----

----

| T | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|-----------------------------------------------------------------------------------------|

| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|---|------------------------------------------------------------------------------------------|

| Ohio                                                           | 31-1626393                              |
|----------------------------------------------------------------|-----------------------------------------|
| (State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification Number) |

|   | T Yes         £ No |
|--------|----------------------------------------------------------------------|

|   | £ Yes         £ No |
|--------|---------------------------------------------------------------------------|

|   Large accelerated filer £                                             | Accelerated filer T              |
|----------------------------------------------------------------------------------------|----------------------------------|
|   Non-accelerated filer £ (Do not check if a smaller reporting company) | Smaller reporting company £ |

|   | £ Yes         T No |
|--------|----------------------------------------------------------------------|

----

----

----

LCNB 

| PART I – FINANCIAL INFORMATION                    | 2                                                                                     |
|---------------------------------------------------------|---------------------------------------------------------------------------------------|
|                                                    |                                                                                  |   |
| Item 1.                                                 | Financial Statements                                                                  | 2 |
|                                                    |                                                                                  |   |
| CONSOLIDATED BALANCE SHEETS                             | 2                                                                                     |
|                                                    |                                                                                  |   |
| CONSOLIDATED STATEMENTS OF INCOME                       | 3                                                                                     |
|                                                    |                                                                                  |   |
| CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME         | 4                                                                                     |
|                                                    |                                                                                  |   |
| CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY   | 5                                                                                     |
|                                                    |                                                                                  |   |
| CONSOLIDATED STATEMENTS OF CASH FLOWS                   | 6                                                                                     |
|                                                    |                                                                                  |   |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS              | 7                                                                                     |
|                                                    |                                                                                  |   |
| REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | 27                                                                                    |
|                                                    |                                                                                  |   |
| Item 2.                                                 | Management's Discussion and Analysis of Financial Condition and Results of Operations | 28 |
|                                                    |                                                                                  |   |
| Item 3.                                                 | Quantitative and Qualitative Disclosures about Market Risks                           | 38 |
|                                                    |                                                                                  |   |
| Item 4.                                                 | Controls and Procedures                                                               | 39 |
|                                                    |                                                                                  |   |
| Item 4T.                                                | Controls and Procedures                                                               | 39 |
|                                                    |                                                                                  |   |
| PART II.  OTHER INFORMATION                   | 40                                                                                    |
|                                                    |                                                                                  |   |
| Item 1.                                                 | Legal Proceedings                                                                     | 40 |
|                                                    |                                                                                  |   |
| Item 1A.                                                | Risk Factors                                                                          | 40 |
|                                                    |                                                                                  |   |
| Item 2.                                                 | Unregistered Sales of Equity Securities and Use of Proceeds                           | 41 |
|                                                    |                                                                                  |   |
| Item 3.                                                 | Defaults Upon Senior Securities                                                       | 41 |
|                                                    |                                                                                  |   |
| Item 4.                                                 | (Removed and Reserved)                                                                | 41 |
|                                                    |                                                                                  |   |
| Item 5.                                                 | Other Information                                                                     | 41 |
|                                                    |                                                                                  |   |
| Item 6.                                                 | Exhibits                                                                              | 42 |
|                                                    |                                                                                  |   |
| SIGNATURES                                              | 44                                                                                    |

----

Index

PART

Item 1.

LCN

|                                                                                                                                  |   | September 30, |    |   | December 31, |   |
|---------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                                                                                                  |   | 2010               |    |   | 2009              |   |
|                                                                                                                                  |   | (Unaudited)        |    |   |              |   |
| ASSETS:                                                                                                                               |   |               |    |   |              |   |
| Cash and due from banks                                                                                                               |   | $                  | 21,003  |   |              |   | 12,626 |   |
| Interest-bearing demand deposits                                                                                                      |   |               | 19,626  |   |              |   | - |   |
| Total cash and cash equivalents                                                                                                       |   |               | 40,629  |   |              |   | 12,626 |   |
| Investment securities:                                                                                                                |   |               |    |   |              |   |   |   |
| Available-for-sale, at fair value                                                                                                     |   |               | 222,833 |   |              |   | 201,578 |   |
| Held-to-maturity, at cost                                                                                                             |   |               | 12,479  |   |              |   | 13,030 |   |
| Federal Reserve Bank and Federal Home Loan Bank stock, at cost                                                                        |   |               | 3,030   |   |              |   | 3,031 |   |
| Loans, net                                                                                                                            |   |               | 456,104 |   |              |   | 457,418 |   |
| Premises and equipment, net                                                                                                           |   |               | 15,827  |   |              |   | 15,722 |   |
| Goodwill                                                                                                                              |   |               | 5,915   |   |              |   | 5,915 |   |
| Bank owned life insurance                                                                                                             |   |               | 14,098  |   |              |   | 14,122 |   |
| Other assets                                                                                                                          |   |               | 11,031  |   |              |   | 10,967 |   |
| TOTAL ASSETS                                                                                                                          |   | $                  | 781,946 |   |              |   | 734,409 |   |
|                                                                                                                                  |   |               |    |   |              |   |   |   |
| LIABILITIES:                                                                                                                          |   |               |    |   |              |   |   |   |
| Deposits –                                                                                                                      |   |               |    |   |              |   |   |   |
| Noninterest-bearing                                                                                                                   |   | $                  | 95,193  |   |              |   | 93,894 |   |
| Interest-bearing                                                                                                                      |   |               | 577,202 |   |              |   | 530,285 |   |
| Total deposits                                                                                                                        |   |               | 672,395 |   |              |   | 624,179 |   |
| Short-term borrowings                                                                                                                 |   |               | 6,797   |   |              |   | 14,265 |   |
| Long-term debt                                                                                                                        |   |               | 23,467  |   |              |   | 24,960 |   |
| Accrued interest and other liabilities                                                                                                |   |               | 6,997   |   |              |   | 5,390 |   |
| TOTAL LIABILITIES                                                                                                                     |   |               | 709,656 |   |              |   | 668,794 |   |
|                                                                                                                                  |   |               |    |   |              |   |   |   |
| SHAREHOLDERS’ EQUITY:                                                                                                           |   |               |    |   |              |   |   |   |
| Preferred shares – no par value, authorized 1,000,000 shares, None outstanding                                                  |   |               | -       |   |              |   | - |   |
| Common shares – no par value, authorized 12,000,000 shares, issued 7,445,514 shares at September 30, 2010 and December 31, 2009 |   |               | 11,068  |   |              |   | 11,068 |   |
| Surplus                                                                                                                               |   |               | 15,437  |   |              |   | 15,407 |   |
| Retained earnings                                                                                                                     |   |               | 52,705  |   |              |   | 48,962 |   |
| Treasury shares at cost, 758,282 shares at September 30, 2010 and December 31, 2009                                                   |   |               | (11,737 | )      |              |   | (11,737 | ) |
| Accumulated other comprehensive income (loss), net of taxes                                                                           |   |               | 4,817   |   |              |   | 1,915 |   |
| TOTAL SHAREHOLDERS’ EQUITY                                                                                                      |   |               | 72,290  |   |              |   | 65,615 |   |
|                                                                                                                                  |   |               |    |   |              |   |   |   |
| TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                      |   | $                  | 781,946 |   |              |   | 734,409 |   |

----

Index

LCN

|                                                               |   | Three Months Ended |      |   | Nine Months Ended |   |
|--------------------------------------------------------------------|--------|------------------------------|-----------|--------|-----------------------------|--------|
|                                                               |   | September 30,                |      |   | September 30,               |   |
|                                                               |   | 2010                         |      |   | 2009                        |   |   | 2010 |   |   | 2009 |   |
| INTEREST INCOME:                                                   |   |                         |      |   |                        |   |   |   |   |   |   |   |
| Interest and fees on loans                                         |   | $                            | 6,738     |   |                        |   | 6,884 |   |   |   | 20,347 |   |   |   | 20,580 |   |
| Dividends on Federal Reserve Bank and Federal Home Loan Bank stock |   |                         | 24        |   |                        |   | 26 |   |   |   | 99 |   |   |   | 101 |   |
| Interest on investment securities –                          |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                            |   |                         | 913       |   |                        |   | 1,050 |   |   |   | 2,727 |   |   |   | 3,183 |   |
| Non-taxable                                                        |   |                         | 773       |   |                        |   | 795 |   |   |   | 2,364 |   |   |   | 2,129 |   |
| Other short-term investments                                       |   |                         | 15        |   |                        |   | 13 |   |   |   | 40 |   |   |   | 41 |   |
| TOTAL INTEREST INCOME                                              |   |                         | 8,463     |   |                        |   | 8,768 |   |   |   | 25,577 |   |   |   | 26,034 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| INTEREST EXPENSE:                                                  |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Interest on deposits                                               |   |                         | 1,902     |   |                        |   | 2,278 |   |   |   | 5,806 |   |   |   | 7,269 |   |
| Interest on short-term borrowings                                  |   |                         | 6         |   |                        |   | - |   |   |   | 19 |   |   |   | - |   |
| Interest on long-term debt                                         |   |                         | 173       |   |                        |   | 177 |   |   |   | 523 |   |   |   | 440 |   |
| TOTAL INTEREST EXPENSE                                             |   |                         | 2,081     |   |                        |   | 2,455 |   |   |   | 6,348 |   |   |   | 7,709 |   |
| NET INTEREST INCOME                                                |   |                         | 6,382     |   |                        |   | 6,313 |   |   |   | 19,229 |   |   |   | 18,325 |   |
| PROVISION FOR LOAN LOSSES                                          |   |                         | 268       |   |                        |   | 664 |   |   |   | 987 |   |   |   | 970 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES                |   |                         | 6,114     |   |                        |   | 5,649 |   |   |   | 18,242 |   |   |   | 17,355 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST INCOME:                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Trust income                                                       |   |                         | 479       |   |                        |   | 451 |   |   |   | 1,389 |   |   |   | 1,365 |   |
| Service charges and fees                                           |   |                         | 1,027     |   |                        |   | 1,018 |   |   |   | 3,003 |   |   |   | 2,956 |   |
| Net gain on sales of securities                                    |   |                         | 48        |   |                        |   | 60 |   |   |   | 176 |   |   |   | 60 |   |
| Insurance agency income                                            |   |                         | 378       |   |                        |   | 402 |   |   |   | 1,220 |   |   |   | 1,160 |   |
| Bank owned life insurance income                                   |   |                         | 148       |   |                        |   | 162 |   |   |   | 1,245 |   |   |   | 478 |   |
| Gains from sales of mortgage loans                                 |   |                         | 195       |   |                        |   | 46 |   |   |   | 243 |   |   |   | 377 |   |
| Other operating income                                             |   |                         | 42        |   |                        |   | 37 |   |   |   | 173 |   |   |   | 121 |   |
| TOTAL NON-INTEREST INCOME                                          |   |                         | 2,317     |   |                        |   | 2,176 |   |   |   | 7,449 |   |   |   | 6,517 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| NON-INTEREST EXPENSE:                                              |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Salaries and wages                                                 |   |                         | 2,522     |   |                        |   | 2,378 |   |   |   | 7,370 |   |   |   | 7,102 |   |
| Pension and other employee benefits                                |   |                         | 614       |   |                        |   | 503 |   |   |   | 1,846 |   |   |   | 1,779 |   |
| Equipment expenses                                                 |   |                         | 227       |   |                        |   | 262 |   |   |   | 661 |   |   |   | 749 |   |
| Occupancy expense, net                                             |   |                         | 456       |   |                        |   | 418 |   |   |   | 1,421 |   |   |   | 1,280 |   |
| State franchise tax                                                |   |                         | 176       |   |                        |   | 152 |   |   |   | 537 |   |   |   | 470 |   |
| Marketing                                                          |   |                         | 124       |   |                        |   | 112 |   |   |   | 335 |   |   |   | 353 |   |
| Intangible amortization                                            |   |                         | 27        |   |                        |   | 28 |   |   |   | 81 |   |   |   | 83 |   |
| FDIC insurance premiums                                            |   |                         | 269       |   |                        |   | 317 |   |   |   | 716 |   |   |   | 926 |   |
| Write-off of pension asset                                         |   |                         | -         |   |                        |   | - |   |   |   | - |   |   |   | 722 |   |
| Other non-interest expense                                         |   |                         | 1,447     |   |                        |   | 1,024 |   |   |   | 3,955 |   |   |   | 3,414 |   |
| TOTAL NON-INTEREST EXPENSE                                         |   |                         | 5,862     |   |                        |   | 5,194 |   |   |   | 16,922 |   |   |   | 16,878 |   |
| INCOME BEFORE INCOME TAXES                                         |   |                         | 2,569     |   |                        |   | 2,631 |   |   |   | 8,769 |   |   |   | 6,994 |   |
| PROVISION FOR INCOME TAXES                                         |   |                         | 580       |   |                        |   | 588 |   |   |   | 1,816 |   |   |   | 1,548 |   |
| NET INCOME                                                         |   |                         | 1,989     |   |                        |   | 2,043 |   |   |   | 6,953 |   |   |   | 5,446 |   |
| PREFERRED STOCK DIVIDENDS AND DISCOUNT ACCRETION                   |   |                         | -         |   |                        |   | 206 |   |   |   | - |   |   |   | 514 |   |
| NET INCOME AVAILABLE TOCOMMON SHAREHOLDERS                         |   | $                            | 1,989     |   |                        |   | 1,837 |   |   |   | 6,953 |   |   |   | 4,932 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Dividends declared per common share                                |   | $                            | 0.16      |   |                        |   | 0.16 |   |   |   | 0.48 |   |   |   | 0.48 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Earnings per common share:                                         |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                              |   | $                            | 0.30      |   |                        |   | 0.27 |   |   |   | 1.04 |   |   |   | 0.74 |   |
| Diluted                                                            |   |                         | 0.30      |   |                        |   | 0.27 |   |   |   | 1.03 |   |   |   | 0.74 |   |
|                                                               |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Average common shares outstanding:                                 |   |                         |      |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Basic                                                              |   |                         | 6,687,232 |   |                        |   | 6,687,232 |   |   |   | 6,687,232 |   |   |   | 6,687,232 |   |
| Diluted                                                            |   |                         | 6,740,884 |   |                        |   | 6,707,746 |   |   |   | 6,737,965 |   |   |   | 6,693,032 |   |

----

Index

LCN

|                                                                                                                                                                                                                                                                                                                 |   | Three Months Ended |   |   | Nine Months Ended |   |
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|
|                                                                                                                                                                                                                                                                                                                 |   | September 30,                |   |   | September 30,               |   |
|                                                                                                                                                                                                                                                                                                                 |   | 2010                         |   |   | 2009                        |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                                                                                                                                                                                                                 |   |                         |   |   |                        |   |   |   |   |   |   |   |
| Net Income                                                                                                                                                                                                                                                                                                           |   | $                            | 1,989  |   |                        |   | 2,043 |   |   |   | 6,953 |   |   |   | 5,446 |   |
|                                                                                                                                                                                                                                                                                                                 |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Other comprehensive income (loss):                                                                                                                                                                                                                                                                                   |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
|                                                                                                                                                                                                                                                                                                                 |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Net unrealized gain on available-for-sale securities (net of taxes of $719 and $1,194 for the three months ended September 30, 2010 and 2009, respectively, and $1,554 and $1,440 for the nine months ended September 30, 2010 and 2009, respectively)                                                               |   |                         | 1,396  |   |                        |   | 2,310 |   |   |   | 3,017 |   |   |   | 2,795 |   |
|                                                                                                                                                                                                                                                                                                                 |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Reclassification adjustment for  net realized gain on sale of available-for-sale securities included in net income (net of taxes of $17 and $20 for the three months ended September 30, 2010 and 2009, respectively, and $61 and $20 for the nine months ended September 30, 2010 and 2009, respectively) |   |                         | (31    | )      |                        |   | (40 | ) |   |   | (115 | ) |   |   | (40 | ) |
|                                                                                                                                                                                                                                                                                                                 |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Reversal of pension plan unrecognized net loss (net of taxes of $1,564)                                                                                                                                                                                                                                              |   |                         | -      |   |                        |   | - |   |   |   | - |   |   |   | 3,037 |   |
|                                                                                                                                                                                                                                                                                                                 |   |                         |   |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| TOTAL COMPREHENSIVE INCOME                                                                                                                                                                                                                                                                                           |   | $                            | 3,354  |   |                        |   | 4,313 |   |   |   | 9,855 |   |   |   | 11,238 |   |

----

Index

LCN

|                                                                                             |   | Common Shares Outstanding |      |   | Preferred Stock |   |   | Common Stock |   |   | Surplus |   |   | Retained Earnings |   |   | Treasury Shares |   |   | Accumulated Other Comprehensive Income (Loss) |   |   | Total Shareholders’ Equity |   |
|--------------------------------------------------------------------------------------------------|--------|---------------------------|-----------|--------|-----------------|--------|--------|--------------|--------|--------|---------|--------|--------|-------------------|--------|--------|-----------------|--------|--------|-----------------------------------------------|--------|--------|----------------------------------|--------|
| Balance January 1, 2010                                                                          |   |                      | 6,687,232 |   |            | $      | -      |         |   |   | 11,068  |   |   |              | 15,407 |   |            |   | 48,962 |                                          |   |   | (11,737                          | )      |   |   | 1,915 |   |   |   | 65,615 |   |
| Net income                                                                                       |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   | 6,953  |                                          |   |   |                             |   |   |   |   |   |   |   | 6,953 |   |
| Net unrealized gain on available-for-sale securities, net of tax and reclassification adjustment |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   |   |                                          |   |   |                             |   |   |   | 2,902 |   |   |   | 2,902 |   |
| Compensation expense relating to stock options                                                   |   |                      |      |   |            |   |   |         |   |   |    |   |   |              | 30     |   |            |   |   |                                          |   |   |                             |   |   |   |   |   |   |   | 30 |   |
| Common stock dividends, $0.48 per share                                                          |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   | (3,210 | )                                             |   |   |                             |   |   |   |   |   |   |   | (3,210 | ) |
| Balance September 30, 2010                                                                       |   |                      | 6,687,232 |   |            | $      | -      |         |   |   | 11,068  |   |   |              | 15,437 |   |            |   | 52,705 |                                          |   |   | (11,737                          | )      |   |   | 4,817 |   |   |   | 72,290 |   |
|                                                                                             |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   |   |                                          |   |   |                             |   |   |   |   |   |   |   |   |   |
| Balance January 1, 2009                                                                          |   |                      | 6,687,232 |   |            | $      | -      |         |   |   | 11,068  |   |   |              | 14,792 |   |            |   | 46,584 |                                          |   |   | (11,737                          | )      |   |   | (2,591 | ) |   |   | 58,116 |   |
| Net income                                                                                       |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   | 5,446  |                                          |   |   |                             |   |   |   |   |   |   |   | 5,446 |   |
| Issuance of preferred stock and related warrants                                                 |   |                      |      |   |            |   | 12,817 |         |   |   |    |   |   |              | 583    |   |            |   |   |                                          |   |   |                             |   |   |   |   |   |   |   | 13,400 |   |
| Net unrealized gain on available-for-sale securities, net of tax and reclassification adjustment |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   |   |                                          |   |   |                             |   |   |   | 2,755 |   |   |   | 2,755 |   |
| Reversal of pension plan unrecognized net loss, net of tax                                       |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   |   |                                          |   |   |                             |   |   |   | 3,037 |   |   |   | 3,037 |   |
| Compensation expense relating to stock options                                                   |   |                      |      |   |            |   |   |         |   |   |    |   |   |              | 23     |   |            |   |   |                                          |   |   |                             |   |   |   |   |   |   |   | 23 |   |
| Preferred stock dividends and discount accretion                                                 |   |                      |      |   |            |   | 112    |         |   |   |    |   |   |              |   |   |            |   | (514   | )                                             |   |   |                             |   |   |   |   |   |   |   | (402 | ) |
| Common stock dividends, $0.48 per share                                                          |   |                      |      |   |            |   |   |         |   |   |    |   |   |              |   |   |            |   | (3,210 | )                                             |   |   |                             |   |   |   |   |   |   |   | (3,210 | ) |
| Balance September 30, 2009                                                                       |   |                      | 6,687,232 |   |            | $      | 12,929 |         |   |   | 11,068  |   |   |              | 15,398 |   |            |   | 48,306 |                                          |   |   | (11,737                          | )      |   |   | 3,201 |   |   |   | 79,165 |   |

----

Index

LCNB 

|                                                                             |   | Nine Months Ended |    |
|----------------------------------------------------------------------------------|--------|-----------------------------|---------|
|                                                                             |   | September 30,               |    |
|                                                                             |   | 2010                        |    |   | 2009 |   |
| CASH FLOWS FROM OPERATING ACTIVITIES:                                            |   |                        |    |   |   |   |
| Net income                                                                       |   | $                           | 6,953   |   |   |   | 5,446 |   |
| Adjustments to reconcile net income to net cash flows from operating activities- |   |                        |    |   |   |   |   |   |
| Depreciation, amortization, and accretion                                        |   |                        | 2,007   |   |   |   | 1,734 |   |
| Provision for loan losses                                                        |   |                        | 987     |   |   |   | 970 |   |
| Increase in cash surrender value of bank owned life insurance                    |   |                        | (453    | ) |   |   | (478 | ) |
| Bank owned life insurance death benefits in excess of cash surrender value       |   |                        | (792    | ) |   |   | - |   |
| Realized (gain) loss  on sales of securities available-for-sale        |   |                        | (176    | ) |   |   | (60 | ) |
| Realized (gain) loss  on sale of premises and equipment                |   |                        | 16      |   |   |   | (17 | ) |
| Origination of mortgage loans for sale                                           |   |                        | (12,512 | ) |   |   | (26,033 | ) |
| Realized gains from sales of mortgage loans                                      |   |                        | (243    | ) |   |   | (377 | ) |
| Proceeds from sales of mortgage loans                                            |   |                        | 12,624  |   |   |   | 26,151 |   |
| Compensation expense related to stock options                                    |   |                        | 30      |   |   |   | 23 |   |
| Write-down of other real estate owned                                            |   |                        | 389     |   |   |   | - |   |
| Increase (decrease) due to changes in assets and liabilities:                    |   |                        |    |   |   |   |   |   |
| Income receivable                                                                |   |                        | (366    | ) |   |   | (945 | ) |
| Other assets                                                                     |   |                        | (81     | ) |   |   | (1,139 | ) |
| Other liabilities                                                                |   |                        | 111     |   |   |   | 2,414 |   |
| NET CASH FLOWS FROM OPERATING ACTIVITIES                                         |   |                        | 8,494   |   |   |   | 7,689 |   |
|                                                                             |   |                        |    |   |   |   |   |   |
| CASH FLOWS FROM INVESTING ACTIVITIES:                                            |   |                        |    |   |   |   |   |   |
| Proceeds from sales of securities available-for-sale                             |   |                        | 12,591  |   |   |   | 210 |   |
| Proceeds from maturities and calls of investment securities                      |   |                        |    |   |   |   |   |   |
| Available-for-sale                                                               |   |                        | 46,839  |   |   |   | 46,421 |   |
| Held-to-maturity                                                                 |   |                        | 3,989   |   |   |   | 235 |   |
| Purchases of investment securities                                               |   |                        |    |   |   |   |   |   |
| Available-for-sale                                                               |   |                        | (77,025 | ) |   |   | (110,212 | ) |
| Held-to-maturity                                                                 |   |                        | (3,435  | ) |   |   | (10,447 | ) |
| Purchase of Federal Reserve Bank stock                                           |   |                        | -       |   |   |   | (3 | ) |
| Proceeds from redemption of Federal Reserve Bank stock                           |   |                        | 1       |   |   |   | - |   |
| Net (increase) decrease in loans                                                 |   |                        | 1       |   |   |   | (9,435 | ) |
| Proceeds from bank owned life insurance death benefits                           |   |                        | 1,269   |   |   |   | - |   |
| Proceeds from sale of repossessed assets                                         |   |                        | 137     |   |   |   | 72 |   |
| Purchases of premises and equipment                                              |   |                        | (919    | ) |   |   | (1,263 | ) |
| Proceeds from sales of premises and equipment                                    |   |                        | 16      |   |   |   | 18 |   |
| NET CASH FLOWS FROM INVESTING ACTIVITIES                                         |   |                        | (16,536 | ) |   |   | (84,404 | ) |
|                                                                             |   |                        |    |   |   |   |   |   |
| CASH FLOWS FROM FINANCING ACTIVITIES:                                            |   |                        |    |   |   |   |   |   |
| Net increase (decrease) in deposits                                              |   |                        | 48,216  |   |   |   | 61,459 |   |
| Net increase (decrease) in short-term borrowings                                 |   |                        | (7,468  | ) |   |   | (1,889 | ) |
| Proceeds from long-term debt                                                     |   |                        | -       |   |   |   | 21,000 |   |
| Principal payments on long-term debt                                             |   |                        | (1,493  | ) |   |   | (691 | ) |
| Proceeds from issuance of preferred stock                                        |   |                        | -       |   |   |   | 13,400 |   |
| Cash dividends paid on common stock                                              |   |                        | (3,210  | ) |   |   | (3,210 | ) |
| Cash dividends paid on preferred stock                                           |   |                        | -       |   |   |   | (402 | ) |
| NET CASH FLOWS FROM FINANCING ACTIVITIES                                         |   |                        | 36,045  |   |   |   | 89,667 |   |
|                                                                             |   |                        |    |   |   |   |   |   |
| NET CHANGE IN CASH AND CASH EQUIVALENTS                                          |   |                        | 28,003  |   |   |   | 12,952 |   |
|                                                                             |   |                        |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD                                 |   |                        | 12,626  |   |   |   | 18,020 |   |
|                                                                             |   |                        |    |   |   |   |   |   |
| CASH AND CASH EQUIVALENTS AT END OF PERIOD                                       |   | $                           | 40,629  |   |   |   | 30,972 |   |
|                                                                             |   |                        |    |   |   |   |   |   |
| SUPPLEMENTAL CASH FLOW INFORMATION:                                              |   |                        |    |   |   |   |   |   |
| CASH PAID DURING THE YEAR FOR:                                                   |   |                        |    |   |   |   |   |   |
| Interest                                                                         |   | $                           | 6,385   |   |   |   | 7,813 |   |
| Income taxes                                                                     |   |                        | 2,331   |   |   |   | 1,560 |   |
|                                                                             |   |                        |    |   |   |   |   |   |
| SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING ACTIVITIES:                         |   |                        |    |   |   |   |   |   |
| Investment securities transferred from available-for-sale to held-to-maturity    |   |                        | -       |   |   |   | 1,944 |   |
| Transfer from loans to other real estate owned and repossessed assets            |   |                        | 170     |   |   |   | 2,392 |   |

----

Index

LCN

----

Index

|                                   |   | September 30, 2010 |    |
|----------------------------------------|--------|-------------------------|---------|
|                                   |   | Amortized Cost          |    |   | Unrealized Gains |   |   | Unrealized Losses |   |   | Fair Value |   |
| U.S. Treasury notes                    |   | $                       | 20,308  |   |   |   | 355 |   |   |   | - |   |   |   | 20,663 |   |
| U.S. Agency notes                      |   |                    | 55,675  |   |   |   | 472 |   |   |   | 2 |   |   |   | 56,145 |   |
| U.S. Agency mortgage-backed securities |   |                    | 38,759  |   |   |   | 1,737 |   |   |   | - |   |   |   | 40,496 |   |
| Corporate securities                   |   |                    | 9,546   |   |   |   | 118 |   |   |   | - |   |   |   | 9,664 |   |
| Municipal securities:                  |   |                    |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-taxable                            |   |                    | 71,240  |   |   |   | 4,136 |   |   |   | 2 |   |   |   | 75,374 |   |
| Taxable                                |   |                    | 18,262  |   |   |   | 733 |   |   |   | 6 |   |   |   | 18,989 |   |
| Other debt securities                  |   |                    | 556     |   |   |   | 14 |   |   |   | - |   |   |   | 570 |   |
| Trust preferred securities             |   |                    | 549     |   |   |   | 62 |   |   |   | 1 |   |   |   | 610 |   |
| Equity securities                      |   |                    | 313     |   |   |   | 13 |   |   |   | 4 |   |   |   | 322 |   |
|                                   |   | $                       | 215,208 |   |   |   | 7,640 |   |   |   | 15 |   |   |   | 222,833 |   |

|                                   |   | December 31, 2009 |    |
|----------------------------------------|--------|------------------------|---------|
|                                   |   | Amortized Cost         |    |   | Unrealized Gains |   |   | Unrealized Losses |   |   | Fair Value |   |
|                                   |   |                   |    |   |   |   |   |   |   |   |   |   |
| U.S. Treasury notes                    |   | $                      | 13,288  |   |   |   | 49 |   |   |   | 29 |   |   |   | 13,308 |   |
| U.S. Agency notes                      |   |                   | 45,931  |   |   |   | 207 |   |   |   | 250 |   |   |   | 45,888 |   |
| U.S. Agency mortgage-backed securities |   |                   | 48,650  |   |   |   | 1,093 |   |   |   | 119 |   |   |   | 49,624 |   |
| Corporate securities                   |   |                   | 8,450   |   |   |   | 64 |   |   |   | 26 |   |   |   | 8,488 |   |
| Municipal securities:                  |   |                   |    |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Non-taxable                            |   |                   | 72,002  |   |   |   | 2,056 |   |   |   | 36 |   |   |   | 74,022 |   |
| Taxable                                |   |                   | 9,127   |   |   |   | 176 |   |   |   | 2 |   |   |   | 9,301 |   |
| Other debt securities                  |   |                   | 542     |   |   |   | - |   |   |   | 4 |   |   |   | 538 |   |
| Trust preferred securities             |   |                   | 298     |   |   |   | 46 |   |   |   | - |   |   |   | 344 |   |
| Equity securities                      |   |                   | 62      |   |   |   | 3 |   |   |   | - |   |   |   | 65 |   |
|                                   |   | $                      | 198,350 |   |   |   | 3,694 |   |   |   | 466 |   |   |   | 201,578 |   |

----

Index

|                                      |   | September 30, |    |   | December 31, |   |
|-------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                      |   | 2010               |    |   | 2009              |   |
|                                      |   |               |    |   |              |   |
| Commercial and industrial                 |   | $                  | 35,853  |   |              |   | 42,807 |   |
| Commercial, secured by real estate        |   |               | 193,422 |   |              |   | 185,024 |   |
| Residential real estate                   |   |               | 194,703 |   |              |   | 193,293 |   |
| Consumer                                  |   |               | 21,384  |   |              |   | 26,185 |   |
| Agricultural                              |   |               | 3,191   |   |              |   | 3,125 |   |
| Other loans, including deposit overdrafts |   |               | 9,415   |   |              |   | 9,422 |   |
|                                      |   |               | 457,968 |   |              |   | 459,856 |   |
| Deferred net origination costs            |   |               | 426     |   |              |   | 560 |   |
|                                      |   |               | 458,394 |   |              |   | 460,416 |   |
| Less allowance for loan losses            |   |               | 2,290   |   |              |   | 2,998 |   |
| Loans, net                                |   | $                  | 456,104 |   |              |   | 457,418 |   |

----

Index

|                         |   | Nine Months Ended |   |
|------------------------------|--------|-------------------|--------|
|                         |   | September 30,     |   |
|                         |   | 2010              |   |   | 2009 |   |
| Balance, beginning of period |   | $                 | 2,998  |   |   |   | 2,468 |   |
| Provision for loan losses    |   |              | 987    |   |   |   | 970 |   |
| Charge-offs                  |   |              | (1,863 | ) |   |   | (910 | ) |
| Recoveries                   |   |              | 168    |   |   |   | 271 |   |
| Balance, end of period       |   | $                 | 2,290  |   |   |   | 2,799 |   |

|                                        |   | September 30, |   |   | December 31, |   |
|---------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                        |   | 2010               |   |   | 2009              |   |
| Non-accrual loans                           |   | $                  | 3,071  |   |              |   | 2,939 |   |
| Past-due 90 days or more and still accruing |   |               | 174    |   |              |   | 924 |   |
| Restructured loans                          |   |               | 9,439  |   |              |   | 7,173 |   |
| Total                                       |   | $                  | 12,684 |   |              |   | 11,036 |   |
| Percent to total loans                      |   |               | 2.77   | %      |              |   | 2.40 | % |

----

Index

|                                          |   | September 30, |   |   | December 31, |   |
|-----------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                          |   | 2010               |   |   | 2009              |   |
|                                          |   |               |   |   |              |   |
| Impaired loans without a valuation allowance  |   | $                  | 9,368  |   |              |   | 6,927 |   |
| Impaired loans with a valuation allowance     |   |               | 2,824  |   |              |   | 3,249 |   |
| Total impaired loans                          |   | $                  | 12,192 |   |              |   | 10,176 |   |
|                                          |   |               |   |   |              |   |   |   |
| Valuation allowance related to impaired loans |   | $                  | 210    |   |              |   | 858 |   |

|                                    |   | Nine Months Ended |   |
|-----------------------------------------|--------|-----------------------------|--------|
|                                    |   | September 30,               |   |
|                                    |   | 2010                        |   |   | 2009 |   |
| Balance, beginning of period            |   | $                           | 2,424  |   |   |   | 39 |   |
| Additions                               |   |                        | 104    |   |   |   | 2,385 |   |
| Reductions due to valuation write downs |   |                        | (389   | ) |   |   | - |   |
| Balance, end of period                  |   | $                           | 2,139  |   |   |   | 2,424 |   |

----

Index

|                                                               |   | Current Interest Rate |   |   | September 30,2010 |   |   | December 31,2009 |   |
|--------------------------------------------------------------------|--------|-----------------------|--------|--------|------------------------|--------|--------|-----------------------|--------|
|                                                               |   |                  |   |   |                   |   |   |                  |   |
| Fixed Rate Advances, due at maturity:                              |   |                  |   |   |                   |   |   |                  |   |
| Advance due February 2011                                          |   |                  | 2.10   | %      |                   | $      | 5,000  |                  |   |   | 5,000 |   |
| Advance due August 2012                                            |   |                  | 1.99   | %      |                   |   | 6,000  |                  |   |   | 6,000 |   |
| Advance due March 2017                                             |   |                  | 5.25   | %      |                   |   | 5,000  |                  |   |   | 5,000 |   |
|                                                               |   |                  |   |   |                   |   |   |                  |   |   |   |   |
| Fixed Rate Advances, with monthly principal and interest payments: |   |                  |   |   |                   |   |   |                  |   |   |   |   |
| Advance due March 2014                                             |   |                  | 2.45   | %      |                   |   | 3,564  |                  |   |   | 4,288 |   |
| Advance due March 2019                                             |   |                  | 2.82   | %      |                   |   | 3,903  |                  |   |   | 4,672 |   |
|                                                               |   |                  |   |   |                   | $      | 23,467 |                  |   |   | 24,960 |   |

|                      |   | September 30, 2010 |   |   | December 31, 2009 |   |
|---------------------------|--------|------------------------------|--------|--------|-----------------------------|--------|
|                      |   | Amount                       |   |   | Rate                        |   |   | Amount |   |   | Rate |   |
| U.S. Treasury demand note |   | $                            | 306    |   |                        |   | - | % |   | $ | 457 |   |   |   | - | % |
| Federal funds purchased   |   |                         | -      |   |                        |   | - | % |   |   | 7,000 |   |   |   | 0.50 | % |
| Line of credit            |   |                         | -      |   |                        |   | - | % |   |   | 3,173 |   |   |   | 1.00 | % |
| Repurchase agreements     |   |                         | 6,491  |   |                        |   | 0.40 | % |   |   | 3,635 |   |   |   | 0.40 | % |
|                      |   | $                            | 6,797  |   |                        |   | 0.38 | % |   | $ | 14,265 |   |   |   | 0.57 | % |

----

Index

|                                                           |   | September 30, |    |   | December 31, |   |
|----------------------------------------------------------------|--------|--------------------|---------|--------|-------------------|--------|
|                                                           |   | 2010               |    |   | 2009              |   |
| Commitments to extend credit:                                  |   |               |    |   |              |   |
| Commercial loans                                               |   | $                  | 9,797   |   |              |   | 10,020 |   |
| Other loans                                                    |   |               |    |   |              |   |   |   |
| Fixed rate                                                     |   |               | 3,715   |   |              |   | 359 |   |
| Adjustable rate                                                |   |               | 322     |   |              |   | 537 |   |
| Unused lines of credit:                                        |   |               |    |   |              |   |   |   |
| Fixed rate                                                     |   |               | 2,649   |   |              |   | 4,168 |   |
| Adjustable rate                                                |   |               | 69,018  |   |              |   | 69,974 |   |
| Unused overdraft protection amounts on demand and NOW accounts |   |               | 10,062  |   |              |   | 10,205 |   |
| Standby letters of credit                                      |   |               | 6,976   |   |              |   | 7,273 |   |
|                                                           |   | $                  | 102,539 |   |              |   | 102,536 |   |

----

Index

----

Index

----

Index

|                                          |   | At                 |   |   | At                |   |
|-----------------------------------------------|--------|--------------------|--------|--------|-------------------|--------|
|                                          |   | September 30, |   |   | December 31, |   |
|                                          |   | 2010               |   |   | 2009              |   |
|                                          |   |               |   |   |              |   |
| Regulatory Capital:                           |   |               |   |   |              |   |
| Shareholders' equity                          |   | $                  | 72,290 |   |              |   | 65,615 |   |
| Goodwill and other intangibles                |   |               | (6,431 | )      |              |   | (6,507 | ) |
| Accumulated other comprehensive (income) loss |   |               | (4,817 | )      |              |   | (1,915 | ) |
| Tier 1 risk-based capital                     |   |               | 61,042 |   |              |   | 57,193 |   |
|                                          |   |               |   |   |              |   |   |   |
| Eligible allowance for loan losses            |   |               | 2,290  |   |              |   | 2,998 |   |
| Total risk-based capital                      |   | $                  | 63,332 |   |              |   | 60,191 |   |
|                                          |   |               |   |   |              |   |   |   |
| Capital ratios:                               |   |               |   |   |              |   |   |   |
| Total risk-based (required 8.00%)             |   |               | 13.31  | %      |              |   | 12.68 | % |
| Tier 1 risk-based (required 4.00%)            |   |               | 12.82  | %      |              |   | 12.04 | % |
| Leverage (required 3.00%)                     |   |               | 7.99   | %      |              |   | 7.77 | % |

----

Index

|                                                      |   | For the Three Months |   |   | For the Nine Months |   |
|-----------------------------------------------------------|--------|-------------------------------------|--------|--------|------------------------------------|--------|
|                                                      |   | Ended September 30,       |   |   | Ended September 30,      |   |
|                                                      |   | 2010                                |   |   | 2009                               |   |   | 2010 |   |   | 2009 |   |
|                                                      |   |                                |   |   |                               |   |   |   |   |   |   |   |
| Qualified noncontributory defined benefit retirement plan |   | $                                   | 71     |   |                               |   | 7 |   |   |   | 192 |   |   |   | 124 |   |
|                                                      |   |                                |   |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| 401(k) plan                                               |   |                                | 76     |   |                               |   | 58 |   |   |   | 229 |   |   |   | 170 |   |

----

Index

|                                            |   | Three Months Ended September 30, 2010 |   |   | Nine Months Ended September 30, 2010 |   |
|-------------------------------------------------|--------|--------------------------------------------|--------|--------|-------------------------------------------|--------|
| Service cost                                    |   | $                                          | 44     |   |                                      |   | 131 |   |
| Interest cost                                   |   |                                       | 8      |   |                                      |   | 24 |   |
| Amortization of unrecognized prior service cost |   |                                       | 12     |   |                                      |   | 36 |   |
| Amortization of unrecognized net gain           |   |                                       | (1     | )      |                                      |   | (1 | ) |
| Net periodic pension cost                       |   | $                                          | 63     |   |                                      |   | 190 |   |

|                 |   |   | Outstanding Stock Options |   |   | Exercisable Stock Options       |   |
|----------------------|--------|--------|---------------------------|--------|--------|---------------------------------|--------|
| Exercise Price Range |   |   | Number                    |   |   | Weighted Average Exercise Price |   |   | Weighted Average Remaining Contractual Life (Years) |   |   | Number |   |   | Weighted Average Exercise Price |   |
|                 |   |   |                      |   |   |                            |   |   |   |   |   |   |   |   |   |   |
| $9.00 - $10.99       |   |   |                      | 29,110 |   |                            |   | 9.00 |   |   |   | 8.3 |   |   |   | 5,822 |   |   |   | 9.00 |   |
| $11.00 - $12.99      |   |   |                      | 34,716 |   |                            |   | 11.92 |   |   |   | 8.6 |   |   |   | 5,567 |   |   |   | 12.55 |   |
| $13.00 - $14.99      |   |   |                      | 11,056 |   |                            |   | 13.09 |   |   |   | 2.3 |   |   |   | 11,056 |   |   |   | 13.00 |   |
| $17.00 - $18.99      |   |   |                      | 24,158 |   |                            |   | 18.16 |   |   |   | 5.0 |   |   |   | 19,325 |   |   |   | 18.14 |   |
|                 |   |   |                      | 99,040 |   |                            |   | 12.71 |   |   |   | 6.9 |   |   |   | 41,770 |   |   |   | 14.78 |   |

----

Index

|                                  |   | Nine Months ended September 30, |   |
|---------------------------------------|--------|--------------------------------------|--------|
|                                  |   | 2010                                 |   |   | 2009 |   |
|                                  |   | Options                              |   |   | Weighted Average Exercise Price |   |   | Options |   |   | Weighted Average Exercise Price |   |
|                                  |   |                                 |   |   |   |   |   |   |   |   |   |   |
| Outstanding, January 1,               |   |                                 | 78,242 |   |   | $ | 13.04 |   |   |   | 49,132 |   |   | $ | 15.43 |   |
| Granted                               |   |                                 | 20,798 |   |   |   | 11.50 |   |   |   | 29,110 |   |   |   | 9.00 |   |
| Exercised                             |   |                                 | -      |   |   |   | - |   |   |   | - |   |   |   | - |   |
| Outstanding, September 30,            |   |                                 | 99,040 |   |   | $ | 12.71 |   |   |   | 78,242 |   |   | $ | 13.04 |   |
| Exercisable,  September 30, |   |                                 | 41,770 |   |   | $ | 14.78 |   |   |   | 29,954 |   |   | $ | 15.73 |   |

|                                                                        |   | 2010   |   |   | 2009   |   |
|-----------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|
| Risk-free interest rate                                                     |   |   | 3.34   | %      |   |   | 3.49 | % |
| Average dividend yield                                                      |   |   | 4.31   | %      |   |   | 4.04 | % |
| Volatility factor of the expected market price of LCNB’s common stock |   |   | 28.32  | %      |   |   | 27.54 | % |
| Average life in years                                                       |   |   | 7.0    |   |   |   | 9.0 |   |

----

Index

|                                                                                                                |   | For the Three Months |      |   | For the Nine Months |   |
|---------------------------------------------------------------------------------------------------------------------|--------|-------------------------------------|-----------|--------|------------------------------------|--------|
|                                                                                                                |   | Ended September 30,       |      |   | Ended September 30,      |   |
|                                                                                                                |   | 2010                                |      |   | 2009                               |   |   | 2010 |   |   | 2009 |   |
|                                                                                                                |   |                                |      |   |                               |   |   |   |   |   |   |   |
| Net income available to common shareholders                                                                         |   | $                                   | 1,989     |   |                               |   | 1,837 |   |   |   | 6,953 |   |   |   | 4,932 |   |
|                                                                                                                |   |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Weighted average number of shares outstanding used in the calculation of basic earnings per common share            |   |                                | 6,687,232 |   |                               |   | 6,687,232 |   |   |   | 6,687,232 |   |   |   | 6,687,232 |   |
|                                                                                                                |   |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Add dilutive effect of:                                                                                             |   |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Stock options                                                                                                       |   |                                | 3,435     |   |                               |   | - |   |   |   | 3,029 |   |   |   | 567 |   |
| Restricted stock                                                                                                    |   |                                | 2,511     |   |                               |   | - |   |   |   | 2,033 |   |   |   | - |   |
| Stock warrant                                                                                                       |   |                                | 47,706    |   |                               |   | 20,514 |   |   |   | 45,671 |   |   |   | 5,233 |   |
|                                                                                                                |   |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Adjusted weighted average number of shares outstanding used in the calculation of diluted earnings per common share |   |                                | 6,740,884 |   |                               |   | 6,707,746 |   |   |   | 6,737,965 |   |   |   | 6,693,032 |   |
|                                                                                                                |   |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Basic earnings per common share                                                                                     |   | $                                   | 0.30      |   |                               |   | 0.27 |   |   |   | 1.04 |   |   |   | 0.74 |   |
|                                                                                                                |   |                                |      |   |                               |   |   |   |   |   |   |   |   |   |   |   |
| Diluted earnings per common share                                                                                   |   | $                                   | 0.30      |   |                               |   | 0.27 |   |   |   | 1.03 |   |   |   | 0.74 |   |

----

Index

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

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

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

----

Index

|                                    |   |                    |    |   | Fair Value Measurements at Reporting Date Using               |   |
|-----------------------------------------|--------|-------------------------|---------|--------|---------------------------------------------------------------|--------|
|                                    |   | Fair Value Measurements |    |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| September 30, 2010                      |   |                    |    |   |                                                          |   |   |   |   |   |   |   |
| Available-for-sale securities:          |   |                    |    |   |                                                          |   |   |   |   |   |   |   |
| U.S. Treasury notes                     |   | $                       | 20,663  |   |                                                          |   | 20,663 |   |   |   | - |   |   |   | - |   |
| U.S. Agency notes                       |   |                    | 56,145  |   |                                                          |   | - |   |   |   | 56,145 |   |   |   | - |   |
| U.S. Agency mortgage- backed securities |   |                    | 40,496  |   |                                                          |   | - |   |   |   | 40,496 |   |   |   | - |   |
| Corporate securities                    |   |                    | 9,664   |   |                                                          |   | 9,664 |   |   |   | - |   |   |   | - |   |
| Municipal securities:                   |   |                    |    |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Non-taxable                             |   |                    | 75,374  |   |                                                          |   | - |   |   |   | 75,374 |   |   |   | - |   |
| Taxable                                 |   |                    | 18,989  |   |                                                          |   | - |   |   |   | 18,989 |   |   |   | - |   |
| Other debt securities                   |   |                    | 570     |   |                                                          |   | - |   |   |   | - |   |   |   | 570 |   |
| Trust preferred securities              |   |                    | 610     |   |                                                          |   | 610 |   |   |   | - |   |   |   | - |   |
| Equity securities                       |   |                    | 322     |   |                                                          |   | 299 |   |   |   | - |   |   |   | 23 |   |
| Totals                                  |   | $                       | 222,833 |   |                                                          |   | 31,236 |   |   |   | 191,004 |   |   |   | 593 |   |
|                                    |   |                    |    |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009                       |   |                    |    |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Available-for-sale securities:          |   |                    |    |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| U.S. Treasury notes                     |   | $                       | 13,308  |   |                                                          |   | 13,308 |   |   |   | - |   |   |   | - |   |
| U.S. Agency notes                       |   |                    | 45,888  |   |                                                          |   | - |   |   |   | 45,888 |   |   |   | - |   |
| U.S. Agency mortgage- backed securities |   |                    | 49,624  |   |                                                          |   | - |   |   |   | 49,624 |   |   |   | - |   |
| Corporate securities                    |   |                    | 8,488   |   |                                                          |   | 8,488 |   |   |   | - |   |   |   | - |   |
| Municipal securities:                   |   |                    |    |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Non-taxable                             |   |                    | 74,022  |   |                                                          |   | - |   |   |   | 74,022 |   |   |   | - |   |
| Taxable                                 |   |                    | 9,301   |   |                                                          |   | - |   |   |   | 9,301 |   |   |   | - |   |
| Other debt securities                   |   |                    | 538     |   |                                                          |   | - |   |   |   | - |   |   |   | 538 |   |
| Trust preferred securities              |   |                    | 344     |   |                                                          |   | 344 |   |   |   | - |   |   |   | - |   |
| Equity securities                       |   |                    | 65      |   |                                                          |   | 42 |   |   |   | - |   |   |   | 23 |   |
| Totals                                  |   | $                       | 201,578 |   |                                                          |   | 22,182 |   |   |   | 178,835 |   |   |   | 561 |   |

----

Index

|                                                                           |   | Total  |   |   | Other Debt Securities |   |   | Equity Securities |   |
|--------------------------------------------------------------------------------|--------|--------|--------|--------|-----------------------|--------|--------|-------------------|--------|
|                                                                           |   |   |   |   |                  |   |   |              |   |
| Beginning balance                                                              |   | $      | 561    |   |                  |   | 538    |              |   |   | 23 |   |
| Purchases                                                                      |   |   | -      |   |                  |   | -      |              |   |   | - |   |
| Dividends reinvested                                                           |   |   | 14     |   |                  |   | 14     |              |   |   | - |   |
| Net change in unrealized gains (losses) included in other comprehensive income |   |   | 18     |   |                  |   | 18     |              |   |   | - |   |
| Ending balance                                                                 |   | $      | 593    |   |                  |   | 570    |              |   |   | 23 |   |

----

Index

|                    |   |                    |   |   | Fair Value Measurements at Reporting Date Using               |   |
|-------------------------|--------|-------------------------|--------|--------|---------------------------------------------------------------|--------|
|                    |   | Fair Value Measurements |   |   | Quoted Prices in Active Markets for Identical Assets(Level 1) |   |   | Significant Other Observable Inputs(Level 2) |   |   | Significant Unobservable Inputs(Level 3) |   |
| September 30, 2010      |   |                    |   |   |                                                          |   |   |   |   |   |   |   |
| Impaired loans          |   | $                       | 2,614  |   |                                                          |   | - |   |   |   | 331 |   |   |   | 2,283 |   |
| Other real estate owned |   |                    | 2,139  |   |                                                          |   | 51 |   |   |   | 2,088 |   |   |   | - |   |
| Repossessed assets      |   |                    | 19     |   |                                                          |   | - |   |   |   | - |   |   |   | 19 |   |
| Totals                  |   | $                       | 4,772  |   |                                                          |   | 51 |   |   |   | 2,419 |   |   |   | 2,302 |   |
|                    |   |                    |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| December 31, 2009       |   |                    |   |   |                                                          |   |   |   |   |   |   |   |   |   |   |   |
| Impaired loans          |   | $                       | 2,391  |   |                                                          |   | - |   |   |   | - |   |   |   | 2,391 |   |
| Other real estate owned |   |                    | 2,424  |   |                                                          |   | - |   |   |   | 2,424 |   |   |   | - |   |
| Repossessed assets      |   |                    | 46     |   |                                                          |   | - |   |   |   | - |   |   |   | 46 |   |
| Totals                  |   | $                       | 4,861  |   |                                                          |   | - |   |   |   | 2,424 |   |   |   | 2,437 |   |

|                                                  |   | September 30, 2010 |    |   | December 31, 2009 |   |
|-------------------------------------------------------|--------|------------------------------|---------|--------|-----------------------------|--------|
|                                                  |   | Carrying Amount              |    |   | Fair Value                  |   |   | Carrying Amount |   |   | Fair Value |   |
|                                                  |   |                         |    |   |                        |   |   |   |   |   |   |   |
| FINANCIAL ASSETS:                                     |   |                         |    |   |                        |   |   |   |   |   |   |   |
| Cash and cash equivalents                             |   | $                            | 40,629  |   |                        |   | 40,629 |   |   |   | 12,626 |   |   |   | 12,626 |   |
| Securities available-for-sale                         |   |                         | 222,833 |   |                        |   | 222,833 |   |   |   | 201,578 |   |   |   | 201,578 |   |
| Securities held-to-maturity                           |   |                         | 12,479  |   |                        |   | 12,479 |   |   |   | 13,030 |   |   |   | 13,030 |   |
| Federal Reserve Bank and Federal Home Loan Bank stock |   |                         | 3,030   |   |                        |   | 3,030 |   |   |   | 3,031 |   |   |   | 3,031 |   |
| Loans, net                                            |   |                         | 456,104 |   |                        |   | 467,533 |   |   |   | 457,418 |   |   |   | 467,226 |   |
|                                                  |   |                         |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| FINANCIAL LIABILITIES:                                |   |                         |    |   |                        |   |   |   |   |   |   |   |   |   |   |   |
| Deposits                                              |   |                         | 672,395 |   |                        |   | 675,337 |   |   |   | 624,179 |   |   |   | 627,536 |   |
| Short-term borrowings                                 |   |                         | 6,797   |   |                        |   | 6,797 |   |   |   | 14,265 |   |   |   | 14,265 |   |
| Long-term debt                                        |   |                         | 23,467  |   |                        |   | 24,610 |   |   |   | 24,960 |   |   |   | 26,266 |   |

----

Index

----

Index

----

Index

REP

|   | /s/ J.D. Cloud & Co. L.L.P. |
|--------|---------------------------------|

----

Index

 2. Management's 

----

Index

|                                                                          |   | Three Months Ended September 30, |    |
|-------------------------------------------------------------------------------|--------|----------------------------------|---------|
|                                                                          |   | 2010                             |    |   | 2009 |   |
|                                                                          |   | Average Outstanding Balance      |    |   | Interest Earned/ Paid |   |   | Average Yield/ Rate |   |   | Average Outstanding Balance |   |   | Interest Earned/ Paid |   |   | Average Yield/ Rate |   |
|                                                                          |   |                             |    |   | (Dollars in thousands) |   |   |   |   |   |   |   |
|                                                                          |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                                     |   | $                                | 458,952 |   |   |   | 6,738 |   |   |   | 5.82 | % |   | $ | 457,372 |   |   | $ | 6,884 |   |   |   | 5.97 | % |
| Interest- bearing demand deposits                                             |   |                             | 25,698  |   |   |   | 15 |   |   |   | 0.23 | % |   |   | 20,014 |   |   |   | 13 |   |   |   | 0.26 | % |
| Federal Reserve Bank stock                                                    |   |                             | 939     |   |   |   | - |   |   |   | - | % |   |   | 940 |   |   |   | - |   |   |   | - | % |
| Federal Home Loan Bank stock                                                  |   |                             | 2,091   |   |   |   | 24 |   |   |   | 4.55 | % |   |   | 2,091 |   |   |   | 26 |   |   |   | 4.93 | % |
| Investment securities:                                                        |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                       |   |                             | 138,480 |   |   |   | 913 |   |   |   | 2.62 | % |   |   | 112,375 |   |   |   | 1,050 |   |   |   | 3.71 | % |
| Non-taxable (2)                                                               |   |                             | 85,871  |   |   |   | 1,171 |   |   |   | 5.41 | % |   |   | 86,662 |   |   |   | 1,205 |   |   |   | 5.52 | % |
| Total earnings assets                                                         |   |                             | 712,031 |   |   |   | 8,861 |   |   |   | 4.94 | % |   |   | 679,454 |   |   |   | 9,178 |   |   |   | 5.36 | % |
| Non-earning assets                                                            |   |                             | 68,050  |   |   |   |   |   |   |   |   |   |   |   | 64,019 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                                     |   |                             | (3,017  | ) |   |   |   |   |   |   |   |   |   |   | (2,678 | ) |   |   |   |   |   |   |   |   |
| Total assets                                                                  |   | $                                | 777,064 |   |   |   |   |   |   |   |   |   |   | $ | 740,795 |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                     |   | $                                | 574,853 |   |   |   | 1,902 |   |   |   | 1.31 | % |   | $ | 548,512 |   |   |   | 2,278 |   |   |   | 1.65 | % |
| Short-term borrowings                                                         |   |                             | 6,379   |   |   |   | 6 |   |   |   | 0.37 | % |   |   | 599 |   |   |   | - |   |   |   | - | % |
| Long-term debt                                                                |   |                             | 23,584  |   |   |   | 173 |   |   |   | 2.91 | % |   |   | 23,929 |   |   |   | 177 |   |   |   | 2.93 | % |
| Total interest-bearing liabilities                                            |   |                             | 604,816 |   |   |   | 2,081 |   |   |   | 1.37 | % |   |   | 573,040 |   |   |   | 2,455 |   |   |   | 1.70 | % |
| Demand deposits                                                               |   |                             | 94,094  |   |   |   |   |   |   |   |   |   |   |   | 84,927 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                             |   |                             | 6,527   |   |   |   |   |   |   |   |   |   |   |   | 5,342 |   |   |   |   |   |   |   |   |   |
| Capital                                                                       |   |                             | 71,627  |   |   |   |   |   |   |   |   |   |   |   | 77,486 |   |   |   |   |   |   |   |   |   |
| Total liabilities and capital                                                 |   | $                                | 777,064 |   |   |   |   |   |   |   |   |   |   | $ | 740,795 |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest rate spread (3)                                                  |   |                             |    |   |   |   |   |   |   |   | 3.57 | % |   |   |   |   |   |   |   |   |   |   | 3.66 | % |
|                                                                          |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and net interest margin on a taxable-equivalent basis (4) |   |                             |    |   |   |   | 6,780 |   |   |   | 3.78 | % |   |   |   |   |   | $ | 6,723 |   |   |   | 3.93 | % |
|                                                                          |   |                             |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of interest-earning assets to interest-bearing liabilities              |   |                             | 117.73  | % |   |   |   |   |   |   |   |   |   |   | 118.57 | % |   |   |   |   |   |   |   |   |

| (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) | The net interest spread is the difference between the average rate on total interest-earning assets and interest-bearing liabilities. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets. |
|-----|-------------------------------------------------------------------------------------------------------------------|

----

Index

|                             |   | Three Months Ended September 30, 2010 vs. 2009Increase (decrease) due to: |   |
|----------------------------------|--------|---------------------------------------------------------------------------|--------|
|                             |   | Volume                                                                    |   |   | Rate |   |   | Total |   |
|                             |   | (In thousands)                                                            |   |
| Interest-earning Assets:         |   |                                                                      |   |   |   |   |   |   |   |
| Loans                            |   | $                                                                         | 24     |   |   |   | (170 | ) |   |   | (146 | ) |
| Interest-bearing demand deposits |   |                                                                      | 3      |   |   |   | (1 | ) |   |   | 2 |   |
| Federal Reserve Bank stock       |   |                                                                      | -      |   |   |   | - |   |   |   | - |   |
| Federal Home Loan Bank stock     |   |                                                                      | -      |   |   |   | (2 | ) |   |   | (2 | ) |
| Investment securities:           |   |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Taxable                          |   |                                                                      | 212    |   |   |   | (349 | ) |   |   | (137 | ) |
| Nontaxable                       |   |                                                                      | (11    | ) |   |   | (23 | ) |   |   | (34 | ) |
| Total interest income            |   |                                                                      | 228    |   |   |   | (545 | ) |   |   | (317 | ) |
|                             |   |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing Liabilities:    |   |                                                                      |   |   |   |   |   |   |   |   |   |   |
| Deposits                         |   |                                                                      | 105    |   |   |   | (481 | ) |   |   | (376 | ) |
| Short-term borrowings            |   |                                                                      | -      |   |   |   | 6 |   |   |   | 6 |   |
| Long-term debt                   |   |                                                                      | (3     | ) |   |   | (1 | ) |   |   | (4 | ) |
| Total interest expense           |   |                                                                      | 102    |   |   |   | (476 | ) |   |   | (374 | ) |
| Net interest income              |   | $                                                                         | 126    |   |   |   | (69 | ) |   |   | 57 |   |

----

Index

|                                                                          |   | Nine Months Ended September 30, |    |
|-------------------------------------------------------------------------------|--------|---------------------------------|---------|
|                                                                          |   | 2010                            |    |   | 2009 |   |
|                                                                          |   | Average Outstanding Balance     |    |   | Interest Earned/ Paid |   |   | Average Yield/ Rate |   |   | Average Outstanding Balance |   |   | Interest Earned/ Paid |   |   | Average Yield/ Rate |   |
|                                                                          |   |                            |    |   | (Dollars in thousands) |   |   |   |   |   |   |   |
|                                                                          |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Loans (1)                                                                     |   | $                               | 459,015 |   |   |   | 20,347 |   |   |   | 5.93 | % |   | $ | 452,047 |   |   | $ | 20,580 |   |   |   | 6.09 | % |
| Interest-bearing demand deposits                                              |   |                            | 22,649  |   |   |   | 40 |   |   |   | 0.24 | % |   |   | 21,107 |   |   |   | 41 |   |   |   | 0.26 | % |
| Federal Reserve Bank stock                                                    |   |                            | 939     |   |   |   | 28 |   |   |   | 3.99 | % |   |   | 939 |   |   |   | 28 |   |   |   | 3.99 | % |
| Federal Home Loan Bank stock                                                  |   |                            | 2,091   |   |   |   | 71 |   |   |   | 4.54 | % |   |   | 2,091 |   |   |   | 73 |   |   |   | 4.67 | % |
| Investment securities:                                                        |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Taxable                                                                       |   |                            | 125,551 |   |   |   | 2,727 |   |   |   | 2.90 | % |   |   | 106,067 |   |   |   | 3,183 |   |   |   | 4.01 | % |
| Non-taxable (2)                                                               |   |                            | 85,184  |   |   |   | 3,582 |   |   |   | 5.62 | % |   |   | 76,217 |   |   |   | 3,226 |   |   |   | 5.66 | % |
| Total earnings assets                                                         |   |                            | 695,429 |   |   |   | 26,795 |   |   |   | 5.15 | % |   |   | 658,468 |   |   |   | 27,131 |   |   |   | 5.51 | % |
| Non-earning assets                                                            |   |                            | 67,471  |   |   |   |   |   |   |   |   |   |   |   | 60,313 |   |   |   |   |   |   |   |   |   |
| Allowance for loan losses                                                     |   |                            | (3,013  | ) |   |   |   |   |   |   |   |   |   |   | (2,555 | ) |   |   |   |   |   |   |   |   |
| Total assets                                                                  |   | $                               | 759,887 |   |   |   |   |   |   |   |   |   |   | $ | 716,226 |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing deposits                                                     |   | $                               | 560,948 |   |   |   | 5,806 |   |   |   | 1.38 | % |   | $ | 531,461 |   |   |   | 7,269 |   |   |   | 1.83 | % |
| Short-term borrowings                                                         |   |                            | 6,558   |   |   |   | 19 |   |   |   | 0.39 | % |   |   | 718 |   |   |   | - |   |   |   | - | % |
| Long-term debt                                                                |   |                            | 24,025  |   |   |   | 523 |   |   |   | 2.91 | % |   |   | 18,665 |   |   |   | 440 |   |   |   | 3.15 | % |
| Total interest-bearing liabilities                                            |   |                            | 591,531 |   |   |   | 6,348 |   |   |   | 1.43 | % |   |   | 550,844 |   |   |   | 7,709 |   |   |   | 1.87 | % |
| Demand deposits                                                               |   |                            | 93,633  |   |   |   |   |   |   |   |   |   |   |   | 84,672 |   |   |   |   |   |   |   |   |   |
| Other liabilities                                                             |   |                            | 5,625   |   |   |   |   |   |   |   |   |   |   |   | 4,413 |   |   |   |   |   |   |   |   |   |
| Capital                                                                       |   |                            | 69,098  |   |   |   |   |   |   |   |   |   |   |   | 76,297 |   |   |   |   |   |   |   |   |   |
| Total liabilities and capital                                                 |   | $                               | 759,887 |   |   |   |   |   |   |   |   |   |   | $ | 716,226 |   |   |   |   |   |   |   |   |   |
|                                                                          |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest rate spread (3)                                                  |   |                            |    |   |   |   |   |   |   |   | 3.72 | % |   |   |   |   |   |   |   |   |   |   | 3.64 | % |
|                                                                          |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Net interest income and net interest margin on a taxable-equivalent basis (4) |   |                            |    |   |   |   | 20,447 |   |   |   | 3.93 | % |   |   |   |   |   | $ | 19,422 |   |   |   | 3.94 | % |
|                                                                          |   |                            |    |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |   |
| Ratio of interest-earning assets to interest-bearing liabilities              |   |                            | 117.56  | % |   |   |   |   |   |   |   |   |   |   | 119.54 | % |   |   |   |   |   |   |   |   |

| (1) | Includes nonaccrual loans, if any.  Income from tax-exempt loans is included in interest income on a tax-equivalent basis, using an incremental rate of 34%. |
|-----|------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| (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) | The net interest spread is the difference between the average rate on total interest-earning assets and interest-bearing liabilities. |
|-----|---------------------------------------------------------------------------------------------------------------------------------------|

| (4) | The net interest margin is the taxable-equivalent net interest income divided by average interest-earning assets. |
|-----|-------------------------------------------------------------------------------------------------------------------|

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Index

|                             |   | Nine Months Ended September 30, 2010 vs. 2009Increase (decrease) due to: |   |
|----------------------------------|--------|-------------------------------------------------------------------------------|--------|
|                             |   | Volume                                                                        |   | Rate |   |   | Total |   |
|                             |   | (In thousands)                                                                |   |
| Interest-earning Assets:         |   |                                                                          |   |   |   |   |   |   |   |
| Loans                            |   | $                                                                             | 314    |   |   |   | (547 | ) |   |   | (233 | ) |
| Interest-bearing demand deposits |   |                                                                          | 3      |   |   |   | (4 | ) |   |   | (1 | ) |
| Federal Reserve Bank stock       |   |                                                                          | -      |   |   |   | - |   |   |   | - |   |
| Federal Home Loan Bank stock     |   |                                                                          | -      |   |   |   | (2 | ) |   |   | (2 | ) |
| Investment securities:           |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
| Taxable                          |   |                                                                          | 520    |   |   |   | (976 | ) |   |   | (456 | ) |
| Nontaxable                       |   |                                                                          | 377    |   |   |   | (21 | ) |   |   | 356 |   |
| Total interest income            |   |                                                                          | 1,214  |   |   |   | (1,550 | ) |   |   | (336 | ) |
|                             |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
| Interest-bearing Liabilities:    |   |                                                                          |   |   |   |   |   |   |   |   |   |   |
| Deposits                         |   |                                                                          | 385    |   |   |   | (1,848 | ) |   |   | (1,463 | ) |
| Short-term borrowings            |   |                                                                          | -      |   |   |   | 19 |   |   |   | 19 |   |
| Long-term debt                   |   |                                                                          | 119    |   |   |   | (36 | ) |   |   | 83 |   |
| Total interest expense           |   |                                                                          | 504    |   |   |   | (1,865 | ) |   |   | (1,361 | ) |
| Net interest income              |   | $                                                                             | 710    |   |   |   | 315 |   |   |   | 1,025 |   |

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Index

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Index

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Index

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Index

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Index

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Index

3.  

| Rate Shock Scenario in Basis Points |   | Amount                 |   |   | $ Change in NII |   |   | % Change in NII |   |
|-------------------------------------|--------|------------------------|--------|--------|-----------------|--------|--------|-----------------|--------|
|                                |   | (Dollars in thousands) |   |
| Up 300                              |   | $                      | 54,027 |   |            |   | 1,653  |            |   |   | 3.16 | % |
| Up 200                              |   |                   | 53,392 |   |            |   | 1,018  |            |   |   | 1.94 | % |
| Up 100                              |   |                   | 52,768 |   |            |   | 394    |            |   |   | 0.75 | % |
| Base                                |   |                   | 52,374 |   |            |   | -      |            |   |   | - | % |
| Down 100                            |   |                   | 52,023 |   |            |   | (351   | )               |   |   | -0.67 | % |
| Down 200                            |   |                   | 51,841 |   |            |   | (533   | )               |   |   | -1.02 | % |

| Rate Shock Scenario in Basis Points |   | Amount                 |   |   | $ Change in EVE |   |    | % Change in EVE |   |
|-------------------------------------|--------|------------------------|--------|--------|-----------------|--------|---------|-----------------|--------|
|                                |   | (Dollars in thousands) |   |
| Up 300                              |   | $                      | 67,225 |   |            |   | (16,931 | )               |   |   | -20.12 | % |
| Up 200                              |   |                   | 73,533 |   |            |   | (10,623 | )               |   |   | -12.62 | % |
| Up 100                              |   |                   | 78,905 |   |            |   | (5,251  | )               |   |   | -6.24 | % |
| Base                                |   |                   | 84,156 |   |            |   | -       |            |   |   | - | % |
| Down 100                            |   |                   | 88,788 |   |            |   | 4,632   |            |   |   | 5.50 | % |
| Down 200                            |   |                   | 94,157 |   |            |   | 10,001  |            |   |   | 11.88 | % |

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Index

4.  Controls 

 4T. 

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Index

PAR

 1. 

1A.

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Index

 2.    

Item 3. 

Item 4.  

Item 5.    

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Index

 6.    

| Exhibit No. |   | Exhibit Description |
|-------------|--------|---------------------|
|        | 3.1    |                | Amended and Restated Articles of Incorporation of LCNB Corp., as amended – incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2010, Exhibit 3.1. |
|        |   |                |   |
|        | 3.2    |                | Code of Regulations of LCNB Corp. – incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2005, Exhibit 3(ii). |
|        |   |                |   |
|        | 4.1    |                | Warrant to Purchase Shares of Common Stock of the Registrant, dated January 9, 2009 – incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 9, 2009, Exhibit 4.1. |
|        |   |                |   |
|        | 4.2    |                | Letter Agreement, dated as of January 9, 2009 between the Registrant and the U.S. Department of the Treasury, which includes the Securities Purchase Agreement – Standard Terms – incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 9, 2009, Exhibit 10.1. |
|        |   |                |   |
|        | 4.3    |                | Substitute Warrant to Purchase Shares of Common Stock of the Registrant, dated January 9, 2009 - incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009, Exhibit 4.3. |
|        |   |                |   |
|        | 4.4    |                | Repurchase Letter Agreement, dated as of October 21, 2009 between the Registrant and the U.S. Department of the Treasury – incorporated by reference to the Registrant’s Current Report on Form 8-K filed on October 21, 2009, Exhibit 10.1. |
|        |   |                |   |
|        | 10.1   |                | LCNB Corp. Ownership Incentive Plan – incorporated by reference to Registrant’s Form DEF 14A Proxy Statement pursuant to Section 14(a), dated March 15, 2002, Exhibit A (000-26121). |
|        |   |                |   |
|        | 10.2   |                | Form of Option Grant Agreement under the LCNB Corp. Ownership Incentive Plan – incorporated by reference to the Registrant’s Form 10-K for the fiscal year ended December 31, 2005, Exhibit 10.2. |
|        |   |                |   |
|        | 10.3   |                | Letter Agreement, dated as of January 9, 2009 between the Registrant and the U.S. Department of the Treasury, which includes the Securities Purchase Agreement – Standard Terms – incorporated by reference to the Registrant’s Current Report on Form 8-K filed on January 9, 2009, Exhibit 10.1. |
|        |   |                |   |
|        | 10.4   |                | Nonqualified Executive Retirement Plan – incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2009, Exhibit 10.4. |

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Index

| Exhibit No. |   | Exhibit Description |
|-------------|--------|---------------------|
|        |   |                |   |
|        | 10.5   |                | Repurchase Letter Agreement, dated as of October 21, 2009 between the Registrant and the U.S. Department of the Treasury – incorporated by reference to the Registrant’s Current Report on Form 8-K filed on October 21, 2009, Exhibit 10.1. |
|        |   |                |   |
|        | 10.6   |                | Restricted Stock Grant Agreement, dated as of February 22, 2010, between the Registrant and Stephen P. Wilson – incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q for the period ended March 31, 2010, Exhibit 10.6. |
|        |   |                |   |
|        | 31.1   |                | Certification of Chief Executive Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
|        |   |                |   |
|        | 31.2   |                | Certification of Chief Financial Officer under Section 302 of the Sarbanes-Oxley Act of 2002. |
|        |   |                |   |
|        | 32     |                | Certification of Chief Executive Officer and Chief Financial Officer under Section 906 of the Sarbanes-Oxley Act of 2002. |

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Index

SIGN

|             | LCNB Corp.                                     |   |
|------------------|------------------------------------------------|--------|
|             |                                           |   |
| November 8, 2010 | /s/ Stephen P. Wilson                          |   |
|             | Stephen P. Wilson, Chief Executive Officer and |   |
|             | Chairman of the Board of Directors             |   |
|             |                                           |   |
|             |                                           |   |
| November 8, 2010 | /s/ Robert C. Haines, II                       |   |
|             | Robert C. Haines, II, Executive Vice President |   |
|             | and Chief Financial Officer                    |   |

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