 1,473
IRA and time certificates 192,873 5.47 10,557 191,892 5.70 10,941 177,496 5.72 10,153
Short-term borrowings (3) 884 5.43 48 847 5.43 46 771 5.19 40
--------- ------ -------- ---------- -------- -------
Total interest-bearing
liabilities 331,548 4.25 14,080 310,859 4.61 14,344 284,753 4.65 13,242
Demand deposits 44,484 ------ 34,141 ---------- 32,859 -------
Other liabilities 1,194 2,088 2,981
Capital 40,429 37,242 34,092
-------- ------- --------
Total liabilities
and capital $ 417,655 $ 384,330 $ 354,685
======== ======== ========
Net interest rate spread 3.46 3.08 3.25
Net interest margin
on a taxable equivalent
basis 4.10 $ 15,939 3.78 $ 13,867 3.94 $13,214
======== ========= ======
Ratio of interest-earning
assets to interest-bearing
liabilities 117.38% 118.04% 117.65%
<FN>
(1) Includes nonaccrual 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 34%.
(3) Short-term borrowings are limited to demand notes issued
to the U.S. Treasury in connection with customer tax remittances.
</FN>
</TABLE>
<PAGE>
The net interest spread is the difference between the average rate
on total interest-earning assets and interest-bearing liabilities.
The net interest margin is the taxable-equivalent net interest
income divided by average interest-earning assets.
Other Income. Other income increased $481,000, or 16.2%, to $3.5
million in 1998 from $3.0 million in 1997. The increase is due in
part to a $33,000, or 20.0%, increase in service charges and fee
income. In 1998, the Bank began charging an ATM fee to users who
were not Bank customers. This generated $165,000 in fees,
representing 49.4% of the increase in total service charges and
fee income. A greater number of merchant relationships, from 330
in 1997 to 400 in 1998, brought about an increase of $44,000 in
merchant fees for credit card transactions. Returned check fees
increased by $45,000 in part due to the customer deposit
relationships throughout 1998 that were acquired on September 15,
1997, with three branch offices from KeyBank. Returned check fees
and merchant credit card fees represent 26.6% of the total
increase in service charges and fee income. Also contributing to
the $481,000 increase in Other Income were securities gains of
$234,000. There were no sales of securities in 1997 or 1996.
During 1998, the Bank shifted approximately $13 million from
federal funds sold to investment securities to increase the yield
on earning assets. At various times during 1998 the Bank sold
investment securities to meet normal liquidity needs. Prior to
1998, the Bank relied to a greater extent on federal funds sold
for liquidity. Chiefly for this reason, there was no need to sell
securities in the earlier years.
From 1996 to 1997, other income increased $401,000, or 15.6%, due
primarily to a $313,000 increase in income from trust services.
Other Expense. Other expense increased $2.0 million, or 22.5%,
from 1997 to 1998. This increase was primarily due to a $739,000,
or 16.0%, increase in labor costs including pension and other
benefits resulting from a full year of operating additional branch
offices acquired or constructed in 1997. The Bank acquired three
branch offices in September 1997 located in Oxford, Okeana and
Waynesville, Ohio. The Bank's Wilmington branch was opened in
October 1997. Additionally, amortization of intangibles acquired
with the Oxford, Okeana, and Waynesville branches increased from
$177,000 in 1997 to $611,000 in 1998. The intangibles are being
amortized on a straight line basis over ten years. The Bank
periodically reviews the acquired intangibles for impairment.
The $1.1 million increase in other expense from 1996 to 1997
resulted primarily from $476,000 in additional labor costs due in
part to the additional branches and $177,000 in amortization of
intangibles related to the acquisitions noted above.
Income Taxes. The Bank's effective tax rate of 30.8% in 1998 is
60 basis points greater than the rate in 1997 due to a decline in
tax-exempt interest income as a percent of income before income
taxes. The ratio in 1998 was 10.4% compared to 11.7% in 1997.
The effective tax rate was 30.2% in 1997 compared to 30.5% in
1996.
Financial Condition
Total Assets. Total assets increased $11.1 million, or 2.64%,
from December 31, 1997 to December 31, 1998. The most significant
changes were a $23 million, or 22.23%, increase in investment
securities from $101 million to $124 million, a $3 million, or
1.27%, decrease in total loans from $270 million to $267 million,
and a 56.6% decrease in combined federal funds sold and interest-
bearing deposits in other financial institutions from $21 million
to $9 million.
Securities increased as a result of shifting assets from lower-
yielding overnight fed funds to higher-yielding securities and
investment of incremental deposit proceeds. To help maximize the
returns on the securities portfolio, the Bank hired an investment
management advisor. As a result, the Bank shifted its portfolio
to a higher weighting of corporate notes, U.S. Agency notes, and
U.S. Agency mortgage backed securities from U.S. Treasury notes.
Also contributing to the increase in dollar value of securities
was a transfer of held-to-maturity securities to available-for-
sale and the resulting mark-to-market. This incremental increase
for the appreciation in the transferred securities represented
less than $1 million of the total $23 million increase.
Residential real estate loans and consumer loans decreased $11.8
million and $2.9 million, respectively, while commercial loans
increased $9.6 million from December 31, 1997 to December 31,
1998. The decrease in residential real estate loans is due to the
implementation of a strategy to limit the volume of fixed rate
loans added to the portfolio in 1998 as part of the Bank's ongoing
management of interest rate risk. During 1998, an increasing
number of borrowers opted to lock in low rates available through
fixed rate products. To meet customer demand, the Bank continued
to originate fixed rate real estate loans, however, most were
immediately sold in the secondary market to the Federal Home Loan
Mortgage Corporation (Freddie Mac). Fixed rate residential real
estate loans originated for immediate sale to Freddie Mac were
$11.6 million in 1998 compared to $280,000 in 1997. Variable rate
loans were approximately 15% of total mortgage loans at December
31, 1998, compared to approximately 5% at December 31, 1997. The
Bank retains servicing for all loans sold to Freddie Mac.
Commercial loans increased as result of several significant new
credit relationships.
Total assets increased $51.6 million, or 13.95%, from December 31,
1996 to December 31, 1997. The most significant changes were a
$10 million, or 10.81%, increase in investment securities from $91
million to $101 million, a $32 million, or 13.45%, increase in
total loans from $238 million to $270 million, and the $6 million
intangible from the purchase of three branch operations in
September, 1997.
In 1997, securities increased primarily as a result of the branch
purchases. Of the $32 million increase in loans from 1996 to
1997, residential real estate loans accounted for $20 of which $7
million were purchased with the branches in September, 1997, and
other consumer loans accounted for $5 million of which $1 million
were purchased with the branches. In total, the loans purchased
with the three branches accounted for 31.25% of the increase in
loans from year end 1996 to the end of 1997. Most all loans
originated in 1997 and 1996 were retained for the Bank's
portfolio. The small volume of fixed rate residential real estate
loans originated for immediate sale to Freddie Mac were $280,000
in 1997 compared to $127,000 in 1996.
Deposits. Deposits increased $9.6 million, or 2.6%, to $387
million at December 31, 1998, from $377.4 million at the close of
1997. Of this increase, noninterest-bearing demand deposits were
$8.4 million or 20.3% greater than at year end 1997 and interest
bearing deposits were up $1.2 million or .4%, net of a decrease in
time deposits of $19.9 million. The Bank's strategy is to
competitively price deposit products in the markets served with an
emphasis on growing its lower-priced core deposits products.
Deposits increased $47.0 million, or 14.2%, to $377.4 million at
December 31, 1997, from $330.4 million at the close of 1996. Of
this increase, noninterest-bearing demand deposits were $8.9
million or 27.1% greater than at year end 1996 and interest
bearing deposits were up $38.2 million or 12.8%. Of the deposits
purchased with the three branches in September 1997, $10.7 million
were demand deposits and $39.6 million were interest-bearing.
Premises and Equipment. In January 1998, the Bank sold real estate
in Waynesville associated with the consolidation of its branch
operations in that community. The $33,000 gain realized on the
sale in 1998 is included in Other Operating Income in the
Statements of Income. Expenditures for premises and equipment in
1998 included were approximately $600,000 in renovations to branch
offices and $383,000 for equipment purchases and data processing
systems upgrades. The Bank plans to complete its branch
renovation program in 1999.
Expenditures for premises and equipment in 1997 included
approximately $900,000 in connection with a new branch office
built in Wilmington, Ohio and $835,000 in the aggregate for two
acquired branches, one in Okeana and the other in Waynesville,
Ohio.
The Bank owns its branches with the exception of three. The
Otterbein, Oxford, and South Lebanon branches are leased under
multi-year operating leases. The aggregate lease expense for the
three branches was $64,000 in 1998. The current Otterbein lease
expires in July 2005, the Oxford lease expires in May 2000, and
the South Lebanon lease expires in July 2001. The Otterbein and
South Lebanon leases include renewal options. The Bank is
evaluating future alternative sites to relocate its branch within
the Oxford community.
Purchased Intangible. In connection with the branch acquisitions
in 1997, the Bank recorded an intangible for approximately $6
million. This represents the excess of the purchase price over the
fair value of tangible assets acquired less deposit liabilities
assumed. The intangible asset is being amortized using the
straight-line method over 10 years. At December 31, 1998 and
1997, the intangible which is included in "other assets" in the
Bank's balance sheet was $5.3 million and $5.9 million,
respectively. The Bank periodically reviews intangible assets for
possible impairment. The review is principally to determine if a
significant event may have occurred that could detrimentally
affect operation of the acquired branches and the value of the
related intangible.
Allowance for Loan Losses. The allowance for loan losses is $2.0
million or .75% of total loans at December 31, 1998, compared to
$2.2 million or .81% of total loans at year end 1997. The
following table summarizes the activity in the allowance account
for the past three years ($000s):
<PAGE>
<TABLE>
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
Balance- Beginning of year $2,200,000 2,000,000 1,800,000
Loans charged off:
Commercial and industrial 227,000 - 2,906
Commercial, secured by real estate - - -
Residential real estate 3,000 - -
Consumer, excluding credit card 153,000 93,000 100,000
Agricultural - - -
Credit card 36,000 29,000 17,000
Other - - -
------------ ---------- ---------
Total Loans charged off 419,000 122,000 119,906
------- ------- -------
Recoveries:
Commercial and industrial - - -
Commercial, secured by real estate - - -
Residential real estate - - -
Consumer, excluding credit card 26,000 25,000 29,000
Agricultural - - -
Credit card 2,000 6,000 -
Other - - -
----------- ---------- --------
Total Recoveries 28,000 31,000 29,000
------ ------ ------
Net charge-offs 391,000 91,000 90,906
Provision charged to operations 191,000 291,000 288,000
------- ------- -------
Balance - End of year $2,000,000 2,200,000 2,000,000
========= ========= =========
</TABLE>
<PAGE>
The $419,000 of charge-offs in 1998 includes one commercial loan
for $227,000. The Bank had no loans on nonaccrual status at the
end of 1998, 1997 or 1996. At December 31, 1998, 1997, and 1996,
loans 90 days or more past due and still accruing interest were
$374,000, $108,000, and $182,000, respectively. The Bank had no
real estate acquired through or in lieu of foreclosure at December
31, 1998 or 1997.
In addition to historic charge-off percentages, to determine an
adequate allowance for loan losses at December 31, 1998, the Bank
took 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. The commercial credit that
in 1998 had $227,000 charged-off had a total balance outstanding
at December 31, 1997, of $455,000. The $228,000 difference
between the total loan and the portion charged-off, was collected
in 1998. This loan had been identified at December 31, 1997, as
representing unique credit risks based on the nature of the
related company's operations, the inventory that partially
collateralized the loan, and the significance of the loan balance
outstanding. The loan portfolio at December 31, 1998, does not
include a commercial loan that presently reflects a comparable
level of credit risk. The Bank also considered loans past due 90
days or more at December 31, 1998, compared to a year ago. Of the
$374,000 in principal at December 31, 1998, $255,000 was
adequately secured by real estate. The remaining principal
balance of loans past due 90 days or more at December 31, 1998,
was not significant.
Liquidity. Liquidity is the ability to have funds available at all
times to meet the commitments of the Bank. Asset liquidity is
provided by cash and assets which are readily marketable or
pledgeable or which will mature in the near future. Liquid assets
include cash and deposits in banks, federal funds sold and
securities available for sale. Liquidity is also provided by
access to core funding sources, primarily core depositors in the
bank's trade area. The Bank does not solicit brokered deposits as
a funding source. The liquidity of the Bank is enhanced by the
fact that 87% of total deposits at December 31, 1998 were "core"
deposits. Core deposits, for this purpose, are defined as total
deposits less public funds and certificates of deposit greater
than $100,000.
At December 31, 1998, the Bank's liquid assets amounted to $143.7
million or 33% of total gross assets, up from $92.2 million or 22%
at December31, 1997. Secondary sources of liquidity include the
Bank's ability to sell loan participations and purchase federal
funds. 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. Loans to deposits were 69%
and 72%, at December 31, 1998, and 1997, respectively. The Bank
experienced no liquidity or operational problems as a result of
the current liquidity levels.
Capital Resources. As of December 31, 1998, the Bank had no
material commitments for capital expenditures. Commitments to
extend credit at December 31, 1998, amounted to $54.4 million and
are more fully described in Note 9 to the Bank's Financial
Statements. Since many of the commitments to lend may expire
without being drawn upon, the total commitment amounts do not
necessarily represent future cash requirements. Scheduled
repayments of existing loans and maturities of investment
securities are expected to provide the necessary funds.
The Bank is required by banking regulators to meet certain minimum
levels of capital adequacy. These are expressed in the form of
certain ratios. Capital is separated into Tier I capital
(essentially shareholders' equity less goodwill and other
intangibles) and Tier II capital (essentially the allowance for
loan losses limited to 1.25% of risk-weighted assets). The first
two ratios, which are based on the degree of credit risk in the
Bank's assets, provide for weighting assets based on assigned risk
factors and include off-balance sheet items such as loan
commitments and stand-by letters of credit. The ratio of Tier I
capital to risk-weighted assets must be at least 4.0% and the
ratio of Total capital (Tier1 capital plus Tier 2 capital) to
risk-weighted assets must be at least 8.0%.The capital leverage
ratio supplements the risk-based capital guidelines. Banks are
required to maintain a minimum ratio of Tier 1capital to adjusted
quarterly average total assets of 3.0%. A summary of the
regulatory capital of the Bank at December 31 follows ($000's):
1998 1997
Regulatory Capital:
Shareholders' equity $ 42,199 38,656
Goodwill and other intangibles (5,321) (5,932)
Net unrealized securities gains (646) (86)
------- -------
Tier 1 risk-based capital 36,232 32,638
Eligible allowance for loan losses 2,000 2,200
------- -------
Total risk-based capital $ 38,232 34,838
======= =======
Capital Ratios:
Total risk-based 15.1% 15.7%
Tier 1 risk-based 14.3% 14.8%
Tier 1 leverage 8.6% 7.9%
The FDIC, the insurer of deposits in financial institutions, has
adopted a risk-based insurance premium system based in part on an
institution's capital adequacy. Under this system, a depository
institution is required to pay successively higher premiums
depending on its capital levels and its supervisory rating by its
primary regulator. It is management's intention to maintain
sufficient capital to permit the Bank to maintain a "well
capitalized" designation (the FDIC's highest rating).
Year 2000 Compliance
The Year 2000 problem exists because many computer operating
systems and programs utilize two digits rather than four digits to
define years for computer calculations. After December 31, 1999,
any computer recognizing a two digit date may incur system failure
or miscalculate date sensitive information. This is a particular
problem for financial institutions, since many financial
transactions, such as interest accruals and payments, are date
sensitive. It may also affect the operations of third parties
with whom the Bank does business, including vendors, suppliers,
utility companies and customers.
LCNB has been addressing these challenges since April, 1997 when a
Year 2000 Coordinator was appointed and a management team began
taking action to become Y2K compliant. The Bank adopted the
FFIEC's five-step approach of Awareness, Assessment, Renovation,
Validation and Implementation as its guidelines to verify
compliance.
At December 31, 1998, the Bank had completed the first three phases.
The fourth phase, validation, consists of actual testing of all
sensitive systems to critical dates published by the FFIEC. There
are fourteen dates which could cause potential system problems,
ranging from 4/9/1999 to 12/31/2001. At December 31, 1998, testing
of four of the fourteen dates was complete with no detected errors.
The remaining ten dates are less critical and testing of those is
estimated to be complete by February 28, 1999. The implementation
phase, which will require certification or non-certification of
systems after testing, includes adoption of contingency plans on any
non-certified systems. Based on positive results obtained thus far,
it is anticipated that all systems will be certified Year 2000
compliant. It is estimated this final phase will be complete March
31, 1999.
The Bank is addressing the readiness of its vendors, major customers
and other third parties that do business with the Bank. All
business customers with loans greater than $100,000 were contacted
regarding Year 2000 compliance. All municipalities for which the
Bank holds more than $100,000 in bonds will be contacted and
reviewed for Year 2000 compliance by March 31,1999. All loan
customers have been reviewed with satisfactory results and all new
loans will be checked for compliance before approved. All non-
information technology systems were examined and none were found to
be date sensitive, and therefore are compliant.
All system applications that were not Year 2000 compliant have been
upgraded or replaced by new systems. The hardware and software
costs incurred in 1998 for the purpose of becoming compliant was
$68,000. There are no material system costs remaining to be
incurred in 1999. The costs of new systems have been, or will be,
recorded as an asset and depreciated over the appropriate lives.
The execution of the Banks plan to become Y2K compliant was
performed entirely in-house. These internal costs were not tracked,
however the majority of time spent by bank employees on Y2K issues
is limited to the data processing and auditing departments.
Based on the Bank's significant investment in time and resources to
prepare for the Y2K issues, and the highly regulated nature of the
business, management anticipates the Bank can avoid any major
detrimental effects. The worst case scenario is believed to stem
from the potential of environmental Y2K failures, such as power or
telecommunications, which are generally out of the Bank's control.
Any operational disruptions caused by internal system failures can
be backed up by the off-site processor according to the Bank's
Disaster Recovery Plan.
Quantitative and Qualitative Disclosures About Market Risk
Market risk for Lebanon Citizens is primarily interest rate risk.
Lebanon Citizens 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. Lebanon Citizens does not use derivatives such as
interest rate swaps, caps or floors to hedge this risk. Lebanon
Citizens has not entered into any market risk instruments for
trading purposes. Lebanon Citizens' Asset and Liability Management
Committee ("ALCO") primarily uses Interest Rate Sensitivity Gap
Analysis, also known as repricing mismatch analysis, for measuring
and managing interest rate risk.
Interest Rate Sensitivity Gap Analysis
A traditional gap analysis, provides a point-in-time measurement of
the relationship between the amounts of interest rate sensitive
assets and liabilities in a given time period. An asset or
liability is interest rate sensitive within a specific time period
if it will mature or reprice within that time period. If liabilities
mature or reprice more quickly or to a greater extent than assets,
net interest income would tend to decrease during periods of rising
interest rates but increase during periods of falling interest
rates. Conversely, if liabilities mature or reprice more slowly or
to a lesser extent than assets, net interest income would tend to
increase during periods of rising interest rates but decrease during
periods of falling interest rates. ALCO strives to maintain a range
for the relationship of rate sensitive assets to rate sensitive
liabilities for gap analysis purposes of from 75 to 125 percent for
the one-year and two- to four-year periods.
Table 2 reflects Lebanon Citizens' gap analysis at December 31,
1998. The amounts reported in the table are the principal cash
flows of rate sensitive assets and liabilities by expected maturity
or repricing timeframe. Also presented is the related weighted
average interest rate. Fixed rate real estate mortgage loans and
mortgage-backed securities are allocated to the various maturity /
repricing periods based on contractual maturities adjusted for
expected prepayments under the current market interest rate
environment. Deposit liabilities without contractual maturities
such as NOW and savings accounts are allocated to the various
repricing periods based on an analysis of forecasted account run-off
that takes into consideration the relatively stable nature of these
core deposits. The gap analysis indicates that Lebanon Citizens'
earnings are sensitive to the repricing of liabilities in the first
year, sensitive to repricing of assets in the second through the
fourth year, and liability sensitive thereafter. The aggregate ratio
of rate sensitive assets to rate sensitive liabilities is 221.55%
for years two through four. With the current relatively low market
interest rate environment, management believes the ratio for this
four year time frame does not expose Lebanon Citizens' net interest
income to significant risk.
<PAGE>
<TABLE>
TABLE 2 - Interest Rate Sensitivity Analysis
At December 31, 1998 (in thousands)
<CAPTION>
Expected Maturity / Repricing
----------------------------------------------------------------
Fair
1999 2000 2001 2002 2003 Thereafter Total Value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
- - ASSETS -
Loans: (1)
Fixed rate $ 48,981 $31,294 $24,173 $17,396 $11,957 $ 57,032 $190,833 $190,215
Average interest rate 8.87 % 8.50 % 8.39 % 8.15 % 7.86 % 6.98 %
Variable rate 39,581 6,737 16,326 2,717 3,881 6,795 76,037 76,037
Average interest rate 8.27 % 7.67 % 7.71 % 7.79 % 7.43 % 7.84 %
Securities available for sale(2) 40,757 21,652 20,500 9,739 3,877 25,536 122,061 123,687
Average interest rate (3) 6.05 % 6.03 % 6.05 % 6.26 % 6.75 % 6.84 %
Federal funds sold 3,800 - - - - - 3,800 3,800
Average interest rate 5.74 %
Interest-bearing deposits in banks - 5,492 - - - - 5,492 5,492
Average interest rate 5.12 %
----- -------- -------- ------- ------ ------- --------- ---------
Total earning assets (4) 133,118 65,175 60,999 29,852 19,715 89,363 $398,223 $399,231
Average interest rate 7.74 % 7.31 % 7.42 % 7.50 % 7.56 % 7.00 % ========= =========
- - LIABILITIES-
NOW and money fund 14,597 4,959 4,959 4,959 4,959 44,421 78,852 78,852
Average interest rate 2.08 % 2.73 % 2.73 % 2.73 % 2.73 % 2.35 %
Savings 16,533 1,981 1,981 1,981 1,981 50,526 74,982 74,982
Average interest rate 2.85 % 2.85 % 2.85 % 2.85 % 2.85 % 2.85 %
IRA's:
Fixed rate 7,860 4,913 1,367 1,392 977 1,782 18,291 18,665
Average interest rate 5.51 % 6.04 % 5.73 % 5.92 % 5.78 % 6.72 %
Variable rate 11,597 - - - - - 11,597 11,597
Average interest rate 4.80 %
CD's over $100,000 29,276 5,810 1,452 407 100 208 37,252 37,225
Average interest rate 4.83 % 5.51 % 5.44 % 5.85 % 5.35 % 5.44 %
CD's under $100,000 80,011 25,542 5,135 3,567 904 936 116,095 116,883
Average interest rate 4.98 % 5.42 % 5.31 % 5.94 % 5.61 % 5.76 %
-------- -------- -------- ------- ------- ------ --------- ---------
Total interest bearing
liabilities 159,873 43,204 14,893 12,305 8,920 97,873 $337,069 $338,204
4.48 % 5.08 % 4.18 % 4.14 % 3.41 % 2.73 % ======== =========
--------- --------- --------- ------- ------- --------
Period gap $(26,755) $21,971 $46,106 $17,547 $10,795 $(8,510)
========= ========== ========= ======== ========= =========
Cumulative gap $(26,755) $(4,784) $41,322 $58,869 $69,664 $61,154
========= ========== ========= ======== ========= =========
Ratio of rate sensitive
assets to
rate sensitive liabilities:
First twelve months 83.26%
Years two through four 221.55%
Thereafter 91.30%
<FN>
(1) Excludes adjustments for deferred net origination costs
and allowance for loan losses.
(2) At amortized cost.
(3) Rates for tax-exempt securities are adjusted to a taxable
equivalent rate.
</FN>
/TABLE
<PAGE>
Supervision and Regulation
Lebanon Citizens, as a national banking association, as defined
under the National Bank Act, 12 U.S.C. 21 (the "Bank Act") is
regulated primarily by the Comptroller of the Currency, and is also
subject to various other federal and state laws. The Interim Bank
will also be regulated by the Comptroller of the Currency and
subject to other federal and state laws and regulations to the same
extent as Lebanon Citizens, and also to regulation as a subsidiary
of a registered bank holding company.
The Bank Act permits a national banking association or a state bank
to merge into a national banking association located within the same
state, with the approval of the Comptroller of the Currency. The
transaction must be approved by a majority of the board of directors
of each association or state bank, be ratified and confirmed by the
affirmative vote of the shareholders of each association or state
bank owning at least two thirds of its capital stock outstanding, or
by such greater proportion in the case of a state bank as the state
where it is organized so require, at a meeting of the shareholders.
Under the Bank Act, any shareholder who votes against the merger or
who, prior to such meeting, notifies the presiding officer in
writing, may receive the value of the shares held by him or her when
the merger is approved by the Comptroller, when a written request is
made to the merging bank at any time before thirty days after the
consummation of the merger.
A national bank also may engage in an merger under the Bank Act with
an out-of-state bank if it fulfills the requirements of the Riegle-
Neal Interstate Banking and Branching Efficiency Act of 1994, 12
U.S.C. 1831(u) (the "Riegle-Neal Act"). The Riegle-Neal Act permits
interstate branch banking and mergers, so long as none of the home
states of the concerned banks has enacted a law after the date of
enactment of the Riegle-Neal Act, September 24, 1994 and before June
1, 1997 that expressly prohibits merger transactions involving out-
of-state banks. Ohio no longer has such prohibitive bank merger
laws, nor do its neighboring states of Indiana and Kentucky. LCNB
Corp., however, has no current plans to acquire additional banks
either within or outside of Ohio.
MANAGEMENT OF LEBANON CITIZENS AND LCNB CORP.
Directors and Executive Officers
The reorganization of Lebanon Citizens into a holding company
structure is simply a change in the legal structure of the present
business of Lebanon Citizens and is not meant to cause a change in
any of the present management or business policies of Lebanon
Citizens. Lebanon Citizens will continue to serve all of its
shareholders, depositors and other customers as it has in the past.
LCNB Corp. has the same Directors as Lebanon Citizens. However, the
Board of Directors of LCNB Corp. is divided into three classes of
Directors with overlapping terms. Class I will serve an initial
one-year term, Class II, a two-year term and Class III, a three-year
term. Commencing with the first annual meeting of the shareholders
of LCNB Corp., each Class whose members are to be elected will
thereafter be elected to serve a three-year term. The Directors and
Officers of LCNB Corp. are:
DIRECTORS
CLASS I CLASS II CLASS III
Stephen P. Wilson Marvin Young George L. Leasure
M. Russell Horn Kathleen Porter Stolle William H. Kaufman
Sam Kaufman Corwin Nixon James Miller
Howard Wilson
In addition, the regulations of LCNB Corp. and of the Interim Bank
will provide that directors must qualify for their position by
meeting certain age requirements. No person may stand for election
as a director of LCNB Corp. or of the Interim Bank who has passed
his or her 75th birthday. This age limitation will not apply to the
individuals who currently serve as Directors of LCNB Corp. or of the
Interim Bank.
EXECUTIVE OFFICERS
Chairman/President: Stephen P. Wilson
Senior Vice President: D.J. Benjamin Jackson
Vice President/Trust Officer: Bernard H. Wright, Jr.
Vice President/Chief Financial Officer: Steve P. Foster
Vice President/Cashier: Donald E. Williams
The following table sets forth information as to each person who
currently serves as a Director or executive officer of Lebanon
Citizens and who also will serve as a Director of LCNB Corp.
following the merger, and as to all such Directors and executive
officers as a group, as well as the number of shares of Lebanon
Citizens beneficially owned by each as of December 31, 1998. The
number of shares listed for each person includes shares held in the
name of spouses, minor children, certain relatives, trusts or
estates whose share ownership under the beneficial ownership rules
of the Securities and Exchange Commission, is to be aggregated with
that of the Director or officer whose stock ownership is shown.
Following the merger, all percentage amounts as to LCNB Corp.
ownership will remain unchanged from percentage amounts as to
Lebanon Citizens ownership.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK.]
<PAGE>
<TABLE>
<CAPTION>
Shares of Common Stock of
Lebanon Citizens Beneficially
Owned on December 31, 1998
Name and Principal
Occupation During Position With Director Position With
Past Five Years Lebanon Citizens Since Holding Company Age Number Percent of Class
<S> <C> <C> <C> <C> <C> <C>
M. Russell Horn, Retired Director 12-27-71 Director 81 4,300(1) 2.44%
Sam Kaufman(2), Retired retailer Director 07-23-55 Director 93 1,330(3) 0.76%
William H. Kaufman(2), Director 09-27-82 Director 55 1,671(4) 0.95%
Attorney at Law; former Municipal
Court Judge
George L. Leasure, President of Director 05-09-94 Director 66 573(5) 0.33%
Ghent Manufacturing, Inc.
James B. Miller, Manager, Director 03-03-80 Director 72 2,434(6) 1.38%
President and Director of
Greenwood Farms; CEO, Director
of Mound Steel Corp.
Corwin M. Nixon, Manager of Miami Director 05-26-67 Director 85 1,279 0.73%
Valley Trotting Club and Lebanon
Trotting Club; farm owner
Kathleen Porter Stolle, Attorney Director 05-31-94 Director 51 1,297(7) 0.74%
at Law, former County Court Judge,
former secretary/treasurer of
Interscope Manufacturing, Inc.
Howard E. Wilson(8), Retired Director 08-31-68 Director 71 6,000(9) 3.41%
Chairman and CEO of the Bank
Stephen P. Wilson(8), President, President, 09-27-82 President 48 1,470(10) 0.84%
CEO and Chairman of the Board of CEO, Chairman CEO,Chairman
the Bank of the Board of the Board
Marvin E. Young, Attorney at Law Director 12-02-58 Director 83 4,900(11) 2.78%
All directors and executive --- --- --- 25,254 14.35%
officers as a group (10 persons)
<FN>
1 Includes 2,150 shares owned by Mr. Horn's spouse. All shares
are held in revocable grantor trusts.
2 Sam Kaufman is the uncle of William H. Kaufman.
3 All shares are held jointly with Mr. Kaufman's spouse in
a revocable trust.
4 Includes 700 shares held in trust, 420 shares held jointly with
Mr. Kaufman's spouse, 115 shares owned by Mr. Kaufman's spouse, 40
shares owned by Mr. Kaufman's daughter and 38 shares held in trust
for Mr. Kaufman's daughter.
5 Includes 493 shares held jointly with Mr. Leasure's spouse and
40 shares owned by Mr. Leasure's spouse.
6 Includes 858 shares owned by Mr. Miller's spouse.
7 Includes 760 shares held in an irrevocable trust of which Mrs.
Stolle is one of several beneficiaries.
8 Howard E. Wilson is the father of Stephen P. Wilson.
9 Includes 2,990 shares held in a revocable grantor trust and
2,990 shares owned by Mr. Howard Wilson's spouse and also held in a
revocable grantor trust.
10 Includes 1,270 shares held jointly with Mr. Stephen Wilson's spouse.
11 Includes 2,450 shares owned by Mr. Young's spouse. All shares are
held in revocable grantor trusts.
</FN>
</TABLE>
<PAGE>
All persons referred to above as currently being directors or
officers of Lebanon Citizens will continue to hold similar positions
with the resulting bank after the merger is effective.
Executive Compensation
Two executive officers of Lebanon Citizens had aggregate cash
compensation for the year ended December 31, 1998 in excess of
$100,000, including any cash bonuses. The following table sets
forth information concerning the compensation of the Chief Executive
Officer and Senior Vice President:
<PAGE>
<TABLE>
<CAPTION>
Annual Compensation Long Term
Compensation
Securities
Underlying Restricted
Fiscal Options Stock Other Annual
Name Principal Position Year Salary Bonus(1) Granted Awards Compensation
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen P. CEO, President, 1998 $150,000 $47,475 n/a n/a 11,873
Wilson Chairman of the Board 1997 145,000 49,500 n/a n/a 9,867
1996 140,000 22,275 n/a n/a 9,302
D.J. Senior Vice President 1998 90,000 13,175 n/a n/a 5,523
Benjamin 1997 85,000 14,175 n/a n/a 3,600
Jackson 1996 81,000 12,705 n/a n/a 3,508
<FN>
(1) Mr. Wilson's and Mr. Jackson's 1997 bonuses were paid in
1998, their 1996 bonuses were paid in 1997 and their 1995 bonuses
were paid in 1996. The 1998 bonuses will be paid in 1999.
</FN>
</TABLE>
<PAGE>
The aggregate cash compensation paid to all executive officers of
Lebanon Citizens (5 persons) during the year ended December 31, 1998
was $582,317, which includes amounts paid in employee benefits on
behalf of each employee.
The Board of Directors of Lebanon Citizens meets weekly for a total
of 52 meetings per year. Members of the Board of Directors hold 59
committee meetings. Directors receive approximately $1,155.00 per
month for service on the Board of Directors. Lebanon Citizens does
not pay premiums for health and life insurance for directors with
the exception of two directors who continue to receive health and
life insurance as the result of the grandfathering of policies from
a previous Lebanon Citizens board of directors.
Including Board meetings and Committee meetings, which all Directors
attend, the Board of Directors met approximately fifty-two (52)
times during the fiscal year ended December 31, 1998. Each
incumbent Director attended at least 53.8% of the total number of
Board meetings and over half of the Directors attended over 92.3% of
the total number of meetings.
It is anticipated that LCNB Corp. will also compensate its directors
for attendance at LCNB Corp. Board meetings. The decision as to
whether and how much to give LCNB Corp. directors will be determined
after the completion of the holding company conversion.
CERTAIN BENEFICIAL OWNERS
Under Rule 13(d) of the Securities Exchange Act of 1934, a
beneficial owner of a security is any person who directly or
indirectly has or shares voting power or investment power over such
security. Such beneficial owner under this definition need not
enjoy the economic benefit of such securities. There are no
shareholders (or group as that term is used in Rule 13d-3) deemed to
be beneficial owners of 5% or more of the common stock of Lebanon
Citizens as of December 31, 1998.
COMMON STOCK MARKET INFORMATION
There is currently no established public trading market for Lebanon
Citizens common stock. It is anticipated that shareholder liquidity
will be increased by the conversion of Lebanon Citizens into a
holding company structure, and, although there are no assurances
that LCNB Corp. will be able to do so, management of LCNB Corp.
expects to take steps in the future to enhance its shareholders'
ability to trade LCNB Corp. common stock.
During 1998, trade prices for shares of stock in Lebanon Citizens,
reported through registered securities dealers are set forth below.
Because the bank is not public, the stock of Lebanon Citizens often
trades without the bank having knowledge of the trade. The bank
knows that there were trades in its stock during 1998 of which it
was not aware. The trades that it is aware of from the market
makers in the Bank's stock are those outlined. The prices given are
interdealer without retail markups, markdown or commissions.
High Low
First Quarter $430 $315
Second Quarter 430 390
Third Quarter 530 425
Fourth Quarter 530 505
The Lebanon Citizens common stock was held of record by
approximately 564 persons as of December 31, 1998. Immediately
following consummation of the merger, LCNB Corp. will have the same
number of shareholders as Lebanon Citizens had immediately prior to
the merger except to the extent any shareholders elect to exercise
dissenters' rights due to the conversion. Assuming there are no
dissenting shareholders, the number of outstanding shares of LCNB
Corp. will be exactly ten (10) times the number of shares as that of
Lebanon Citizens, or 1,760,000, and each shareholder's percentage
ownership interest in LCNB Corp. after the merger will be identical
to his or her percentage ownership interest in Lebanon Citizens
prior to the merger.
During the fiscal years ended December 31, 1996, 1997 and 1998,
Lebanon Citizens has paid dividends annually, as set forth in the
following table:
Period Ended Dividend Paid Per Share
1996 $ 9.50
1997 $12.00
1998 $14.00
It is expected that LCNB Corp. will continue to pay dividends on a
similar schedule, to the extent permitted by the business and other
factors beyond management's control.
The LCNB Corp. may, in its sole discretion, issue unaudited
quarterly or other interim reports to its shareholders as it deems
appropriate. These reports, while they are required to be filed
with the SEC by the LCNB Corp., may not be delivered to
shareholders.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In the ordinary course of conducting its banking business, Lebanon
Citizens may engage in banking transactions with the employees,
directors and managers of Lebanon Citizens which may include, but
not be limited to, loans. As required by and in compliance with
national banking law, all banking transactions with Lebanon Citizens
employees, directors and managers are conducted on the same basis
and terms as would be provided to any other customer of Lebanon
Citizens.
Except where quantified below, no amounts of these related
transactions exceeded $60,000 in calendar 1998. In addition, as
required by national banking law, each of these transactions was
made on terms similar to those that could have been negotiated with
an unaffiliated third party.
During 1998, Lebanon Citizens paid John Mullins, the son-in-law of
Mr. M. Russell Horn, $60,088 as gross compensation and reimbursement
for repairs, maintenance and supplies for work on Lebanon Citizens
property. Management believes that these services and supplies were
obtained at prices and terms advantageous to Lebanon Citizens. In
the future, Lebanon Citizens expects to obtain similar services from
Mr. Mullins as needed.
Lebanon Citizens retained Mr. William H. Kaufman's law firm during
1998 for legal services for Lebanon Citizens in connection with
various matters arising in the course of Lebanon Citizens' business.
Lebanon Citizens contemplates using Mr. Kaufman's firm in the future
on similar terms, as needed.
Mr. Howard Wilson retired as President of Lebanon Citizens in 1992.
Prior to his retirement he entered into a contract with Lebanon
Citizens deferring portions of his compensation until after
retirement. During 1998, he received payments under the terms of
the agreement.
Lebanon Citizens retained Mr. Marvin E. Young's law firm during 1998
for legal services for Lebanon Citizens in connection with various
matters arising in the course of Lebanon Citizens' business.
Lebanon Citizens contemplates using Mr. Young's firm in the future
on similar terms, as needed.
In connection with the extension of credit to Lebanon Citizens'
customers, customers are charged for various documents, mortgages,
etc. Lebanon Citizens requires customers to use the legal services
of Kaufman & Florence, a firm in which Mr. William H. Kaufman is a
partner, or Young & Hubbell, a firm in which Mr. Young is a partner,
for these matters.
LEGAL MATTERS
Certain legal matters will be passed upon for LCNB Corp. by Dinsmore
& Shohl, its special counsel, 1900 Chemed Center, 255 East Fifth
Street, Cincinnati, Ohio 45202.
OTHER BUSINESS
It is not anticipated that any other business will arise during the
Annual Meeting as the management of Lebanon Citizens has no other
business to present and does not know that any other person will
present any other business. However, if any other business should
be presented at the meeting, the persons named in the enclosed proxy
intend to take such action as will be in harmony with the policies
of the management of Lebanon Citizens.
By Order of The Board of Directors
Dated: _______________, 1999 Stephen P. Wilson
President
TO ASSURE THAT YOUR SHARES ARE REPRESENTED AT THE MEETING, PLEASE
COMPLETE, DATE, SIGN AND MAIL PROMPTLY THE ENCLOSED PROXY, FOR WHICH
A RETURN ENVELOPE IS PROVIDED.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS REPORT 1
FINANCIAL STATEMENTS
Balance Sheets 2
Statements of Income 3
Statements of Changes in Shareholders' Equity 4
Statements of Cash Flows 5
Notes to Financial Statements 6-18
<PAGE>
REPORT OF J.D. CLOUD & CO. L.L.P. INDEPENDENT AUDITORS
To the Shareholders
Lebanon Citizens National Bank
Lebanon, Ohio
We have audited the accompanying balance sheets of the Lebanon
Citizens National Bank as of December 31, 1998 and 1997, and the
related statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December
31, 1998. These financial statements are the responsibility of the
Lebanon Citizens' management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Lebanon
Citizens National Bank as of December 31, 1998 and 1997, and the
results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with
generally accepted accounting principles.
/s/ J.D. CLOUD & CO. L.L.P.
Certified Public Accountants
Cincinnati, Ohio
April 5, 1999
<PAGE>
<TABLE>
LEBANON CITIZENS NATIONAL BANK
BALANCE SHEETS
<CAPTION>
At December 31 ($000's)
1998 1997
<S> <C> <C>
ASSETS:
Cash and due from banks $ 16,907 12,961
Federal funds sold 3,800 17,400
--------- -------
Total cash and cash equivalents 20,707 30,361
Interest-bearing deposits in banks 5,492 4,000
Federal Reserve Bank stock 647 647
Securities available for sale, at market value 123,040 30,092
Securities held to maturity (market value
$70,853 in 1997) - 70,449
Loans, net 265,057 268,294
Premises and equipment, net 8,102 7,616
Accrued income receivable 3,017 2,989
Other assets 6,097 6,579
-------- -------
TOTAL ASSETS $ 432,159 421,027
======== =======
LIABILITIES:
Deposits -
Demand $ 49,972 41,556
NOW 54,910 45,879
Money fund deposits 23,942 26,660
Savings 74,982 59,174
IRA 29,888 30,899
Certificates - $100,000 and over 37,252 35,931
Other time certificates 116,095 137,310
-------- -------
Total deposits 387,041 377,409
Accrued interest and other liabilities 2,919 4,962
-------- -------
TOTAL LIABILITIES 389,960 382,371
--------- -------
SHAREHOLDERS' EQUITY:
Common stock, $60 par value, 176,000 shares
authorized and outstanding 10,560 10,560
Surplus 11,000 11,000
Retained earnings 19,993 17,010
Accumulated other comprehensive income,
net of taxes 646 86
-------- -------
TOTAL SHAREHOLDERS' EQUITY 42,199 38,656
-------- -------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 432,159 421,027
======== =======
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
<TABLE>
LEBANON CITIZENS NATIONAL BANK
STATEMENTS OF INCOME
<CAPTION>
For the years ended December 31 ($000's, except per share amounts)
1998 1997 1996
<S> <C> <C> <C>
INTEREST INCOME:
Interest and fees on loans $ 23,047 21,385 19,322
Interest on federal funds sold 796 918 1,187
Interest on deposits in banks 289 239 39
Interest on Federal Reserve Bank stock 39 39 39
Interest on investment securities -
Taxable 4,612 4,354 4,521
Non-taxable 816 842 890
------ ------ ------
TOTAL INTEREST INCOME 29,599 27,777 25,998
------ ------ ------
INTEREST EXPENSE:
Interest on deposits -
Money fund and NOW accounts 1,706 1,616 1,473
Savings 1,769 1,741 1,576
IRA 1,737 1,680 1,560
Certificates - $100,000 and over 1,871 2,160 2,079
Other time certificates 6,949 7,101 6,514
------ ------ ------
Total interest on deposits 14,032 14,298 13,202
Interest on funds borrowed 48 46 40
------ ------ ------
TOTAL INTEREST EXPENSE 14,080 14,344 13,242
------ ------ ------
NET INTEREST INCOME 15,519 13,433 12,756
PROVISION FOR LOAN LOSSES 191 291 288
------ ------ ------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 15,328 13,142 12,468
------ ------ ------
OTHER OPERATING INCOME:
Trust income 1,082 1,118 805
Service charges and fees 2,007 1,673 1,684
Securities gains 234 - -
Other operating income 132 183 84
------ ------ ------
TOTAL OTHER OPERATING INCOME 3,455 2,974 2,573
------ ------ ------
OPERATING EXPENSES:
Salaries and wages 4,366 3,690 3,342
Pension and other employee benefits 1,007 944 816
Equipment expenses 475 431 323
Occupancy expense - net 867 690 574
State franchise tax 578 535 485
Marketing 423 317 323
Intangible amortization 611 178 -
Other operating expenses 2,583 2,118 1,988
------ ------ ------
TOTAL OPERATING EXPENSES 10,910 8,903 7,851
------ ------ ------
INCOME BEFORE INCOME TAXES 7,873 7,213 7,190
PROVISION FOR INCOME TAXES 2,426 2,178 2,195
------ ------ ------
NET INCOME $ 5,447 5,035 4,995
====== ====== ======
Basic earnings per share $ 30.95 28.61 28.38
====== ====== ======
Weighted average shares outstanding (000's) 176 176 176
====== ====== ======
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.<PAGE>
<TABLE>
LEBANON CITIZENS NATIONAL BANK
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
($000's, except per share amount)
<CAPTION>
Accumulated
Other Total
Common Retained Comprehensive Comprehensive Shareholders'
Shares Surplus Earnings Income Income Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1996 $10,560 11,000 10,764 - 32,324
Net income 4,995 4,995 4,995
=========
Cash dividends declared -
$9.50 per share (1,672) (1,672)
-------- -------- ------- ----------- --------
Balance, December 31, 1996 10,560 11,000 14,087 - 35,647
Net income 5,035 5,035 5,035
Net unrealized gain on available-
for-sale securities (net of
taxes of $44) 86 86 86
--------
Total comprehensive income 5,121
========
Cash dividends declared -
$12.00 per share (2,112) (2,112)
-------- -------- ------ ----------- -------
Balance, December 31, 1997 10,560 11,000 17,010 86 38,656
Net income 5,447 5,447 5,447
Transition adjustment for the
effect of a change in
accounting principle 473 473 473
Net unrealized gain on available-
for-sale securities (net of
taxes of $124) 241 241 241
Reclassification adjustment for
net realized gain on sale of
available-for-sale securities
included in net income (net
of taxes of $80) (154) (154) (154)
------
Total comprehensive income 6,007
======
Cash dividends declared -
$14.00 per share (2,464) (2,464)
------ ------ ------ ----- ------
Balance, December 31, 1998 $10,560 11,000 19,993 646 42,199
====== ====== ====== ===== ======
</TABLE>
The accompanying notes to financial statements
are an integral part of these statements.
<PAGE>
<TABLE>
LEBANON CITIZENS NATIONAL BANK
STATEMENTS OF CASH FLOWS
For the years ended December 31 ($000's)
<CAPTION>
1998 1997 1996
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 5,447 5,035 4,995
Adjustments to reconcile net income to net cash
provided by operating activities -
Depreciation and amortization 1,799 1,476 850
Deferred loan origination fees (585) (677) (452)
Provision for loan losses 191 291 288
Provision for deferred taxes (51) (62) 113
Realized gains on securities available for sale (234) - -
Origination of mortgage loans for sale (11,600) (280) (127)
Proceeds from sales of mortgage loans 11,600 280 127
(Increase) decrease in interest receivable (35) (355) 229
Increase (decrease) in interest payable (110) 13 60
Increase (decrease) in other accrued expenses, net 227 (66) (160)
------ ------ ------
TOTAL ADJUSTMENTS 1,202 620 928
------ ------ ------
NET CASH PROVIDED BY OPERATING ACTIVITIES 6,649 5,655 5,923
------ ------ ------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (increase) decrease in interest-bearing deposits in banks (1,492) - (4,000)
Proceeds from sales of securities available for sale 8,315 - -
Proceeds from maturities of securities available for sale 10,201 1,076 -
Proceeds from maturities of securities held to maturity 32,010 32,666 52,268
Purchases of securities available for sale (67,634) (31,002) -
Purchases of securities held to maturity (4,474) (12,642) (34,551)
Net decrease (increase) in loans 3,245 (22,096) (34,364)
Purchases of premises and equipment (1,363) (1,932) (1,506)
Proceeds from certain asset sales 274 - 880
Net change due to acquisition of branch offices - 32,757 -
--------- ------- -------
NET CASH USED IN INVESTING ACTIVITIES (20,918) (1,173) (21,273)
--------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits 7,079 (1,861) 14,857
Cash dividends paid (2,464) (2,112) (1,672)
--------- ------- -------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 4,615 (3,973) 13,185
--------- ------- -------
NET CHANGE IN CASH AND CASH EQUIVALENTS (9,654) 509 (2,165)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 30,361 29,852 32,017
--------- ------- -------
CASH AND CASH EQUIVALENTS AT END OF YEAR $ 20,707 30,361 29,852
========== ======== =======
SUPPLEMENTAL CASH FLOW INFORMATION
CASH PAID DURING THE YEAR FOR:
Interest $ 14,190 14,331 13,182
Income taxes 2,245 2,261 2,135
NON-CASH TRANSFER OF SECURITIES FROM HELD-TO-MATURITY
TO AVAILABLE-FOR-SALE CLASSIFICATION 42,768 - -
</TABLE>
The accompanying notes to financial statements are
an integral part of these statements.
<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Lebanon Citizens National Bank provides full banking services,
including trust services, to customers primarily in the southwestern
Ohio area of Warren, Hamilton, Clermont, Clinton and Butler
counties. The accounting and reporting policies of Lebanon Citizens
conform with generally accepted accounting principles (GAAP) and
with general practices within the banking industry. Presented below
is a description of the significant accounting policies followed by
Lebanon Citizens. Certain prior period amounts have been
reclassified to conform to current year presentation.
USE OF ESTIMATES-
The preparation of financial statements in conformity with GAAP
requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those
estimates.
INVESTMENT SECURITIES-
Debt securities which Lebanon Citizens has the intent and ability to
hold to maturity are reported at amortized cost. Debt securities
classified as available for sale and all equity securities are
reported at fair value with unrealized holding gains and losses
reported net of income taxes as Accumulated Other Comprehensive
Income, a separate component of shareholders' equity. Amortization
of premiums and accretion of discounts are recognized as adjustments
to interest income using the level yield method. In 1998, Lebanon
Citizens adopted Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging
Activities." To enable Lebanon Citizens in the future to designate
a security as a hedged item in accordance with the provisions of
SFAS No. 133, securities originally categorized as held-to-maturity
were reclassified in 1998 as available-for-sale (see Recent
Pronouncements and Accounting Changes). Realized gains or losses
from the sale of securities are computed using the specific
identification method. Federal Reserve Bank stock is restricted in
marketability and value. It is reported at cost, which is its par
value. Currently, Lebanon Citizens does not hold any derivatives or
conduct hedging activities as defined by SFAS No. 133.
LOANS AND ALLOWANCE FOR LOAN LOSSES-
Loans are stated at the principal amount outstanding, net of
unearned income, including deferred loan fees, and an allowance for
loan losses. Interest on loans is calculated by using the simple
interest method on daily balances of the principal amount
outstanding. The accrual of interest on impaired loans is
discontinued when there is a clear indication that the borrower's
cash flow may not be sufficient to meet payments as they become due.
Subsequent cash receipts on nonaccrual loans are recorded as a
reduction of principal, and interest income is recorded once
principal recovery is reasonably assured. The current year's
accrued interest on loans placed on nonaccrual status is charged
against earnings. Previous years' accrued interest is charged
against the allowance for loan losses.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loan origination fees and certain direct loan origination costs are
deferred and the net amount amortized as an adjustment of loan
yields. These amounts are being amortized over the lives of the
related loans.
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. The allowance is an
amount that management believes will be adequate to absorb possible
losses on existing loans that may become uncollectible, 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.
Loans are considered impaired when management believes, based on
current information and events, it is probable that Lebanon Citizens
will be unable to collect all amounts due according to the
contractual terms of the loan agreement. Impaired loans are
measured by the present value of expected future cash flows using
the loan's effective interest rate. Impaired collateral-dependent
loans may be measured based on collateral value. Smaller-balance
homogenous loans, including residential mortgage and consumer
installment loans, are collectively evaluated for impairment.
PREMISES AND EQUIPMENT-
Lebanon Citizens' premises and equipment are stated at cost less
accumulated depreciation. Depreciation is computed on both the
straight-line and accelerated methods over the estimated useful
lives of the assets. Costs incurred for maintenance and repairs are
expensed currently.
MARKETING EXPENSE-
Marketing costs are expensed as incurred.
EMPLOYEE BENEFITS-
Lebanon Citizens has a noncontributory pension plan covering full-
time employees. The retirement plan cost is made up of several
components that reflect different aspects of Lebanon Citizens'
financial arrangements as well as the cost of benefits earned by
employees. These components are determined using the projected unit
credit actuarial cost method and are based on certain actuarial
assumptions.
INCOME TAXES-
Certain income and expenses are recognized in different periods for
financial reporting than for purposes of computing income taxes
currently payable. Deferred taxes are provided on such temporary
differences. These differences relate principally to the allowance
for loan losses, loan origination fees, pension expense and
depreciation.
STATEMENTS OF CASH FLOWS-
For purposes of reporting cash flows, cash equivalents include all
highly liquid investments with original maturities of three months
or less.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
EARNINGS PER SHARE-
Basic earnings per share is calculated by dividing net income by the
weighted average number of common shares outstanding during the
period. The Company's capital structure includes no potential for
dilution. There are no warrants, options or other arrangements that
would increase the number of shares outstanding.
RECENT PRONOUNCEMENTS AND ACCOUNTING CHANGES-
Effective January 1, 1998, Lebanon Citizens adopted SFAS No. 130,
"Reporting Comprehensive Income." The new rules establish standards
for reporting comprehensive income and its components in financial
statements. Comprehensive income consists of net income and other
gains and losses affecting shareholders' equity that, under
generally accepted accounting principles, are excluded from net
income. For Lebanon Citizens, such items consist solely of
unrealized gains and losses on investment securities available for
sale. The adoption of SFAS No. 130 did not have an impact on the
Lebanon Citizens' financial position or results of operations, but
did affect the presentation of Lebanon Citizens' statement of
changes in shareholders' equity and balance sheet.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information" became effective in 1998. The nature of
Lebanon Citizens' operations are such that there are no additional
disclosure requirements under SFAS No. 131.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133, "Accounting for Derivative Instruments and Hedging
Activities". In most instances the standard, once adopted,
precludes any held-to-maturity security from being designated as a
hedged item. Lebanon Citizens adopted SFAS No. 133 in the fourth
quarter of 1998. To provide the flexibility in the future to
designate securities as hedged items Lebanon Citizens recatagorized
its
held-to-maturity securities as available for sale. The amortized
cost and related unrealized net gain of the transferred securities
was $42,768,000 and $716,000, respectively, at the date of transfer.
This change in accounting principle had no effect on reported net
income. Comprehensive income increased $473,000 after income taxes
of $243,000 allocated to this component of other comprehensive
income.
NOTE 2 - ACQUISITION
On September 15, 1997, Lebanon Citizens purchased three Ohio branch
offices of KeyBank N.A. located in Waynesville, Oxford and Okeana.
The transaction was accounted for as a purchase and, accordingly,
the results of operations of the acquired branches prior to
September 15, 1997 are excluded from Lebanon Citizens' financial
statements. All assets acquired and liabilities assumed were
recorded at fair value. Lebanon Citizens received $33 million in
cash, $10 million in loans, $1 million in premises and furnishings,
and total deposits of $50 million. The intangible asset of $6
million, representing the excess of the cost of the acquisition over
the face value of net tangible assets acquired, is being amortized
using the straight-line method over 10 years. At December 31, 1998
and 1997, the intangible which
NOTE 2 - ACQUISITION (Continued)
is included in other assets in the balance sheets was $5.3 million
and $5.9 million, respectively. Lebanon Citizens periodically
reviews intangible assets for possible impairment.
<PAGE>
<TABLE>
NOTE 3 - INVESTMENT SECURITIES
The amortized cost and estimated market value of investment
securities at December 31 are summarized as follows ($000's):
<CAPTION>
1998
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury notes $ 28,152 239 - 28,391
U.S. Agency notes 23,134 156 100 23,190
U.S. Agency mortgage-
backed securities 17,394 62 50 17,406
Corporate notes 24,318 91 33 24,376
Municipal securities 29,063 635 21 29,677
------- ----- ----- ------
$122,061 1,183 204 123,040
======== ====== ===== =======
</TABLE>
<TABLE>
1997
<CAPTION>
Amortized Unrealized Unrealized Market
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Securities available for sale:
U.S. Treasury notes $ 1,005 15 - 1,020
U.S. Agency notes 8,038 38 - 8,076
U.S. Agency mortgage-
backed securities 8,205 12 11 8,206
Corporate notes 8,074 14 8 8,080
Municipal securities 4,639 77 6 4,710
----- ---- ---- ------
$29,961 156 25 30,092
======= ==== ===== =======
Securities held to maturity:
U.S. Treasury notes $56,188 194 37 56,345
Municipal securities 14,261 249 2 14,508
------ ---- ---- -------
$70,449 443 39 70,853
====== ==== ==== =======
</TABLE>
<PAGE>
NOTE 3 - INVESTMENT SECURITIES (Continued)
Contractual maturities of debt securities at December 31, 1998, were
as follows ($000's). Actual maturities may differ from contractual
maturities when borrowers have the right to call or prepay
obligations.
Available for Sale
Amortized Market
Cost Value
Due within one year $ 37,066 37,309
Due from one to five years 44,378 44,940
Due from five to ten years 20,010 20,136
Due after ten years 3,213 3,349
------- ---------
104,667 105,634
U.S. Agency mortgage-
backed securities 17,394 17,406
------- --------
$122,061 123,040
======= ========
Gross gains realized on sales of securities available for sale were
$234,000 for 1998. There were no realized losses during 1998.
There were no sales of investment securities during 1997 or 1996.
Investment securities with a carrying value of $45,186,000 and
$35,805,000 at December 31, 1998 and 1997, respectively, were
pledged to secure public deposits and for other purposes required or
permitted by law.
NOTE 4 - LOANS
Major classifications of loans at December 31 are as follows
($000's):
1998 1997
Commercial and industrial $ 20,640 13,905
Commercial, secured by real estate 53,907 51,088
Residential real estate 154,111 165,908
Consumer, excluding credit card 32,302 35,167
Agricultural 2,370 1,645
Credit card 2,574 2,461
Other 966 332
------- -------
266,870 270,506
Deferred costs (fees), net 187 (12)
------- -------
267,057 270,494
Allowance for loan losses (2,000) (2,200)
------- -------
Loans-net $265,057 268,294
======= =======
NOTE 4 - LOANS (Continued)
Mortgage loans serviced for the Federal Home Loan Mortgage
Corporation are not included in the accompanying balance sheets.
The unpaid principal balances of those loans at December 31, 1998
and 1997 were $14,747,000 and $5,102,000, respectively.
Changes in the allowance for loan losses were as follows ($000's):
1998 1997 1996
BALANCE-BEGINNING OF YEAR $2,200 2,000 1,800
Provision for loan losses 191 291 288
Charge offs (418) ( 122) ( 117)
Recoveries 27 31 29
------ ------ -------
BALANCE-END OF YEAR $2,000 2,200 2,000
====== ====== =======
There were no nonaccrual loans at December 31, 1998 or 1997.
Interest income that would have been recorded in 1998, 1997 and 1996
if nonaccrual loans had been current and in accordance with their
original terms, was not material. At December 31, 1998 and 1997,
the recorded investment in loans for which impairment has been
recognized in accordance with FASB Statement No. 114 was not
material. Lebanon Citizens is not committed to lend additional
funds to debtors whose loans have been modified to provide a
reduction or deferral of principal or interest because of a
deterioration in the financial position of the borrower.
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment at December 31 are summarized as follows
($000's):
1998 1997
Land $ 1,550 1,655
Buildings 7,254 6,819
Equipment 6,473 6,090
------ ------
Total 15,277 14,564
Less-Accumulated depreciation 7,175 6,948
------ ------
Premises and Equipment-Net $ 8,102 7,616
====== ======
Depreciation charged to income was $ 636,000 in 1998, $565,000 in
1997 and $396,000 in 1996.
NOTE 6 - DEPOSIT LIABILITIES
Contractual maturities of certificates of deposit at December 31,
1998 were as follows ($000's):
Certificates All other
over 100,000 Certificates Total
Year ending December 31
1999 $28,767 80,761 109,528
2000 6,032 25,324 31,356
2001 1,847 4,591 6,438
2002 406 3,886 4,292
2003 100 950 1,050
Thereafter 100 583 683
------- ------- -------
$37,252 116,095 153,347
======= ======= =======
NOTE 7 - EMPLOYEE BENEFITS
Lebanon Citizens' noncontributory defined benefit retirement plan
covers all regular full-time employees. The benefits are based on
years of service and the employee's highest average compensation
during five consecutive years. Pension costs are funded based on
the Plan's actuarial cost method and are limited to amounts
currently deductible for federal income tax purposes.
The components of net periodic pension cost are summarized as
follows ($000's):
1998 1997 1996
Service cost $ 279 232 223
Interest cost 157 154 132
Expected return on Plan assets (140) (134) (118)
Amortization of unrecognized transition
obligation 17 17 17
Recognized net actuarial loss 43 50 37
----- ----- ----
Net periodic pension cost $ 356 319 291
===== ===== ====
<PAGE>
<TABLE>
NOTE 7 -EMPLOYEE BENEFITS (Continued)
A summary of the Plan's funded status and prepaid benefit cost,
the latter included in Other Assets on Lebanon Citizens' balance sheets,
at December 31 follows ($000's):
<CAPTION>
1998 1997
<S> <C> <C>
Change in projected benefit obligations
Projected benefit obligation at beginning of year $ 3,008 2,789
Service cost 279 232
Interest cost 157 154
Actuarial losses (gains) 188 (66)
Benefits paid (356) (101)
------ ------
Projected benefit obligation at end of year 3,276 3,008
------ ------
Change in plan assets
Fair value of plan assets at beginning of year 2,646 2,214
Actual return on plan assets 111 132
Employer contribution 479 401
Benefits paid (356) (101)
Fair value of plan assets at end of year 2,880 2,646
Funded status (396) (362)
Unrecognized net actuarial loss 1,070 903
Unrecognized transition obligation 61 78
------ -----
Prepaid benefit cost $ 735 619
====== =====
</TABLE>
<PAGE>
The Plan's assets are exclusively certificates of deposit with
Lebanon Citizens. In determining the actuarial present value of the
projected benefit obligation, the following assumptions were used:
1998 1997
Assumed discount rate 5.50% 5.50%
Expected long-term rate of return on Plan assets 5.50% 5.50%
Rate of increase in future compensation levels 4.00% 4.00%
Lebanon Citizens has a benefit plan which permits eligible officers
to defer a portion of their compensation. The deferred
compensation, with accrued interest, is distributable in cash after
retirement or termination of employment. The amount of such
deferred compensation at December 31, 1998 and 1997, was $235,000
and $170,000, respectively. Lebanon Citizens also has a
supplemental income plan which provides a covered employee a certain
sum based on a percentage of average compensation, payable annually
for ten years upon retirement. The projected benefit obligation
included in other liabilities for this supplemental income plan at
December 31, 1998 and 1997, is $51,000 and $32,000, respectively.
The discount rate used to determine the present value of the
obligation was 6.5% in 1998 and 1997. The service cost associated
with this plan in each of the three years 1998, 1997 and 1996 was
approximately $16,000. Interest costs were not material. Both of
these plans are nonqualified and unfunded. Participation in each
plan is limited to a select group of management.
NOTE 8 - INCOME TAXES
The provision for federal income taxes consists of ($000's):
1998 1997 1996
Income taxes currently payable $2,477 2,290 2,082
Deferred income taxes resulting
from temporary differences-
Provision for loan losses 68 (68) (68)
Loan origination fees-net (73) (35) 136
Pension and deferred compensation 12 (14) (1)
Depreciation and amortization (58) 5 46
------ ----- -----
Total deferred income taxes (51) (112) 113
------ ----- -----
Provision for income taxes $2,426 2,178 2,195
====== ===== ======
A reconciliation between the statutory income tax rate and Lebanon
Citizens' effective tax rate follows:
1998 1997 1996
Statutory tax rate 34.0% 34.0 34.0
Increase (decrease) resulting from-
Tax exempt interest (2.9) (3.4) (3.6)
Other-net ( .3) (.4) .1
---- ----- ----
Effective tax rate 30.8% 30.2 30.5
==== ===== ====
Deferred income taxes reflect the net tax effects of temporary
differences between the carrying amount of assets and liabilities
for financial reporting purposes and the amounts used for income tax
purposes. Lebanon Citizens has not recorded a valuation reserve
related to deferred tax assets. Deferred tax assets and liabilities
at December 31 consist of the following ($000's):
1998 1997
Deferred tax assets:
Allowance for loan losses $ 522 590
Amortization of intangibles 83 14
---- ----
605 604
---- ----
Deferred tax liabilities:
Depreciation of premises and equipment (144) (133)
Unrealized gains on securities available
for sale (333) ( 44)
Deferred loan fees (193) (266)
Pension and deferred compensation (153) (141)
----- -----
(823) (584)
----- -----
Net deferred tax $(218) 20
===== =====
NOTE 9 - COMMITMENTS AND CONTINGENT LIABILITIES
Lebanon Citizens is a party to financial instruments with off-
balance-sheet risk in the normal course of business to meet the
financing needs of its customers. These financial instruments
include commitments to extend credit. They involve, to varying
degrees, elements of credit and interest rate risk in excess of the
amount recognized in the statement of financial position.
Lebanon Citizens had commitments to extend credit aggregating
$54,417,000 and $39,728,000 at December 31, 1998 and 1997,
respectively. Lebanon Citizens uses the same credit policies in
making commitments and conditional obligations as it does for on-
balance-sheet instruments. No significant losses are anticipated as
a result of these commitments.
Commitments to extend credit are agreements to lend to a customer as
long as there is no violation of any condition established in the
contract. Commitments generally have fixed expiration dates or
other termination clauses.
Lebanon Citizens evaluates each customer's credit worthiness on a
case-by-case basis. The amount of collateral obtained if deemed
necessary by Lebanon Citizens is based on management's credit
evaluation of the borrower. Collateral held varies, but may include
accounts receivable; inventory; property, plant and equipment;
residential realty; and income-producing commercial properties.
Lebanon Citizens is party to various claims and proceedings arising
in the normal course of business. Management, after consultation
with legal counsel, believes that the liabilities, if any, arising
from such proceedings and claims will not be material to the
financial position of Lebanon Citizens.
NOTE 10 - RELATED PARTY TRANSACTIONS
Lebanon Citizens has entered into related party transactions with
various directors and executive officers. Such transactions
originate in the normal course of Lebanon Citizens' operations as a
depository and lending institution. At December 31, 1998 and 1997,
certain executive officers, directors and associates of such persons
were indebted to Lebanon Citizens directly or as guarantors in the
aggregate amount of $ 3,280,000 and $3,021,000, respectively.
During 1998, $632,000 in new loans were made; repayments totaled
$373,000.
<PAGE>
<TABLE>
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS
Carrying amounts and estimated fair values of financial
instruments as of December 31, were as follows ($000's):
<CAPTION>
1998 1997
Carrying Fair Carrying Fair
Amount Value Amount Value
<S> <C> <C> <C> <C>
FINANCIAL ASSETS:
Cash and cash equivalents $ 20,707 20,707 30,361 30,361
Interest-bearing deposits in banks 5,492 5,492 4,000 4,000
Securities available for sale 123,687 123,687 30,739 30,739
Securities held to maturity - - 70,449 70,853
Loans, net 265,057 264,439 268,294 265,114
FINANCIAL LIABILITIES:
Deposits $387,041 388,176 377,409 377,476
</TABLE>
<PAGE>
The fair value of off-balance-sheet financial instruments at
December 31, 1998 and 1997, was not material.
Fair values of financial instruments are based on various
assumptions, including the discount rate and estimates of future
cash flows. Therefore, the fair values presented may not represent
amounts that could be realized in actual transactions. In addition,
because the required disclosures exclude certain financial
instruments and all nonfinancial instruments, any aggregation of the
fair value amounts presented would not represent the underlying
value of Lebanon Citizens. The following methods and assumptions
were used to estimate the fair value of certain financial
instruments:
Cash and cash equivalents
The carrying amounts presented are deemed to approximate fair value.
Interest-bearing deposits in banks
Fair value is estimated for these certificates of deposit by
discounting the future cash flows at current rates.
NOTE 11 - FAIR VALUE OF FINANCIAL INSTRUMENTS (Continued)
Investment Securities
Fair values are based on quoted market prices, if available. If a
quoted market price is not available, fair value is estimated using
quoted market prices for similar securities.
Loans
Fair value is estimated by discounting the future cash flows using
the current rates at which similar loans would be made to borrowers
with similar credit ratings and for the same remaining maturities.
Deposits
The fair value of demand deposits, savings accounts, and certain
money market deposits is the amount payable on demand at the
reporting date. The fair value of fixed-maturity certificates of
deposit is estimated using the rates currently offered for deposits
of similar remaining maturities.
NOTE 12 - REGULATORY MATTERS
The payment of dividends is subject to restriction by regulatory
authorities. The restrictions generally limit dividends to the
current and prior two years' retained net earnings. In addition,
dividend payments may not reduce capital levels below minimum
regulatory guidelines. Accordingly, future dividends may require
the prior approval of the Comptroller of Currency.
The Federal Reserve Act requires depository institutions to maintain
cash reserves with the Federal Reserve Bank. In 1998 and 1997,
Lebanon Citizens was required to maintain average reserve balances
of $6,538,000 and $4,597,000, respectively.
Lebanon Citizens must meet certain minimum capital requirements set
by federal banking agencies. For various regulatory purposes,
institutions are classified into one of five categories based upon
capital adequacy. The categories range from
"well-capitalized" to "critically-undercapitalized." The
"well-capitalized" category requires total risk-based capital of at
least 10%, tier 1 risk-based capital of at least 6% and leverage
capital of at least 5%. The minimum regulatory capital ratios are
8% for total risk-based, 4% for Tier 1 risk-based, and 3% for
leverage. As of the most recent notification from its regulators,
Lebanon Citizens was categorized as "well-capitalized" under the
regulatory framework for prompt corrective action. A summary of the
regulatory capital of Lebanon Citizens at December 31 follows
($000's):
NOTE 12 - REGULATORY MATTERS (Continued)
1998 1997
Regulatory Capital:
Shareholders' equity $42,199 38,656
Goodwill and other intangibles (5,321) (5,932)
Net unrealized securities gains (646) (86)
------- ------
Tier 1 risk-based capital 36,232 32,638
Eligible allowance for loan losses 2,000 2,200
------ ------
Total risk-based capital $38,232 34,838
====== ======
Capital Ratios:
Total risk-based 15.1% 15.7%
Tier 1 risk-based 14.3% 14.8%
Tier 1 leverage 8.6% 7.9%
NOTE 13 - OTHER DEVELOPMENTS
On September 28, 1998, the Board of Directors adopted a plan of
reorganization to form a one-bank holding company. Under the
proposed plan, in the second quarter of 1999, each shareholder of
Lebanon Citizens would receive ten common shares of the newly-formed
holding company in exchange for one common share of Lebanon
Citizens. The shareholders of Lebanon Citizens would retain the
same percentage ownership of the holding company as each shareholder
held of Lebanon Citizens' shares prior to the reorganization.
Thereafter, Lebanon Citizens would be a wholly-owned subsidiary of
the holding company. The plan is subject to approval by Lebanon
Citizens' shareholders and federal regulatory authorities.
<PAGE>
APPENDIX A TO PROXY STATEMENT
PLAN AND AGREEMENT OF MERGER
This Plan and Agreement of Merger, dated as of __________, 1999, is
hereby entered into by and between Lebanon Citizens National Bank,
Lebanon, Ohio, a national banking association organized and existing
under the laws of the United States, whose address is 2 North
Broadway, Lebanon, Ohio, 45036 (the "Lebanon Citizens"), and LCNB
Corp., a corporation formed under the General Corporation Law of the
State of Ohio ("LCNB Corp."). In addition, as soon as reasonably
and legally possible LCNB Corp. will form as a wholly-owned
subsidiary, a new national banking association organized and
existing under the laws of the United States ("Interim Bank") under
the name The LC Interim National Bank, which will upon such
formation become a party to this Agreement and to the Agreement of
Merger attached hereto and made a part hereof as Exhibit A. All
obligations of the Interim Bank will, until properly assumed by it
by its execution of this Agreement, be made and assumed on its
behalf by LCNB Corp. Lebanon Citizens, LCNB Corp. and the Interim
Bank are herein sometimes referred to collectively as the "Parties",
and individually as a "Party".
W I T N E S S E T H:
WHEREAS, LCNB Corp. will, upon the formation of the Interim Bank be
the owner of all the outstanding shares of the capital stock of the
Interim Bank;
WHEREAS, the Parties desire and contemplate that on the Closing Date
(as hereinafter defined) Lebanon Citizens shall merge with and into
the Interim Bank, with the Interim Bank as the corporation
surviving, pursuant to the Agreement of Merger attached hereto and
made a part hereof as Exhibit A (the "Agreement of Merger" or
"Merger Agreement"), and thereupon the Interim Bank, as successor to
Lebanon Citizens shall commence business as a bank under the name
Lebanon Citizens National Bank in Warren County, Ohio;
WHEREAS, upon the consummation of the merger contemplated by the
Agreement of Merger (the "Merger") the shares of the outstanding
common stock, par value $60 per share, of Lebanon Citizens (other
than those held by dissenting shareholders) ("Lebanon Citizens
common stock") shall be converted into newly issued shares of the
common stock without par value of LCNB Corp. at the rate of ten (10)
shares of the common stock of LCNB Corp. for each share of Lebanon
Citizens common stock issued and outstanding on the effective date
of the Merger, and immediately after the Closing Date, LCNB Corp.
will own all of the outstanding shares of the Interim Bank, and the
former shareholders of Lebanon Citizens will own all of the
outstanding shares of common stock of LCNB Corp.; and
WHEREAS, this Agreement and the Agreement of Merger (collectively
the "Agreements"), and the transactions and other acts respectively
contemplated thereby, have been authorized and approved by the
Boards of Directors of Lebanon Citizens and LCNB Corp., and upon its
formation by the Board of Directors of the Interim Bank.
NOW, THEREFORE, Lebanon Citizens, LCNB Corp. and the Interim Bank
agree as follows:
A. The Closing Date
The transactions contemplated by this Agreement shall be consummated
and the "Closing" shall occur as of the close of business on the
date (the "Closing Date") the Merger is approved in final form by
the Comptroller of the Currency (together with the issuance of all
requisite certificates).
B. Efforts Prior To The Closing
The Parties will each use all reasonable efforts to cause the
Closing to occur and the conditions set forth in Section D hereof to
be satisfied with all reasonable dispatch, and none of them will
undertake any course of action inconsistent with such intended
result.
C. The Closing
Upon the Closing, LCNB Corp. will issue to such person or persons as
Lebanon Citizens shall designate in writing the shares of LCNB
Corp.'s common stock, without par value, ("LCNB Corp. Common")
necessary to consummate the merger under the Agreement of Merger.
From and after the Closing each holder of a certificate or
certificates theretofore representing shares of Lebanon Citizens
common stock shall surrender such certificate or certificates to
Lebanon Citizens and shall receive in exchange therefor, in respect
of the certificate or certificates so surrendered, a certificate or
certificates representing the number of shares of LCNB Corp. Common
into and for which the shares of Lebanon Citizens common stock
theretofore represented by such surrendered certificate or
certificates have been converted pursuant to the provisions of
Article III, Section 3.1 of the Agreement of Merger.
Until surrendered pursuant to the provisions hereof, each
certificate or certificates theretofore representing shares of
Lebanon Citizens common stock shall be deemed for all purposes
(other than for the payment of dividends or other distributions, if
any, to the shareholders of LCNB Corp.) to represent the number of
shares of LCNB Corp. into and for which the shares of Lebanon
Citizens common stock theretofore represented thereby shall have
been converted pursuant to the provisions of Article III, Section
3.1 of the Agreement of Merger.
No dividends or other distributions, if any, payable to the holders
of shares of LCNB Corp. Common shall be paid to the holders of a
certificate or certificates theretofore representing shares of
Lebanon Citizens common stock; provided however, that upon the
surrender and exchange of such certificate or certificates
theretofore representing shares of Lebanon Citizens common stock
pursuant to the provisions hereof, there shall then be paid to the
record holders of a certificate or certificates for shares of LCNB
Corp. Common issued in exchange therefor the amount, without
interest thereon, of all dividends and other distributions, if any,
declared with respect to shares of LCNB Corp. Common to holders of
record of shares of LCNB Corp. Common as of any record date after
the Closing and prior to or coincident with the date of such
surrender and exchange, with respect to the number of shares of LCNB
Corp. Common represented thereby.
D. Conditions Precedent
The obligations of each of the Parties to cause the transactions
respectively contemplated by this Agreement, the Agreement of Merger
and thus the Closing to occur, shall be subject to the satisfaction
of the following conditions except as such Party may waive the same
in writing in accordance with Section E hereof:
(1) Action by Comptroller of the Currency. At or prior to the
Closing, the Comptroller of the Currency, the head of the federal
government agency that regulates national banks, shall have:
(a) approved in final form the incorporation and formation of the
Interim Lebanon Citizens as a national banking association under and
pursuant to the laws of the United States; and
(b) approved this Agreement and the Agreement of Merger, as well as
the Merger contemplated thereby, in accordance with the applicable
laws of the United States;
and each such approval shall be in full force and effect at the
Closing Date.
(2) Orders by the Board of Governors of the Federal Reserve System.
At or prior to the Closing, the Board of Governors of the Federal
Reserve System (i) shall have granted LCNB Corp.'s application for
approval to become a bank holding company pursuant to Section
3(a)(1) of the Bank Holding Company Act of 1956, as amended, and
consummation of the transactions contemplated by this Agreement
shall be in compliance with such approval, which shall be in full
force and effect at the Closing.
(3) Lebanon Citizens Shareholder Approval. This Agreement and the
Agreement of Merger shall have been duly adopted and approved by the
affirmative vote of the holders of at least two-thirds of the
outstanding shares of Lebanon Citizens' common stock entitled to
vote on the proposal to so approve such Agreements.
(4) Securities Law Compliance. The Shares of LCNB Corp.'s common
stock to be issued to the holders of Lebanon Citizens common stock
upon the consummation of the merger in exchange for their shares of
Lebanon Citizens common stock shall be duly registered under the
Securities Act of 1933, as amended, under a registration statement
on Form S-4 and in accordance with the terms and conditions of the
regulations of the Securities and Exchange Commission, and also
properly registered or otherwise qualified under all other
applicable state securities laws, as legally required, and no stop
order shall be in effect under any such federal or state securities
law.
(5) Tax Consequences. At or prior to the Closing, the Parties
shall be confident that for Federal income tax purposes (a) the
Merger will constitute a reorganization within the meaning of
Section 368(a)(1) of the Internal Revenue Code of 1986, as amended,
(b) no gain or loss will be recognized by any shareholder of Lebanon
Citizens upon the exchange of Lebanon Citizens common stock for LCNB
Corp. common stock in the Merger, (c) the basis of LCNB Corp. common
stock so received by a Lebanon Citizens shareholder upon the Merger
will be, in the hands of such shareholder, the same as the basis of
Lebanon Citizens common stock surrendered in exchange therefor, and
(d) the holding period of LCNB Corp. common stock thus received by
a shareholder of Lebanon Citizens will include the holding period of
the shares of Lebanon Citizens common stock surrendered in exchange
therefor provided that such shares are capital assets in the hands
of the shareholders.
(6) Shareholders Dissent. The shareholders of Lebanon Citizens
shall have taken the action contemplated by paragraph D(3) herein
and the holders in the aggregate of not more than 8,800 shares (5%
of the 176,000 total outstanding shares) of Lebanon Citizens common
stock (or such lesser number as may be required to comply with any
conditions or requirements imposed by the Comptroller of the
Currency or the Board of Governors of the Federal Reserve System)
shall have either voted against the Merger or given notice in
writing at or prior to the meeting at which the Merger was ratified
and confirmed that they dissent from the Merger, in accordance with
applicable law.
(7) Litigation. On the Closing Date there shall be no court order
in effect enjoining or preventing consummation of any of the
transactions contemplated by this or any of the other Agreements;
and there shall be no litigation, governmental investigation or
proceeding pending or threatened for the purpose of enjoining or
preventing the consummation of any of the transactions contemplated
by this or any of the other Agreements or otherwise claiming that
such consummation is improper and which the Board of Directors of
Lebanon Citizens shall in good faith determine, with advice of
counsel, (i) has a reasonable likelihood of being successfully
prosecuted, and (ii) if successfully prosecuted, would materially
and adversely affect the benefits intended for the shareholders of
Lebanon Citizens under this Agreement.
(8) Opinion of Counsel. Messrs. Dinsmore & Shohl shall be prepared
to deliver to the Parties their opinion, dated the Closing Date, to
the effect that (i) LCNB Corp. and the Interim Bank both are duly
incorporated, validly existing and in good standing, and have all
requisite power and authority to own properties and conduct the
business herein contemplated to be owned and conducted by each of
them after the Closing Date, under, in each case, the laws of each
corporation's state of incorporation; (ii) each of the Agreements,
as well as the transactions respectively contemplated thereby, have
been duly authorized and approved by all requisite corporate action
on the part of each of the respective parties thereto; (iii) the
Merger has become effective pursuant to all applicable federal laws
and all applicable laws of the State of Ohio, and upon becoming
effective each of the outstanding shares of Lebanon Citizens common
stock (excluding shares held by those shareholders of Lebanon
Citizens who perfected their rights as dissenting shareholders under
applicable federal law) was converted into ten (10) shares of LCNB
Corp. common stock as contemplated by the Merger Agreement; and (iv)
all of the outstanding shares of LCNB Corp. common stock are duly
authorized, validly issued, fully paid and non-assessable. Messrs.
Dinsmore & Shohl shall also be prepared to give all such other
written opinions at the Closing Date as any of the Parties
reasonably may request.
(9) Board of Directors of LCNB Corp. Upon the Closing, the Board
of Directors of LCNB Corp. shall consist of such persons as shall
have been elected by the shareholders of LCNB Corp., as sole
shareholder of the Interim Bank, acting under the direction of LCNB
Corp.'s Board of Directors.
(10) LCNB Corp. Articles. Prior to Closing, LCNB Corp. shall not
have amended its Articles of Incorporation to other than the form
set forth in Exhibit B attached hereto and made a part hereof except
to increase its authorized capital stock to 3,000,000 shares of
common stock without par value. (Also attached hereto as a part of
Exhibit B but not subject to any restriction on amendment are the
Code of Regulations of LCNB Corp.)
(11) LCNB Corp. Common Stock. The Shares of common stock into
which the Shares of common stock of Lebanon Citizens will be
converted upon the consummation of the merger shall be validly
issued and outstanding fully paid and non-assessable.
E. Miscellaneous
(1) Termination. This Agreement may be terminated and the Agreement
of Merger may be terminated and abandoned prior to the Closing,
either before or after the meeting of Lebanon Citizens' shareholders
herein provided for: (a) by mutual consent of the Parties,
authorized by their respective Boards of Directors; or (b) by
written notice from any Party to the other Parties, authorized by
the Board of Directors of the Party giving such notice, if any of
the other Parties shall have breached in any material respect any of
the obligations hereunder and such breach shall not have been
abated; or (c) by written notice from Lebanon Citizens to the other
Parties, authorized by the Board of Directors of Lebanon Citizens if
the Closing shall not have occurred by September 30, 1999.
(2) Waiver and Amendment. Any of the provisions of the Agreements
may be waived at any time by any Party which is, or the shareholders
which are, entitled to the benefit thereof upon the authority of the
Board of Directors of such Party, provided that as to such waiver
after the last vote of the shareholders of such Party with respect
to the Agreements, such waiver shall not, in the judgment of the
Board of Directors of such Party, materially and adversely affect
the benefits of such Party or its shareholders intended under the
Agreements. Any of the provisions of the Agreements may be modified
at any time prior to or after the vote hereon (or thereon as the
case may be) of shareholders of any Party, by agreement in writing
approved by the Board of Directors of each Party thereto and
executed in the same manner (but not necessarily by the same
persons) as such Agreement so to be modified, provided that such
modifications after the last vote of the shareholders of a Party
hereon shall not, in the judgment of the Board of Directors of such
Party, materially and adversely affect the benefits of such Party or
its shareholders intended under the Agreements.
(3) Delegation. To the extent permitted by law, the powers of the
Board of Directors of each Party under and with respect to this
Agreement may be delegated by such Board of Directors (which,
whenever referred to herein shall be understood to include the
Executive Committee of such Board, if any) to any officer or
officers of such Party, and any notices, consents or other action
referred to in this Agreement to be given or taken by any Party may
be given or taken on its behalf by any officer so authorized.
(4) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed an original, but such
counterparts taken together shall constitute one and the same
instrument.
Attest: Lebanon Citizens National Bank
("Lebanon Citizens")
By:______________________________
Its:_____________________________
LCNB Corp.
("Holding Company")
By:______________________________
Its:_____________________________
The LC Interim National Bank hereby agrees to and assumes all the
obligations and agreements contained herein which were agreed to and
assumed on its behalf by ____________ ______________.
The LC Interim National Bank ("Interim Bank")
By:_________________________________
Date:<PAGE>
APPENDIX A-1 TO
PROXY STATEMENT
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER, dated as of __________, 1999, by and among
LC INTERIM NATIONAL BANK ("LC"), LEBANON CITIZENS NATIONAL BANK
("Lebanon Citizens"), and LCNB Corp. ("Parent"), an Ohio
corporation;
W I T N E S S E T H:
WHEREAS, Lebanon Citizens is a banking association organized under
the laws of the United States, being located at 2 North Broadway,
Lebanon, County of Warren, in the State of Ohio, with a capital of
$10,560,000, divided into 176,000 shares of common stock, each of
$60 par value, surplus of $__________, and retained earnings of
$_________ as of December 31, 1998;
WHEREAS, LC is a banking association in organization under the laws
of the United States, to be located at 2 North Broadway, County of
Warren, in the State of Ohio, with a capital of $___________,
divided into ________ shares of common stock, each of $_____ par
value, surplus of $________, with no retained earnings as of
December 31, 1998;
WHEREAS, Lebanon Citizens is authorized to have outstanding 176,000
shares of common stock, of which, as of the date hereof, 176,000
shares are issued and outstanding; and
WHEREAS, LC is authorized to have outstanding ______ shares of
common stock, of which ______ shares are presently subscribed
("Lebanon Citizens Common"); and
WHEREAS, Parent, an Ohio corporation and principal subscriber to the
shares of LC, has agreed to make available to LC at the Closing that
number of shares of its common stock without par value of Parent
("Parent Common") necessary to consummate the merger contemplated
hereby; and
WHEREAS, the Directors of Lebanon Citizens and LC (such corporations
being hereinafter sometimes called the "Constituent Corporations")
deem it advisable for the mutual benefit of the Constituent
Corporations, their respective shareholders and others that Lebanon
Citizens be merged into LC upon the terms and conditions hereinafter
set forth, and such Directors have approved this Agreement of
Merger;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and in accordance with the laws of the
United States, Lebanon Citizens and LC hereby agree that, subject to
the terms and conditions hereinafter set forth, Lebanon Citizens
shall be merged into LC and that the terms and conditions of such
merger, including the mode of carrying the same into effect and the
manner and basis of making distribution to the shareholders of the
Constituent Corporations, shall be as follows:
ARTICLE I
1.1 Upon the Closing on the Closing Date, as defined in Article IV,
Section 4.1 below, Lebanon Citizens shall be merged into LC which
shall be the surviving corporation and shall continue to be governed
by the applicable federal laws. LC, as such surviving corporation,
is hereinafter sometimes referred to as the "Receiving Association."
ARTICLE II
2.1 Effective as of the time that this merger shall become
effective, as specified in the merger approval to be issued by the
Comptroller of the Currency, the Articles of Association of LC,
amended as hereinafter provided and attached hereto as Schedule 1,
shall be the Articles of Association of the Receiving Association
until the same shall thereafter be further amended in accordance
with law. Upon the Closing, Article FIRST of the Articles of
Association of LC shall be deemed amended to change the name of LC
to "LEBANON CITIZENS NATIONAL BANK." The Receiving Association
reserves the right to further amend, alter, change or repeal after
such merger any provision contained in its Articles of Association,
and all rights conferred in this Agreement of Merger are subject to
such reserved power.
2.2 The Board of Directors of the Receiving Association shall
consist of ten (10) persons until such time after the Closing as
such number may be changed in accordance with the Regulations of the
Receiving Association. The names and addresses of the first
Directors of the Receiving Association (each of whom shall serve
until the next annual meeting of shareholders and until his
successor is elected, or until his earlier resignation, removal from
office or death) at the time of the Closing are:
DIRECTOR ADDRESS
M. Russell Horn P.O. Box 59
Lebanon, Ohio 45036
Sam Kaufman P.O. Box 59
Lebanon, Ohio 45036
William H. Kaufman P.O. Box 59
Lebanon, Ohio 45036
George L. Leasure P.O. Box 59
Lebanon, Ohio 45036
James B. Miller P.O. Box 59
Lebanon, Ohio 45036
Corwin M. Nixon P.O. Box 59
Lebanon, Ohio 45036
Kathleen Porter Stolle P.O. Box 59
Lebanon, Ohio 45036
Howard E. Wilson P.O. Box 59
Lebanon, Ohio 45036
Stephen P. Wilson P.O. Box 59
Lebanon, Ohio 45036
Marvin E. Young P.O. Box 59
Lebanon, Ohio 45036
If upon the Closing or thereafter there exists a vacancy in the
Board of Directors of the Surviving Corporation, such vacancy may
be filled by the remaining members of the Board of Directors in the
manner provided by law and the regulations of the Receiving
Association.
2.3 The officers of Lebanon Citizens immediately prior to the
Closing shall be the officers of the Receiving Association and shall
hold office, subject to the regulations of the Receiving
Association, at the pleasure of the Board of Directors.
2.4 The business of the Receiving Association shall be that of a
national banking association and shall be conducted at its main
office, to be located at 2 North Broadway, Lebanon, Warren County,
Ohio, and its legally established branches.
2.5 Upon the Closing, the effect of the merger shall be as provided
by the applicable provisions of federal law. Without limiting the
foregoing, and subject thereto, upon the Closing, the existence of
Lebanon Citizens shall cease as a separate entity but shall continue
in the Receiving Association, subject to the rights of creditors
which shall be preserved unimpaired; the Receiving Association shall
have, without further act or deed, all property, rights, powers,
duties and obligations of each of the Constituent Corporations and
trusts and to the duties and liabilities connected therewith, and
shall perform every such trust or relation in the same manner as if
it had itself originally assumed the trust or relation and the
obligation and liabilities connected therewith within the limits of
the charter of the Receiving Association.
ARTICLE III
The terms of the merger, the mode of carrying the same into effect
and the manner and basis of making distribution to the shareholders
of the Constituent Corporations shall be as follows:
3.1 Forthwith upon the Closing, each share of Lebanon Citizens
Common outstanding immediately prior to the Closing (excluding
shares held by those shareholders of Lebanon Citizens who have
perfected their rights as dissenting shareholders) shall be
converted into and become ten (10) shares of Parent Common. The
number of authorized shares of common stock, $____ par value per
share, of LC will, by virtue of the merger, be _____ upon
consummation of the merger, all of which will be issued and
outstanding and all of which will be canceled as a result of the
merger.
3.2 The amount of capital stock of LC shall be $________, divided
into ____ shares of common stock, each of $________ par value, and
at the time the merger shall become effective, the association shall
have a surplus of $_______, and undivided profits, including capital
reserves, which when combined with the capital and surplus will be
equal to the combined capital structures of Lebanon Citizens and of
LC, as stated in the preamble of this agreement, adjusted however,
for normal earnings and expenses (and if applicable, purchase
accounting adjustments) between ___________, 19____, and the
effective time of the merger.
3.3 The shares of Parent Common into which shares of Lebanon
Citizens Common are converted pursuant to the provisions of Section
3.1 above shall be the shares furnished for such purpose by Parent
as referred to in the third recital clause at the beginning of this
Agreement.
3.4 From and after the Closing each holder of a certificate or
certificates theretofore representing shares of Lebanon Citizens
Common shall surrender such certificate or certificates to Lebanon
Citizens, and shall receive in exchange therefor a certificate or
certificates representing the number of shares of Parent Common into
and for which the shares of Lebanon Citizens Common theretofore
represented by such surrendered certificate or certificates have
been converted pursuant to the provisions of Section 3.1 above.
3.5 Until surrendered pursuant to the provisions of Section 3.4
above, each certificate or certificates theretofore representing
shares of Lebanon Citizens Common shall be deemed for all purposes
(other than for the payment of dividends or other distributions, if
any, to the shareholders of Parent) to represent the number of
shares of Parent into and for which the shares of Lebanon Citizens
Common thereto represented thereby shall have been converted
pursuant to the provisions of Section 3.1 above.
3.6 No dividends or other distributions, if any, payable to the
holders of shares of Parent Common shall be paid to the holders of
a certificate or certificates theretofore representing shares of
Lebanon Citizens Common; provided however, that upon the surrender
and exchange of such certificate or certificates theretofore
representing shares of Lebanon Citizens Common pursuant to the
provisions of Section 3.4 above, there shall then be paid to the
record holders of a certificate or certificates for shares of Parent
Common issued in exchange therefor, the amount, without interest
thereon, of all dividends and other distributions, if any, declared
with respect to shares of Parent Common to holders of record of
shares of Parent Common as of any record date after the Closing and
prior to or coincident with the date of such surrender and exchange,
with respect to the number of shares of Parent Common represented
thereby.
3.7 Upon the merger becoming effective in accordance with the terms
of Article IV hereof, Parent shall repurchase all shares of Parent
Common originally issued to the Incorporator of Parent to facilitate
Parent's organization. Such purchase shall be in an amount equal to
the amount expended by such person to originally purchase such
shares.
ARTICLE IV
4.1 The merger shall become effective, and the "Closing" shall
occur, as of the close of business on the date (the "Closing Date")
when the Merger is approved in final form by the Comptroller of the
Currency (together with the issuance of all requisite certificates).
ARTICLE V
5.1 If the Plan and Agreement of Merger among Parent, Lebanon
Citizens and LC, dated as of ______________, is terminated in
accordance with the terms thereof, then this Agreement of Merger
shall simultaneously terminate without further action by the
Constituent Corporations. In the event of such termination, the
Board of Directors of each of the Constituent Corporations shall
direct its officers not to file this Agreement of Merger as provided
above, notwithstanding favorable action on this Agreement of Merger
by the shareholders of the respective Constituent Corporations.
ARTICLE VI
6.1 This Agreement of Merger may be executed in any number of
counterparts, each of which shall be deemed to be an original, but
such counterparts together shall constitute one and the same
instrument.
6.2 Any of the provisions of this Agreement of Merger may be waived
at any time by the party which is, or the shareholders of which are,
entitled to the benefit thereof upon the authority of the Board of
Directors of such party, provided that as to such waiver after the
last vote of the shareholders of such party hereon such waiver shall
not, in the judgment of the Board of Directors of such party, affect
materially and adversely the benefits of such party or its
shareholders intended under this Agreement of Merger. Any of the
provisions of this Agreement of Merger may be modified at any time
prior to or after the vote hereon of shareholders of any party, by
agreement in writing approved by the Board of Directors of each
party and executed in the same manner (but not necessarily by the
same persons) as this Agreement of Merger, provided that such
modification after the last vote of the shareholders of a party
hereon shall not, in the judgment of the Board of Directors of such
party, affect materially and adversely the benefits of such party or
its shareholders intended under this Agreement of Merger.
IN WITNESS WHEREOF, Lebanon Citizens National Bank; The LC Interim
National Bank and LCNB Corp. have caused their respective corporate
seals to be hereunto affixed and these presents to be signed by
their respective officers thereunto duly authorized, all as of the
day and year aforesaid.
LEBANON CITIZENS NATIONAL BANK
Attest: ("Lebanon Citizens")
Name: __________________________
Its: _____________________________
LC INTERIM NATIONAL BANK
Attest: ("LC")
Name: __________________________
Its: _____________________________
LCNB CORP.
Attest: ("Parent")
Name: __________________________
Its: ____________________________
<PAGE>
ARTICLES OF INCORPORATION
OF
LCNB CORP.
The undersigned, desiring to form a corporation for profit, under
the General Corporation Law of Ohio, does hereby certify:
FIRST: The name of this Corporation shall be LCNB Corp.
SECOND: The place in Ohio where its principal office is to be
located is Lebanon, County of Warren.
THIRD: The purpose for which the Corporation is formed is to engage
in any lawful act or activity for which corporations may be formed
under Chapter 1701 of the Ohio Revised Code.
FOURTH: The maximum number of shares which the Corporation is
authorized to have outstanding is Eight Hundred Fifty (850) shares,
all of which shall be designated common stock and shall be without
par value.
FIFTH: The number of Directors of the Corporation shall be fixed
from time to time in accordance with the Corporation's Regulations
and may be increased or decreased as therein provided. The Board of
Directors shall be divided into three classes, as nearly equal in
number as the then total number of Directors constituting the whole
Board permits, it not being required that each class have the same
number of members if such is mathematically impossible with the term
of office of one class expiring each year. At the organizational
meeting of shareholders, Directors of the first class shall be
elected to hold office for a term expiring at the next succeeding
Annual Meeting; Directors of the second class shall be selected to
hold office for a term expiring at the second succeeding Annual
Meeting and Directors of the third class shall be selected to hold
office for a term expiring at the third succeeding Annual Meeting.
Thereafter, at each Annual Meeting of shareholders, the successors
to the class of Directors whose term shall then expire shall be
elected to hold office for a term expiring at the third succeeding
Annual Meeting after such election. In the event of any increase in
the number of Directors of the Corporation, the additional Directors
shall be so classified that all classes of Directors shall be
increased equally as nearly as may be possible. In the event of any
decrease in the number of Directors of the Corporation, all classes
of Directors shall be decreased equally as nearly as possible.
SIXTH: (A) Except as otherwise provided in Clause (B) of this
Article SIXTH:
(i) any merger or consolidation of the Corporation with or into any
other corporation;
(ii) any sale, lease, exchange or other disposition of all or any
substantial part of the assets of the Corporation to or with any
other corporation, person or other entity;
(iii) the issuance or transfer of any securities of the Corporation
to any other corporation, person or other entity in exchange for
assets or securities or a combination thereof (except assets or
securities or a combination thereof so acquired in a single
transaction or a series of related transactions having an aggregate
fair market value of less than $250,000), or
(iv) the issuance or transfer of any securities of the Corporation
by the Corporation to any other corporation, person or other entity
for cash;
shall require the affirmative vote of the holders of at least eighty
percent (80%) of the outstanding shares of capital stock of the
Corporation which are not beneficially owned by such other
corporation, person or other entity if, as of the record date for
the determination of shareholders entitled to notice thereof and to
vote thereon, such other corporation, person or entity is the
beneficial owner, directly or indirectly, of 10% or more of the
outstanding shares of capital stock of the Corporation entitled to
vote generally in the election of Directors, considered for the
purposes of this Article SIXTH as one class. Such affirmative
vote shall be required notwithstanding the fact that no vote may be
required, or that some lesser percentage may be specified, by law or
in any agreement with any national securities exchange.
(B) The provisions of this Article SIXTH shall not apply to any
transaction described in clauses (i), (ii), (iii) or (iv) of Clause
(A) of this Article SIXTH, (i) with another corporation if a
majority, by vote, of the outstanding shares of all classes of
capital stock of such other corporation entitled to vote generally
in the election of Directors, considered for this purpose as one
class, is owned of record or beneficially by the Corporation and/or
its subsidiaries; (ii) with another corporation, person or other
entity if the Board of Directors of the Corporation shall by
resolution have approved a memorandum of understanding with such
other corporation, person or other entity with respect to and
substantially consistent with such transaction prior to the time
such other corporation, person or other entity became the beneficial
owner, directly or indirectly, of 10% or more of the outstanding
shares of capital stock of the Corporation entitled to vote
generally in the election of Directors; or (iii) approved by
resolution adopted by the affirmative vote of at least a majority of
the members of the whole Board of Directors of the Corporation at
any time prior to the consummation thereof.
(C) For the purposes of this Article SIXTH, a corporation, person
or other entity shall be deemed to be the beneficial owner of any
shares of capital stock of the corporation (i) which it has the
right to acquire pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise; or (ii) which
are beneficially owned, directly or indirectly (including shares
deemed owned through application of clause (i) above), by any other
corporation, person or other entity with which it or its "affiliate"
or "associate" (as defined below) has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or
disposing of capital stock of the Corporation, or which is its
"affiliate" or "associate" as those terms were defined in Rule 12b-2
of the general rules and regulations under the Securities Exchange
Act of 1934. For the purposes of this Article SIXTH, the
outstanding shares of any class of capital stock of the Corporation
shall include shares deemed owned through the application of clauses
(i) and (ii) of this Clause (C) but shall not include any other
shares which may be issuable pursuant to any agreement, or upon
exercise of conversion rights, warrants or options, or otherwise.
(D) The Board of Directors of the Corporation shall have the power
and duty to determine for the purposes of this Article SIXTH, on the
basis of information then known to it, whether (i) any other
corporation, person or other entity beneficially owns, directly or
indirectly, 10% or more of the outstanding shares of capital stock
of the Corporation entitled to vote generally in the election of
Directors, or is an "affiliate" or an "associate" (as defined above)
of another, (ii) any proposed sale, lease, exchange or other
disposition of part of the assets of the Corporation involves a
substantial part of the assets of the Corporation, (iii) assets or
securities, or a combination thereof, to be acquired in exchange for
securities of the Corporation, have an aggregate fair market value
of less than $250,000 and whether the same are proposed to be
acquired in a single transaction or a series of related
transactions, and (iv) the memorandum of understanding referred to
above is substantially consistent with the transaction to which it
relates. Any such determination by the Board shall be conclusive
and binding for all purposes of this Article SIXTH.
SEVENTH: The Board of Directors of the Corporation, when evaluating
any offer of another party to (i) purchase or exchange any
securities or property for any outstanding equity securities of the
Corporation, (ii) merge or consolidate the Corporation with another
corporation, or (iii) purchase or otherwise acquire all or
substantially all of the properties and assets of the Corporation,
shall, in connection with the exercise of its judgment in
determining what is in the best interests of the Corporation and its
shareholders, give due consideration not only to the price or other
consideration being offered but also to all other relevant factors,
including without limitation the financial and managerial resources
and future prospects of the other party; the possible effects on the
business of the Corporation and its subsidiaries and on the
depositors, employees, and other constituents of the Corporation and
its subsidiaries; and the possible effects on the communities and
the public interest which the Corporation and its subsidiaries
serve. In evaluating any such offer, the Board of Directors shall
be deemed to be performing their duly authorized duties and acting
in good faith and in the best interests of the Corporation within
the meaning of Section 1701.13 of the Ohio Revised Code, as it may
be amended from time to time, and the Corporation's Regulations.
EIGHTH: When authorized by the affirmative vote of a majority of
the Board of Directors, without the action or approval of the
shareholders of this Corporation, this Corporation may redeem,
purchase, or contract to purchase, at any time and from time to
time, shares of any class issued by this Corporation for such prices
and upon and subject to such terms and conditions as the Board of
Directors may determine.
NINTH: The statutes of Ohio require that action on certain
specified matters at a shareholders' meeting shall be taken by the
affirmative vote of the holders of more than a majority of shares
entitled to vote thereon, unless other provision is made in the
Articles of Incorporation. On all these specified matters, action
may be taken by the affirmative vote of a two-thirds majority of
shares entitled to vote thereon or, if the vote is required to be by
classes, by the affirmative vote of a two-thirds majority of each
class of shares entitled to vote thereon as a class, except that any
amendment, alteration, addition to or repeal of Article FIFTH, SIXTH
or this Article NINTH and of any of the matters specified above in
Article SIXTH as requiring a vote other than the affirmative vote of
the holders of a two-thirds majority of the shares entitled to vote
thereon, may only be taken by the affirmative vote of the holders of
at least eighty percent (80%) of the outstanding shares of capital
stock of the Company entitled to vote thereon, considered for the
purposes of this Article as one class.
IN WITNESS WHEREOF, the Incorporator has hereunto subscribed his
name this _______ day of ________________, 1998.
_______________________________
Dorothy Kim Corbett<PAGE>
REGULATIONS
OF
LCNB CORP.
ARTICLE I
SEAL
The Board of Directors may from time to time adopt such seal or
seals, if any, as they deem appropriate for the use of the
Corporation in transacting its business.
ARTICLE II
SHAREHOLDERS
(a) Annual Meeting. The annual meeting of the shareholders shall be
held at the principal office of the Corporation, or at such other
place either within or without the State of Ohio as may be specified
in the notice required under paragraph (c) of this Article on a date
between the fourth Tuesday in January and the fourth Tuesday in
April of each year, at which time there shall be elected Directors
to serve until the end of the term to which they are elected and
until their successors are elected and qualified. Any other
business may be transacted at the annual meeting without specific
notice of such business being given, except such business as may
require specific notice by law.
(b) Special Meetings. Special meetings of the shareholders may be
called and held within or without the State of Ohio, as provided by
law.
(c) Notice. Notice of each annual or special meeting of the
shareholders shall be given in writing either by the President, any
Vice President, the Secretary, or any Assistant Secretary, not less
than ten (10) days before the meeting. Any shareholder may, at any
time, waive any notice required to be given under these Regulations.
(d) Quorum. The shareholders present in person or by proxy at any
meeting shall constitute a quorum unless a larger proportion is
required to take the action stated in the notice of the meeting, in
which case, to constitute a quorum, there shall be present in person
or by proxy the holders of record of shares entitling them to
exercise the voting power required by the Articles of Incorporation
of the Corporation or applicable law to take the action stated.
(e) Order of Business. At all shareholders' meetings the order of
business shall be as follows unless changed by a majority vote:
1. Reading of minutes of previous meeting and acting thereon;
2. Reports of Directors and Committees;
3. Financial report or statement;
4. Reports from Chairman, President or other officers;
5. Unfinished business;
6. Election of Directors;
7. New or miscellaneous business;
8. Adjournment.
(f) Organization. The Chairman of the Board shall preside at all
meetings of the shareholders, but in his absence the President shall
preside, and in his absence the shareholders shall elect another
officer or a shareholder to so preside. The Secretary of the
Corporation shall act as Secretary of all meetings of the
shareholders, but in the absence of the Secretary at any meeting of
the shareholders, the presiding officer may appoint any person to
act as Secretary of the meeting.
ARTICLE III
DIRECTORS
(a) Number. The Board of Directors shall be composed of not less
than five (5) nor more than fifteen (15) persons, as shall be fixed
by the shareholders in accordance with applicable law, who shall be
elected in accordance with the provisions of the Articles of
Incorporation by action of the shareholders. Any Director's office
created by the Directors by reason of an increase in their number
may be filled by action of a majority of the Directors then in
office.
(b) Changes. The number of Directors fixed in accordance with the
immediately preceding paragraph may also be increased or decreased
by the Directors at a meeting or by action in writing without a
meeting, and the number of Directors as so changed shall be the
number of Directors until further changed in accordance with this
Section; provided, that no such decrease in the number of Directors
shall have the effect of shortening the term of any incumbent
Director; and provided, further, that the number of Directors shall
not be increased by the Directors to more than three Directors
beyond the number of Directors as fixed at the most recently held
meeting of shareholders called for the purpose of electing
Directors.
(c) Nominations. Nominations for the election of Directors may be
made by the Board of Directors or a proxy committee appointed by the
Board of Directors or by any shareholder entitled to vote in the
election of Directors generally. However, any shareholder entitled
to vote in the election of Directors generally may nominate one or
more persons for election as Directors at a meeting only if written
notice of such shareholder's intent to make such nomination or
nominations has been given, either by personal delivery or by United
States mail, postage prepaid, to the Secretary of the Corporation
not later than (1) with respect to an election to be held at an
annual meeting of shareholders, 45 days in advance of the
corresponding date for the date of the preceding year's annual
meeting of shareholders, and (2) with respect to an election to be
held at a special meeting of shareholders for the election of
Directors, the close of business on the seventh day following the
date on which notice of such meeting is first given to shareholders.
Each such notice shall set forth: (a) the name and address of the
shareholder who intends to make the nomination and of the person or
persons to be nominated; (b) a representation that the shareholder
is a holder of record of stock of the Corporation entitled to vote
at such meeting and intends to appear in person or by proxy at the
meeting to nominate the person or persons specified in the notice;
(c) a description of all arrangements or understandings between the
shareholder and each nominee and any other person or persons (naming
such person or persons) pursuant to which the nomination or
nominations are to be made by the shareholder; and (d) the consent
of each nominee to serve as a Director of the Corporation if so
elected. The chairman of the meeting may refuse to acknowledge the
nomination of any person not made in compliance with the foregoing
procedure.
(d) Age Limitation. No person shall be eligible to stand as a
candidate for election as a member of the Board of Directors who has
passed his or her 75th birthday. The foregoing age limitation shall
not apply to persons who are members of the Board of Directors as of
the date of adoption of these Regulations.
(e) Vacancies. Vacancies in the Board of Directors shall be filled
as provided by the laws of the State of Ohio then in effect.
(f) Time of Meeting. The Board of Directors shall meet at the
principal office of the Corporation, at least annually, immediately
following the annual meeting of the shareholders, but the Directors
shall have the authority to change the time and place of such
meeting by the adoption of By-Laws or by resolution.
(g) Call and Notice. Meetings of the Board of Directors other than
the annual meeting may be called at any time by the Chairman of the
Board and shall be called by the Chairman upon the request of two
members of the Board. Such meetings may be held at any place within
or without the State of Ohio. Notice of the annual meeting need not
be given and each director shall take notice thereof, but this
provision shall not be held to prevent the giving of notice in such
manner as the Board may determine. The Board shall decide what
notice shall be given and the length of time prior to the meetings
that such notice shall be given of all other meetings. Any meeting
at which all of the directors are present shall be a valid meeting
whether notice thereof was given or not and any business may be
transacted at such a meeting.
(h) Presence Through Communications Equipment. Meetings of the
Board of Directors, and meetings of any Committee thereof, may be
held through any communications equipment if all persons
participating can hear each other, and participation in a meeting
pursuant to this subparagraph (h) shall constitute presence at such
a meeting.
(i) By Laws. The Board of Directors may adopt By Laws for their own
government and that of the Corporation provided such By Laws are not
inconsistent with the Articles of Incorporation or these
Regulations.
ARTICLE IV
COMMITTEES
The Board of Directors may, by resolution, designate not less than
three (3) of its number to serve on an Executive Committee or such
other committee or committees as the Board may from time to time
constitute. The Board of Directors may delegate to any such
Executive Committee any of the authority of the Directors, however
conferred, other than that of filling vacancies among the Directors
or in any committee of the Directors and to incur debts, excepting
for current expenses, unless specifically authorized. The specific
duties and authority of any such committee or committees shall be
stated in the resolution constituting the same.
ARTICLE V
OFFICERS
(a) Number. The officers of the Corporation shall be a Chairman of
the Board, a President, one or more Vice Presidents, a Secretary and
a Treasurer. Any two or more of the offices may be held by the same
persons, but no officer shall execute, acknowledge, or verify any
instrument in more than one capacity if such instrument is required
to be executed, acknowledged or verified by two or more officers.
(b) Other Officers. The Board of Directors is authorized in its
discretion to establish the office of Executive Vice President, and
shall have the further power to provide for such other officers,
assistant officers and agents as it shall deem necessary from time
to time and may dispense with any of said offices and agencies at
any time.
(c) Election, Term and Removal. At the first meeting of the Board
of Directors after the annual meeting of shareholders, the Board
shall select one of its members by a majority vote to be Chairman of
the Board and shall select one of its members by a majority vote to
be President of the Corporation. It shall also select all other
officers of the Corporation by a majority vote, but none of such
other officers shall be required to be members of the Board, except
the Chairman of the Board and President. All officers of the
Corporation shall hold office for one year and until their
successors are elected and qualified.
(d) Vacancies and Absence. If any office shall become vacant by
reason of the death, resignation, disqualification, or removal of
the incumbent thereof, or other cause, the Board of Directors may
elect a successor to hold office for the unexpired term in respect
to which such vacancy occurred or was created. In case of the
absence of any officer of the Corporation or for any reason that the
Board of Directors may determine as sufficient, the said Board may
delegate the powers and duties of such officer to any other officer
or to any director, except where otherwise provided by these
Regulations or by statute, for the time being.
ARTICLE VI
DUTIES OF OFFICERS
(a) Chairman of the Board. The Chairman of the Board of Directors
shall preside at all meetings of the Board and of the shareholders,
appoint all special or other committees unless otherwise ordered by
the Board, confer with and advise all other officers of the
Corporation, and perform such other duties as may be delegated to
him from time to time by the Board.
(b) President. The President shall be the Chief Executive Officer
and active head of the Corporation, and in the recesses of the Board
of Directors and the Executive Committee, if the Board establishes
such a committee, shall have general control and management of all
its business and affairs. He shall make such recommendations to the
Board of Directors, or any committees thereof, as he thinks proper,
and he shall bring before said Board such information as may be
required touching the business and property of the Corporation. He
shall perform generally all the duties incident to the office of
President, as required or authorized by law and such as are usually
vested in the President of a similar corporation.
(c) Vice Presidents. The Vice Presidents, including the Executive
Vice President, if the Board establishes such office, shall perform
such duties as may be delegated to them by the Board of Directors,
or assigned to them from time to time by the Board of Directors or
the President. The Executive Vice President, if the Board
establishes such office, or the Vice President, or in the event
there shall be more than one Vice President, such Vice President as
may be designated by the Board, shall perform the duties and have
the powers of the President in case of the absence of the latter
from his office, and during such absence such Vice President shall
be authorized to exercise all the functions of the President and
shall sign all papers and perform all duties as acting President.
(d) Secretary. The Secretary shall keep a record of all proceedings
of the Board of Directors, and of all meetings of shareholders, and
shall perform such other duties as may be assigned to him by the
Board of Directors or the President.
(e) Treasurer. The Treasurer shall have charge of the funds and
accounts of the Corporation and shall keep proper books of account
showing all receipts, expenditures and disbursements of the
Corporation, with vouchers in support thereof. The Treasurer shall
also from time to time, as required, make reports and statements to
the Directors as to the financial condition of the Corporation, and
submit detailed statements of receipts and disbursements; he shall
perform such other duties as shall be assigned to him from time to
time by the Board of Directors or the President.
(f) Bonds of Officers. The Board of Directors shall determine which
officers, if any, of the Corporation shall give bond, and the terms
and amount thereof, the expense to be paid by the Corporation.
ARTICLE VII
INDEMNIFICATION
The Corporation shall indemnify each director and each officer of
the Corporation, and each person employed by the Corporation who
serves at the written request of the Chairman or President of the
Corporation as a director, trustee, officer, employee, or agent of
another corporation, domestic or foreign, non-profit or for profit,
partnership, joint venture, trust or other enterprise, to the full
extent permitted by Ohio law. The term "officer" as used in this
Article VII shall include the Chairman of the Board, the President,
each Vice President, the Treasurer, the Secretary, the Controller,
the Auditor, the Counsel and any other person who is specifically
designated as an "officer" within the operation of this Article VII
by action of the Board of Directors. The Corporation may indemnify
assistant officers, employees and others by action of the Board of
Directors to the extent permitted by Ohio law.
ARTICLE VIII
STOCK
(a) Certificates of Stock. Each shareholder of this Corporation
whose stock has been fully paid for shall be entitled to a
certificate or certificates, showing the number of shares registered
in his or her name on the books of the Corporation. Each
certificate shall be signed by the Chairman of the Board or the
President or any Vice President and by the Secretary, any Assistant
Secretary, the Treasurer or any Assistant Treasurer. A full record
of each certificate, as issued, shall be entered on the stub
thereof.
(b) Transfers of Stock. Shares shall be transferable on the books
of the Corporation by the holders thereof in person or by a duly
authorized attorney upon surrender of the Certificates therefor with
duly executed assignment endorsed thereon or attached thereto.
Evidence of authority to endorse any certificate and to request its
transfer shall be produced to the Corporation. In case of transfer
by executors, administrators, guardians or other legal
representatives or fiduciaries, appropriate legal evidence of their
authority to act shall be produced and may be required to be filed
with the Corporation. No transfer shall be made until the stock
certificate in question and such evidence of authority are delivered
to the Corporation.
(c) Transfer Agents and Registrars. The Board of Directors may
appoint an agent or agents to keep the records of the shares of the
Corporation, or to transfer or to register shares, or both, in Ohio
or any other state and shall define the duties and liabilities of
any such agent or agents.
(d) Lost, Destroyed or Mutilated Certificates. If any certificate
of stock in this Corporation becomes worn, defaced or mutilated, the
Directors, upon production and surrender thereof, may order the same
cancelled, and may issue a new certificate in lieu of the same. If
any certificate of stock be lost or destroyed, a new certificate may
be issued upon such terms and under such regulations as may be
adopted by the Board of Directors.
ARTICLE IX
AMENDMENTS
These Regulations, or any of them, may be altered, amended, added to
or repealed as provided by law and the Articles of Incorporation of
the Corporation.
<PAGE>
APPENDIX B TO PROXY STATEMENT
OHIO REVISED CODE SECTION 1115.19
[Dissenting shareholders]
Unless the articles of incorporation of the state bank otherwise
provide, any shareholder of a state bank that has been consolidated
or merged with, or whose assets have been transferred to, another
state bank or a national bank, savings bank, or a savings
organization, who did not vote in favor of the consolidation,
merger, or transfer, shall be paid the fair cash value as of the day
before the vote was taken authorizing the action, of the shares
held, excluding from any such fair cash value any appreciation or
depreciation in consequence of the consolidation, merger, or
transfer which entitled the shareholder to this relief. Section
1701.85 of the Revised Code shall govern with respect to all rights
of such shareholder and any limitations on those rights. Any
shareholder who does not object and demand in writing the payment of
the fair cash value of the shares in the manner and at the time
provided in Section 1701.85 of the Revised Code shall be bound by
the vote of the board of directors or the assenting shareholders of
the state bank.
OHIO REVISED CODE SECTION 1701.85
[Relief to dissenting shareholder of domestic corporation.]
Sec. 1701.85(A)(1) A shareholder of a domestic corporation is
entitled to relief as a dissenting shareholder in respect of the
proposals in sections 1701.74, 1701.76, and 1701.84 of the Revised
Code, only in compliance with this section.
(2) If the proposal must be submitted to the shareholders of the
corporation involved, the dissenting shareholder shall be a record
holder of the shares of the corporation as to which he seeks relief
as of the date fixed for the determination of shareholders entitled
to notice of a meeting of the shareholders at which the proposal is
to be submitted, and such shares shall not have been voted in favor
of the proposal. Not later than ten days after the date on which
the vote on such proposal was taken at the meeting of the
shareholders, the shareholder shall deliver to the corporation a
written demand for payment to him of the fair cash value of the
shares as to which he seeks relief, stating his address, the number
and class of such shares, and the amount claimed by him as the fair
cash value of the shares.
(3) The dissenting shareholder entitled to relief under division (C)
of section 1701.84 of the Revised Code in the case of a merger
pursuant to section 1701.80 of the Revised Code and a dissenting
shareholder entitled to relief under division (E) of section 1701.84
of the Revised Code in the case of a merger pursuant to section
1701.801 [1701.80.1] of the Revised Code shall be a record holder of
the shares of the corporation as to which he seeks relief as of the
date on which the agreement of merger was adopted by the directors
of that corporation. Within twenty days after he has been sent the
notice provided in section 1701.80 or 1701.801 [1701.80.1] of the
Revised Code, the shareholder shall deliver to the corporation a
written demand for payment with the same information as that
provided for in division (A)(2) of this section.
(4) In the case of a merger or consolidation, a demand served on the
constituent corporation involved constitutes service on the
surviving or the new corporation, whether served before, on, or
after the effective date of the merger or consolidation.
(5) If the corporation sends to the dissenting shareholder, at the
address specified in his demand, a request for the certificates
representing the shares as to which he seeks relief, he, within
fifteen days from the date of the sending of such request, shall
deliver to the corporation the certificates requested, in order that
the corporation may forthwith endorse on them a legend to the effect
that demand for the fair cash value of such shares has been made.
The corporation promptly shall return such endorsed certificates to
the shareholder. Failure on the part of the shareholder to deliver
such certificates terminates his rights as a dissenting shareholder,
at the option of the corporation, exercised by written notice sent
to him within twenty days after the lapse of the fifteen-day period,
unless a court for good cause shown otherwise directs. If shares
represented by a certificate on which such a legend has been
endorsed are transferred, each new certificate issued for them shall
bear a similar legend, together with the name of the original
dissenting holder of such shares. Upon receiving a demand for
payment from a dissenting shareholder who is the record holder of
uncertificated securities, the corporation shall make an appropriate
notation of the demand for payment in its shareholder records. If
uncertificated shares for which payment has been demanded are to be
transferred, any new certificate issued for the shares shall bear
the legend required for certificated securities as provided in this
paragraph. A transferee of the shares so endorsed, or of
uncertificated securities where such notation has been made,
acquires only such rights in the corporation as the original
dissenting holder of such shares had immediately after the service
of a demand for payment of the fair cash value of the shares. Such
request by the corporation is not an admission by the corporation
that the shareholder is entitled to relief under this section.
(B) Unless the corporation and the dissenting shareholder shall have
come to an agreement on the fair cash value per share of the shares
as to which he seeks relief, the shareholder or the corporation,
which in case of a merger or consolidation may be the surviving or
the new corporation, within three months after the service of the
demand by the shareholder, may file a complaint in the court of
common pleas of the county in which the principal office of the
corporation which issued such shares is located, or was located at
the time when the proposal was adopted by the shareholders of the
corporation, or, if the proposal was not required to be submitted to
the shareholders, was approved by the directors. Other dissenting
shareholders, within the period of three months, may join as
plaintiffs, or may be joined as defendants in any such proceeding,
and any two or more such proceedings may be consolidated. The
complaint shall contain a brief statement of the facts, including
the vote and the facts entitling the dissenting shareholder to the
relief demanded. No answer to such complaint is required. Upon the
filing of the complaint, the court, on motion of the petitioner,
shall enter an order fixing a date for a hearing on the complaint,
and requiring that a copy of the complaint and a notice of the
filing and of the date for hearing be given to the respondent or
defendant in the manner in which summons is required to be served or
substituted service is required to be made in other cases. On the
day fixed for the hearing on the complaint or any adjournment of it,
the court shall determine from the complaint and from such evidence
as is submitted by either party whether the shareholder is entitled
to be paid the fair cash value of any shares and, if so, the number
and class of such shares. If the court finds that the shareholder
is so entitled, the court may appoint one or more persons as
appraisers to receive evidence and to recommend a decision on the
amount of the fair cash value. The appraisers have such power and
authority as is specified in the order of their appointment. The
court thereupon shall make a finding as to the fair cash value of a
share, and shall render judgment against the corporation for the
payment of it, with interest at such rate and from such date as the
court considers equitable. The costs of the proceeding, including
reasonable compensation to the appraisers to be fixed by the court,
shall be assessed or apportioned as the court considers equitable.
The proceeding is a special proceeding, and final orders in it may
be vacated, modified, or reversed on appeal pursuant to the Rules of
Appellate Procedure and, to the extent not in conflict with those
rules, Chapter 2505 of the Revised Code. If during the pendency of
any proceeding instituted under this section a suit or proceeding is
or has been instituted to enjoin or otherwise to prevent the
carrying out of the action as to which the shareholder has
dissented, the proceeding instituted under this section shall be
stayed until the final determination of the other suit or
proceeding. Unless any provision in division (D) of this section is
applicable, the fair cash value of the shares as agreed upon by the
parties or as fixed under this section shall be paid within thirty
days after the date of final determination of such value under this
division, the effective date of the amendment to the articles, or
the consummation of the other action involved, whichever occurs
last. Upon the occurrence of the last such event, payment shall be
made immediately to a holder of uncertificated securities entitled
to such payment. In the case of holders of shares represented by
certificates, payment shall be made only upon and simultaneously
with the surrender to the corporation of the certificates
representing the shares for which such payment is made.
(C) If the proposal was required to be submitted to the shareholders
of the corporation, fair cash value as to those shareholders shall
be determined as of the day prior to that on which the vote by the
shareholders was taken, and, in the case of a merger pursuant to
section 1701.80 or 1701.801 [1701.80.1] of the Revised Code, fair
cash value as to shareholders of a constituent subsidiary
corporation shall be determined as of the day before the adoption of
the agreement of merger by the directors of the particular
subsidiary corporation. The fair cash value of a share for the
purposes of this section is the amount that a willing seller, under
no compulsion to sell, would be willing to accept, and that a
willing buyer, under no compulsion to purchase, would be willing to
pay, but in no event shall the fair cash value exceed the amount
specified in the demand of the particular shareholder. In computing
such fair cash value, any appreciation or depreciation in market
value resulting from the proposal submitted to the directors or to
the shareholders shall be excluded.
(D) The right and obligation of a dissenting shareholder to receive
such fair cash value and to sell such shares as to which he seeks
relief, and the right and obligation of the corporation to purchase
such shares and to pay the fair cash value of them terminates if:
(1) Such shareholder has not complied with this section, unless the
corporation by its directors waives such failure;
(2) The corporation abandons, or is finally enjoined or prevented
from carrying out, or the shareholders rescind their adoption, of
the action involved;
(3) The shareholder withdraws his demand, with the consent of the
corporation by its directors;
(4) The corporation and the dissenting shareholder shall not have
come to an agreement as to the fair cash value per share, and
neither the shareholder nor the corporation shall have filed or
joined in a complaint under division (B) of this section within the
period provided.
(E) From the time of giving the demand, until either the termination
of the rights and obligations arising from it or the purchase of the
shares by the corporation, all other rights accruing from such
shares, including voting and dividend or distribution rights, are
suspended. If during the suspension, any dividend or distribution
is paid in money upon shares of such class, or any dividend,
distribution, or interest is paid in money upon any securities
issued in extinguishment of or in substitution for such shares, an
amount equal to the dividend, distribution, or interest which,
except for the suspension, would have been payable upon such shares
or securities, shall be paid to the holder of record as a credit
upon the fair cash value of the shares. If the right to receive
fair cash value is terminated otherwise than by the purchase of
shares by the corporation, all rights of the holder shall be
restored and all distributions which, except for the suspension,
would have been made shall be made to the holder of record of the
shares at the time of termination.
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The LCNB Corp.'s code of regulations provides that LCNB Corp. shall
indemnify to the full extent permitted by law any person who was or
is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, trustee, or employee of LCNB
Corp. or of another corporation if serving at the request of LCNB
Corp. Indemnification of agents of LCNB Corp. is permitted at the
discretion of the Board of Directors.
In general, Ohio law provides that a corporation may indemnify such
persons against expenses, including attorneys' fees, judgments,
fines, and amounts paid in settlement actually and reasonably
incurred by them in connection with such suits, actions or
proceedings if the person seeking indemnification acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful; provided, however, that in the case of an
action by or in the name of the claim or issue as to which such
person has been adjudged to be liable to negligence or misconduct
unless and to the extent that the court in which the action was
brought holds that indemnification is warranted.
The LCNB Corp.'s code of regulations, as permitted by Ohio law, also
provides that LCNB Corp. may purchase and maintain insurance on
behalf of any of the persons which it may indemnify, as described,
above against such types of liability.
Item 21. Exhibits and Financial Statement Schedules.
(a) The following exhibits are included as part of this Registration
Statement:
Exhibit No. Description
2 Plan and Agreement of Merger, including
Agreement of Merger
3.1 Articles of Incorporation of LCNB Corp.
3.2 Code of Regulations of LCNB Corp.
5, 23.2 Opinion and Consent of Messrs. Dinsmore & Shohl LLP**
8, 23.3 Tax Opinion and Consent of Messrs. Dinsmore & Shohl LLP
21 Subsidiary of the Registrant**
23.1 Consent of J.D. Cloud & Co. LLP
25 Power of Attorney*
27 Financial Data Schedule**
99 Form of Proxy
- --------------
* Contained on the signature page to this Registration Statement on
Form S-4.
** Previously filed.
Item 22. Undertakings.
As the offering herein described is an offering under Rule 415 of
the Securities Act of 1933, the undersigned registrant hereby
undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set
forth in the registration statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering granted may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b)(Section
230.424(b)) of this chapter) if, in the aggregate, the changes in
volume and price present no more than a 20% change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement.
Provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do not
apply if the registration statement in on Form S-3 (Section 239.13
of this chapter) or Form S-8(Section 239.16b of this chapter), and
the information required to be included in a post-effective
amendment by those paragraphs is contained in periodic reports filed
by the registrant pursuant to section 14 or section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference
in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold
at the termination of the offering.
(1) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus, which is a part of this
registration statement, by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c), the issuer
undertakes that such reoffering prospectus will contain the
information called for by the applicable registration form with
respect to reofferings by persons who may be deemed underwriters, in
addition to the information called for by the other Items of the
applicable form.
(2) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (1) immediately preceding, or (ii) that
purports to meet the requirements of Section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
(3) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11, or 13 of this Form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in the documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
(4) The undersigned registrant hereby undertakes to supply by means
of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement
when it became effective.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this Amendment No. 2 to the Registration
Statement to be signed on its behalf by the undersigned, thereunto
duly authorized in the City of Lebanon, State of Ohio on this 5th
day of April, 1999.
LCNB CORP.
By: /s/ Stephen P. Wilson
Stephen P. Wilson, President
Each person whose signature appears below constitutes and appoints
Stephen P. Wilson to be his true and lawful attorney-in-fact and
agent with full power of substitution, for him or her in his or her
name, place and stead, in any capacity, to sign any and all
amendments relating to this Registration Statement, and to file the
same, with exhibits thereto and other documents in connection
therewith, with the Securities and Exchange Commission, granting
unto such attorney-in-fact and agent full power and authority to do
and perform each and every act and thing requisite and necessary to
be done in and about the premises, as fully to all intents and
purposes might or could do in person, hereby ratifying and
confirming all that the attorney-in-fact and agent or his substitute
may lawfully cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Amendment No. 2 to the Registration Statement has been signed below
by the following persons, in the capacities indicated and on the
dates indicated.
Principal Executive Officer: Date:
/s/ Stephen P. Wilson April 5, 1999
Stephen P. Wilson
Principal Financial Officer:
/s/ Steve P. Foster April 5, 1999
Steve P. Foster
Principal Accounting Officer:
/s/ Donald E. Williams April 5, 1999
Donald E. Williams
Directors: Date:
/s/ Stephen P. Wilson* April 5, 1999
M. Russell Horn
/s/ Stephen P. Wilson* April 5, 1999
Sam Kaufman
/s/ Stephen P. Wilson* April 5, 1999
William H. Kaufman
/s/ Stephen P. Wilson* April 5, 1999
George L. Leasure
/s/ Stephen P. Wilson* April 5, 1999
James B. Miller
/s/ Stephen P. Wilson* April 5, 1999
Corwin M. Nixon
/s/ Stephen P. Wilson* April 5, 1999
Kathleen Porter Stolle
/s/ Stephen P. Wilson* April 5, 1999
Howard E. Wilson
/s/ Stephen P. Wilson* April 5, 1999
Stephen P. Wilson
/s/ Stephen P. Wilson* April 5, 1999
Marvin E. Young
*Stephen P. Wilson, by signing his name hereto, signs this document
on behalf of each person indicated above pursuant to a power of
attorney duly executed and filed with the Securities and Exchange
Commission.
<PAGE>
EXHIBIT INDEX
Page in
Sequential
Numbering
Exhibit No. Description System
2 Plan and Agreement of Merger,
including Agreement of Merger*
3.1 Articles of Incorporation of
LCNB Corp.**
3.2 Code of Regulations of LCNB
Corp.***
5, 23.2 Opinion and Consent of Messrs.
Dinsmore & Shohl LLP*****
8, 23.3 Tax Opinion and Consent of Messrs. Dinsmore & Shohl
LLP
21 Subsidiary of the Registrant*****
23.1 Consent of J.D. Cloud & Co. LLP
25 Power of Attorney****
27 Financial Data Schedule*****
99 Form of Proxy
* Contained as Appendices A and A-1 to Proxy Statement/Prospectus
** Contained as Appendix A-2 to Proxy Statement/Prospectus
*** Contained as Appendix A-3 to Proxy Statement/Prospectus
**** Contained in the Signature Pages to the Registration Statement
***** Previously filed.
Exhibit 8, 23.3
Susan B. Zaunbrecher, Esq.
[email protected]
(513) 977-8171
April 5, 1999
LCNB Corp.
P.O. Box 59
Lebanon, Ohio 45036
Ladies and Gentlemen
This opinion is rendered for use in connection with the
Registration Statement on Form S-4, under the Securities Act of
1933, Securities and Exchange Commission File No. 333-70913 (the
"Registration Statement") filed by LCNB Corp. with the Securities
and Exchange Commission pursuant to which up to 1,760,000 shares of
LCNB Corp.'s common stock are to be registered for purposes of the
proposed reorganization whereby Lebanon Citizens National Bank will
be merged with and into LC Interim National Bank, a wholly owned
subsidiary of LCNB Corp., in order to effect a holding company
structure. As counsel for LCNB Corp., we have been requested to
render our opinion with respect to certain tax matters and
consequences of the reorganization described in the Registration
Statement. All capitalized terms used herein which are not defined
shall have the meanings ascribed to them in the Registration
Statement.
We hereby consent to the filing of this opinion as Exhibit 8 and
23.3 to the Registration Statement and the reference to our name in
the Registration Statement.
We have reviewed the terms of the proposed transaction as set forth
in the Plan and Agreement of Merger and the Agreement of Merger and
described in the Registration Statement.
Our opinion is limited to the matters expressly addressed above. No
opinion is given or should be inferred as to any other issue. Our
opinion is further based on our analysis of the applicable
provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), Treasury Regulations, Internal Revenue Service Rulings, and
judicial decisions interpreting the Code as in effect on the date
hereof, all of which are subject to change, prospectively or
retroactively.
Based upon and subject to the foregoing, our opinion is as follows:
1. The proposed statutory merger will qualify as a tax-free
reorganization within the meaning of Section 368(a)(1)(A) and
Section 368(a)(2)(D) of the Internal Revenue Code of 1986. Lebanon
Citizens, the Interim Bank and LCNB Corp. will each be a party to
the reorganization within the meaning of Section 368(b) of the Code.
2. No gain or loss will be recognized by Lebanon Citizens upon the
transfer of substantially all of its assets to the Interim Bank in
exchange for LCNB Corp.'s common stock, and the assumption of all of
Lebanon Citizens' liabilities by the Interim Bank.
3. No gain or loss will be recognized by either LCNB Corp. or the
Interim Bank upon the acquisition by the Interim Bank of
substantially all of the assets of Lebanon Citizens in exchange for
LCNB Corp.'s common stock.
4. The basis of the assets of Lebanon Citizens acquired by the
Interim Bank will be the same in the hands of the Interim Bank as
the basis of such assets in the hands of Lebanon Citizens
immediately prior to the merger. The holding periods of the assets
of Lebanon Citizens received by the Interim Bank will include the
periods for which such assets were held by Lebanon Citizens.
5. No gain or loss will be recognized by the shareholders of Lebanon
Citizens upon the exchange of Lebanon Citizens common stock into
LCNB Corp. common stock.
6. The federal income tax basis of the shares of LCNB Corp. common
stock received by the shareholders of Lebanon Citizens will be the
same as the basis of Lebanon Citizens common stock surrendered
therefor.
7. The holding period of LCNB Corp. common stock received by the
shareholders of Lebanon Citizens will include the period during
which Lebanon Citizens common stock surrendered therefor was held,
provided that Lebanon Citizens common stock was a capital asset in
the hands of the shareholders of Lebanon Citizens on the date of the
consummation of the transaction.
8. The Interim Bank shall take into account as of the date of the
proposed merger (as defined in Section 1.381(b)-1(b) of the
Regulations promulgated under Code Section 381), the items described
in Section 381(c) of the Code subject to the conditions and
limitations of Sections 381, 382, 383 and 384 of the Internal
Revenue Code of 1986 and the regulations thereunder.
Very truly yours,
DINSMORE & SHOHL LLP
/s/ Susan B. Zaunbrecher
Susan B. Zaunbrecher
SBZ:gt
Exhibit 23.1
The Board of Directors
Lebanon Citizens National Bank
We consent to the incorporation in the registration statement on
Form S-4 of Lebanon Citizens National Bank of our report dated
January 13, 1999, relating to the balance sheets for Lebanon
Citizens National Bank as of December 31, 1998 and 1997, and the
related statements of income, changes in shareholders' equity, and
cash flows for each of the three years in the period ended December
31, 1998.
/s/ J.D. Cloud & Co., L.L.P.
Certified Public Accountants
Cincinnati, Ohio
April 1, 1999
Exhibit 99
PROXY
LEBANON CITIZENS NATIONAL BANK
P.O. Box 59
Lebanon, Ohio 45036
PROXY FOR SPECIAL MEETING OF SHAREHOLDERS CALLED FOR
________________, 1999
THIS PROXY IS SOLICITED BY MANAGEMENT AND UNLESS OTHERWISE MARKED
WILL BE VOTED FOR THE PROPOSAL.
The undersigned, having received notice of the Special Meeting of
Shareholders of Lebanon Citizens National Bank, Lebanon, Ohio to be
held at 10:00 a.m., Tuesday, _______________, 1999, at the main
office of the bank, located at 2 North Broadway, Lebanon, Ohio,
hereby designates and appoints
______________________________________, or any of them, as attorneys
and proxies for the undersigned, with full power of substitution, to
vote for and in the name of the undersigned all shares of the common
stock of Lebanon Citizens National Bank which the undersigned is
entitled to vote at such Special Meeting of Shareholders, or at any
adjournment thereof, such proxies being directed to vote as
specified below on the following proposal:
Management recommends a vote FOR the proposal.
Proposal To vote on the approval of the following Resolution:
RESOLVED, Lebanon Citizens National Bank reorganize into a bank
holding company structure as described in the Proxy
Statement/Prospectus and the Appendices attached to the Proxy
Statement/Prospectus that the Lebanon Citizens National Bank sent
with the Proxy Statement/Prospectus sent to the shareholders.
FOR______ AGAINST______ ABSTAIN______
If this Proxy is properly signed but one or more of the above
ballots are not marked, such proxies are authorized to vote the
shares represented by this proxy in accordance with their
discretion. It is the present intention of such proxies to vote for
the election of directors as nominated herein, for the merger
proposal and for the ratification of the auditors, and in the best
interest of Lebanon Citizens, in the judgment of the proxies,
concerning any other matters presented at the meeting.
The undersigned reserves the right to revoke this Proxy at any time
until the Proxy is voted at the Special Meeting. The Proxy may be
revoked by a later dated Proxy, by giving written notice to Lebanon
Citizens at any time before the Proxy is voted, or in open meeting.
DATED:________________ _______________________
Signature
_________________________________ _______________________
(Number of Shares) Signature
(Please sign Proxy as your name appears on your stock
certificate(s). Joint owners should each sign personally. When
signing as attorney, executor, administrator, trustee, guardian or
corporate officer, please give your full title as such.)
ALL FORMER PROXIES
ARE HEREBY REVOKED
Please date, sign, and mail this proxy to the Proxy Committee, in
care of Lebanon Citizens National Bank, P.O. Box 59, Lebanon, Ohio
45036. A pre-addressed envelope is enclosed.
