Hook
LCNB Corporation (LCNB) is one of those rare small-cap regional bank setups where the balance sheet, earnings and payout combine to make an actionable trade: the shares are changing hands below book value, the dividend yields north of 5%, and the most recent quarterly results show clean credit and steady core earnings. That combination - capital strength + yield + below-book trading - creates an asymmetric risk-reward profile for a long trade with a well-defined stop.
This is a tactical, position-sized long idea for investors with a 3-12 month time horizon who want income plus capital upside if the stock re-rates closer to tangible book or benefits from stable net interest margin dynamics.
What the company does and why it matters
LCNB Corp is the holding company for The National Bank, providing commercial and personal banking services. The business is classic regional banking: interest income from loans and securities is the engine, with noninterest income (fees, service charges) and disciplined expense management supporting operating leverage.
Why the market should care: small regional banks that are well-capitalized and trade below book are inherently interesting when credit risk is manageable and the dividend is meaningful. At a time when deposit competition and rates remain top-of-mind, a bank with a >12% equity-to-assets buffer and minimal provisions is a different animal than one burning capital.
Guardrails - the numbers that matter
- Latest quarter (period ended 09/30/2025): revenues $26.305M, net income $6.936M, diluted EPS $0.49.
- Balance sheet: total assets $2,244.365M, equity $269.870M, long-term debt $104.717M (quarter end 09/30/2025).
- Capital cushion: equity/assets roughly 12.0% (269.87M / 2,244.37M).
- Profit mix: net interest income ~$18.126M of the $26.305M revenue (about 69% of revenues), noninterest income ~$5.704M and noninterest expense ~$15.145M.
- Efficiency and credit: operating income $8.474M and a modest provision for loan losses of $0.211M in the quarter.
- Dividend: quarterly cash dividend $0.22 (frequency 4) - annualized $0.88; at a reference price of $16.33 the yield is ~5.4%.
Those items tell a consistent story: a bank generating recurring net interest income, keeping credit costs low (small provision), operating with a reasonable expense base, and sitting on a thick capital cushion.
Valuation framing
Market snapshot: last trade near $16.33 (as of 01/09/2026). Outstanding-share proxy: the most recent diluted average shares were ~14.10M (Q3 2025). Using that as a conservative proxy for shares outstanding implies an approximate market capitalization of ~ $230M (14.097M * $16.33 ≈ $230.2M).
Book-value logic: using reported equity of $269.87M divided by the same share proxy gives book value per share of roughly $19.14. That puts the stock at ~0.85x book (16.33 / 19.14). Trading below book for a well-capitalized bank with small provisions is a clear valuation point - the market is paying you income plus optionality to mean-revert to book.
Earnings multiple: the most recent quarter produced diluted EPS of $0.49. Annualizing the most recent quarter gives a rough EPS run-rate of $1.96 and a P/E of ~8.3x (16.33 / 1.96). A more conservative TTM-estimate using the first three quarters of 2025 (0.33 + 0.41 + 0.49 = 1.23) annualized gives ~1.64 EPS and a P/E around ~10x. Either way, the stock appears cheap on an earnings basis.
Note on precision: full trailing-12-month figures and shares outstanding are not explicitly available in the morning snapshot used here; the calculations above rely on the company quarter-end equity and the reported diluted average shares as the best available proxies. The conclusion - below-book, mid-single-digit yield, low-teens equity ratio - is robust to reasonable adjustments.
Trade idea - actionable
Trade direction: Long (buy the stock).
Risk level: Medium - small-cap bank, deposit competition and interest-rate moves are the main macro risks.
Time horizon: Position - 6 to 12 months is the target window for a re-rating to tangible book or for dividend income to matter while valuation re-prices.
- Entry: 15.80 - 16.75. If you can average in, prioritize fills below $16.50.
- Initial stop: $14.25 (roughly 12-13% below the $16.33 reference price). Move the stop up to breakeven after a $2 move higher.
- Target 1: $19.00 - conservative reversion toward book value (~book ~ $19.14).
- Target 2: $23.00 - 1.2x book; possible if credit remains clean and investor sentiment on small banks improves.
Position sizing guidance: limit position to a size that corresponds to a portfolio-level risk tolerance of ~3-5% of capital at entry; stop defines loss. Small regional banks can gap on macro news – keep position size modest relative to larger, more liquid names.
Catalysts
- Dividend support - a steady $0.22 quarterly payout ($0.88 annualized) creates an attractive yield (~5.4%) that underpins the floor for buyer interest.
- Improving net interest income - if rates stabilize at levels that expand loan yields more than funding costs, NII can lift earnings and multiple expansion.
- Better-than-expected credit - continued low provisions and stable asset quality would shrink a key investor overhang for regional banks.
- Capital deployment - any share repurchase program or opportunistic M&A that is earnings-accretive could unlock value above book.
- Re-rating conversation - broader market rotation back into regional banks or a successful investor day could close the discount to book.
Risks and counterarguments
Always assume small regional banks carry structural and event risks. Below are the main ones I see for this trade.
- Deposit volatility and funding pressure. Smaller banks can face deposit flight or stepped-up cost of funds. If deposit beta jumps, net interest margin could compress quickly.
- Macroeconomic / credit deterioration. A less favorable macro or a localized economic hit could produce higher provisions; while provisions are low now ($0.211M in the latest quarter), that could change quickly.
- Valuation risk - continued discount to book. Market sentiment about regional banking could keep multiples low; earnings might be fine but the multiple may not re-rate.
- Liquidity and volatility. With an implied market cap near $230M and relatively modest daily volume, shares can gap on headlines. The stop needs to be sized to withstand normal volatility but firm enough to cap downside.
- Execution / balance-sheet moves. Large, unexpected financing (e.g., emergency borrowing or large deposit outflows requiring balance-sheet changes) could pressure both book and market confidence.
Counterargument - you can argue that trading below book is a value trap: if the market expects slower earnings, higher credit costs, or worse funding dynamics for smaller banks, the discount may persist or widen. That is a real possibility and is why the trade is position-sized with a stop.
What would change my mind
I am constructive on the trade if LCNB maintains capital above 10% of assets, provisions remain small relative to loan balances, and dividends hold. I would change my view (i.e., move to neutral or short) if any of the following occur: a sustained increase in provisions or a material charge, equity declines materially below current book suggesting capital erosion, or management signals a dividend cut or capital raise. Specific triggers: a quarter with provisions rising above $2.0M or a 10%+ sequential decline in tangible equity would make me reassess immediately.
Bottom line
LCNB looks like a pragmatic long: a well-capitalized regional bank trading below book while paying a >5% yield, supported by steady net interest income and very modest provisions. If you can accept small-cap bank volatility, the trade offers asymmetric upside (reversion to book or better) while downside is limited by a healthy capital base and a stop that reflects short-term liquidity considerations.
Enter below $16.75, stop $14.25, and target $19 (base) / $23 (upside). Keep position sizes modest and treat the dividend as income while you wait for a potential valuation rerating.
Disclosure: This is not financial advice. Do your own due diligence; market conditions change.