LCNB's Q1 2025 Earnings: A Tale of Two Performances – Strong Revenue, Missed EPS Targets

LCNB Corp. (NASDAQ: LCNB) delivered a mixed set of results for Q1 2025, showcasing robust revenue growth while falling short of earnings per share (EPS) expectations. Let’s dissect the numbers, explore the reasons behind the gap, and assess what this means for investors.

Revenue: A Solid Showing

LCNB’s total revenue for Q1 2025 hit $21.52 million, narrowly missing the $21.7 million consensus estimate but marking a 19.3% jump from $17.82 million in Q1 2024. This growth was driven by two key factors:

1. Net Interest Income: Rose to $16.3 million (up 17.9% year-over-year), fueled by higher loan rates and reduced interest costs on liabilities.
2. Non-Interest Income: Surged 32.9% to $5.2 million, benefiting from gains on loan sales and a 9.7% increase in fiduciary income. LCNB Wealth Management’s assets under management hit a record $1.40 billion, a testament to its growing advisory services.

EPS: The Miss Explained

Despite strong top-line growth, LCNB reported an EPS of $0.33, falling short of $0.36 (its own guidance) and $0.39 (Zacks consensus). This 8% miss highlights execution challenges:

• Cost Inflation: Non-interest expenses rose $337,000 to $15.8 million, driven by ongoing costs from recent acquisitions (e.g., Eagle Financial Bancorp and Cincinnati Federal) and increased marketing spend.
• Efficiency Woes: The efficiency ratio (tax-equivalent) worsened to 73.3%, up from 64% in Q4 2024, signaling that expenses grew faster than revenue.
• Dilution: Shares outstanding increased to 14.2 million, up from 13.2 million in Q1 2024, diluting EPS growth.

Why the Discrepancy?

The gap between revenue and EPS stems from integration costs of acquisitions and operational inefficiencies. While LCNB has successfully boosted revenue through strategic deals (e.g., achieving a “positive tangible book value earn back” for Eagle a year early), the lag in expense management has hampered profitability.

CEO Eric Meilstrup acknowledged these challenges but emphasized that LCNB’s strong balance sheet and asset quality remain intact. Total assets grew to $2.30 billion, with non-performing assets at just 0.21% of total assets—a sign of prudent risk management.

Strategic Strengths to Watch

1. Net Interest Margin (NIM): Expanded to 3.25%, the highest in seven quarters, thanks to disciplined pricing on loans and deposits.
2. Wealth Management: LCNB’s wealth division is a growth engine, with assets under management up 25% year-over-year.
3. Geographic Expansion: Focus on Southwestern Ohio could drive incremental loan growth and fee income.

What’s Next?

• Q2 2025 Outlook: Analysts expect EPS of $0.40 and revenue of $23.6 million. LCNB must demonstrate better cost control to meet these targets.
• Zacks Rank: The stock holds a “Hold” rating (#3) due to mixed estimate revisions, though the Banks–Northeast sector ranks in the top 25% of Zacks industries.
• Stock Performance: LCNB’s shares have dropped 7.7% year-to-date, outperforming the S&P 500’s -12.3% decline.

Conclusion: Growth vs. Profitability

LCNB’s Q1 results are a reminder that revenue growth alone doesn’t guarantee shareholder returns. While the company has executed well on strategic initiatives—acquisitions, balance sheet optimization, and wealth management expansion—the 73.3% efficiency ratio and lingering integration costs are red flags.

The positives are clear: strong NIM expansion, robust asset quality, and a 7.8% rise in tangible equity to $258.7 million. However, to justify its valuation, LCNB must narrow its efficiency gap and meet Q2 estimates.

For now, investors should remain cautiously optimistic. LCNB’s long-term prospects hinge on cost discipline and operational synergy capture from its acquisitions. If those materialize, the EPS trajectory could align with revenue momentum—and that’s when the stock could shine.