LNB Bancorp, Inc. Reports Earnings for the Third Quarter 2012

LNB Bancorp, Inc. Reports Earnings for the Third Quarter 2012

  • Net income of $1.5 million
  • Loan balances grew by $48 million over prior year, or 5.7%
  • Nonperforming assets continue to decline, down $2.3 million from the previous quarter
  • Lorain National Bank opened a mortgage loan production office in Solon, Ohio, extending the bank's reach into additional high-growth markets.

LORAIN, Ohio--(BUSINESS WIRE)-- LNB Bancorp, Inc. (NAS: LNBB) ("LNB" or the "Company") today reported financial results for the quarter ended September 30, 2012. Net income was $1.53 million compared to $1.67 million for the third quarter of 2011, a decline of $147,000 or 8.79%. Net income available to common shareholders was $1.21 million, or $0.15 per common share, compared to $1.35 million, or $0.17 per common share, for the 2011 third quarter. For the first nine months of 2012, net income was $4.46 million, up $954,000 or 27%, from the first nine months of the prior year. Net income available to common shareholders for the first nine months of 2012 was $3.51 million, or $0.44 per common share; this compares to $2.56 million for the 2011 nine-month period, or $0.32 per common share, an increase of $0.12 per share, or 37.5%.

"We are particularly pleased with the continued progress that we are making in credit quality," noted Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc. "Non-performing assets have declined $2.3 million in the quarter and nearly $5 million year over year. The ratio of non-performing assets to total assets is 2.84% in the quarter, down from 3.35% a year ago.

"Loans have grown by $42.6 million since year-end 2011. This month, the U.S. Small Business Administration recognized Lorain National Bank for ranking 4th in the Cleveland metro area in small business SBA loan production over the last twelve months.

"We have participated in the resurgence in the automobile industry through our indirect lending activities, originating auto loans through dealers in Ohio, Indiana, Georgia, North Carolina, Kentucky and Tennessee. The auto loan portfolio has increased $21 million during the first nine months of 2012."

Third Quarter Review

Net income for the 2012 third quarter declined by $147,000 from the year-ago quarter but increased $88,000 from the preceding quarter. Improvement in asset quality has more than offset the impact of declining interest rates, resulting in a 27% improvement in net income for the first nine months of 2012 compared to the year-earlier nine months.

Operating revenue, including net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations, was $12.5 million for the third quarter of 2012, a decline of $100,000 compared to the third quarter of 2011. Stronger loan sales this quarter offset declining net interest income; and while loan sales were stronger, the Company still achieved $47 million of growth in average earning assets year over year. Net interest income on a tax-equivalent basis (FTE) in the quarter was $9.6 million, down $600,000, or 6.0%, from the 2011 third quarter. The net interest margin (FTE) for the full nine months of 2012 was 3.53%, a decline of fifteen basis points from the 2011 nine-month period.

Excluding gains of $46,000 and $7,000 from securities sales in the third quarter of 2012 and 2011 respectively, noninterest income from recurring operations was $3.0 million for the third quarter of 2012 compared to $2.5 million for the year-ago third quarter, an increase of 17.8%. Strong mortgage and auto loan originations and sales accounted for the majority of fee income growth, up $183,000, or double the level of gains in the 2011 third quarter.

For the third quarter of 2012, noninterest expense was $8.5 million compared to $8.3 million for the year-ago quarter. On a pretax, tax­ equivalent basis, pre-provision core earnings* for the third quarter were $3.94 million, down 7.8%, from the third quarter of 2011.

Total assets were $1.2 billion as of September 30, 2012, up 3.1% since September 30, 2011. Portfolio loans increased 5.7% during the same 12-month period, to $885.7 million. Of the $48.2 million in total loan growth over the past twelve months, $42.6 million was booked since year-end 2011. Commercial lending was the primary contributor to recent loan growth, up $28.3 million since the beginning of the year.

Asset quality continues to improve. Nonperforming assets declined by $5 million, or 12.7%, over the past twelve months, to $34.2 million. LNB added $1.9 million to the loan loss reserve during the quarter. At quarter-end, the loan loss reserve was 1.99% of total portfolio loans compared to 2.13% for the year-ago third quarter and 1.99% for the second quarter of 2012.

All regulatory ratios continue to exceed the threshold for "well-capitalized." Tangible common equity ratio improved by 13 basis points to 5.79% as a result of $3.5 million growth in common equity since September 30, 2011.

* Pre-provision core earnings is a non-GAAP financial measure that the Company's management believes is useful in analyzing the Company's underlying performance trends, particularly in periods of economic stress. Pre-provision core earnings is defined as income before income tax expense, adjusted to exclude the impact of provision for loan losses. Pre-provision core earnings is reconciled to the related GAAP financial measure in the "Reconciliation" table included after the consolidated financial statements and supplemental financial information included in this press release.

About LNB Bancorp, Inc.

LNB Bancorp, Inc. is a $1.2 billion bank holding company. Its major subsidiary, The Lorain National Bank, is a full-service commercial bank, specializing in commercial, personal banking services, residential mortgage lending and investment and trust services. The Lorain National Bank and its Morgan Bank division serve customers through 20 retail-banking locations and 28 ATMs in Lorain, Erie, Cuyahoga and Summit counties, as well as a loan production office in Solon, Ohio. North Coast Community Development Corporation is a wholly owned subsidiary of The Lorain National Bank. For more information about LNB Bancorp, Inc., and its related products and services or to view its filings with the Securities and Exchange Commission, visit us at http://www.4lnb.com.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. Terms such as "will," "should," "plan," "intend," "expect," "continue," "believe," "anticipate" and "seek," as well as similar comments, are forward-looking in nature. Actual results and events may differ materially from those expressed or anticipated as a result of risks and uncertainties which include but are not limited to:

  • a worsening of economic conditions or slowing of any economic recovery, which could negatively impact, among other things, business activity and consumer spending and could lead to a lack of liquidity in the credit markets;
  • changes in the interest rate environment which could reduce anticipated or actual margins;
  • increases in interest rates or further weakening of economic conditions that could constrain borrowers' ability to repay outstanding loans or diminish the value of the collateral securing those loans;
  • market conditions or other events that could negatively affect the level or cost of funding, affecting the Company's ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth, and new business transactions at a reasonable cost, in a timely manner and without adverse consequences;
  • changes in political conditions or the legislative or regulatory environment, including new or heightened legal standards and regulatory requirements, practices or expectations, which may impede profitability or affect the Company's financial condition (such as, for example, the Dodd-Frank Act and rules and regulations that have been or may be promulgated under the Act);
  • persisting volatility and limited credit availability in the financial markets, particularly if market conditions limit the Company's ability to raise funding to the extent required by banking regulators or otherwise;
  • significant increases in competitive pressure in the banking and financial services industries, particularly in the geographic or business areas in which the Company conducts its operations;
  • limitations on the Company's ability to return capital to shareholders, including the ability to pay dividends, and the dilution of the Company's common shares that may result from, among other things, funding any repurchase or redemption of the Company's outstanding preferred stock;
  • adverse effects on the Company's ability to engage in routine funding transactions as a result of the actions and commercial soundness of other financial institutions;
  • general economic conditions becoming less favorable than expected, continued disruption in the housing markets and/or asset price deterioration, which have had and may continue to have a negative effect on the valuation of certain asset categories represented on the Company's balance sheet;
  • increases in deposit insurance premiums or assessments imposed on the Company by the FDIC;
  • a failure of the Company's operating systems or infrastructure, or those of its third-party vendors, that could disrupt its business;
  • risks that are not effectively identified or mitigated by the Company's risk management framework; and
  • difficulty attracting and/or retaining key executives and/or relationship managers at compensation levels necessary to maintain a competitive market position; as well as the risks and uncertainties described from time to time in the Company's reports as filed with the SEC.

The Company undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

At September 30, 2012At December 31, 2011
(Dollars in thousands except share amounts)
Cash and due from Banks$20,445$34,323
Federal funds sold and interest bearing deposits in banks 8,082  6,324 
Cash and cash equivalents28,52740,647
Securities Available for sale, at fair value 235,334  226,012 
Total securities235,334226,012
Restricted stock5,7415,741
Loans held for sale3,3803,448
Portfolio loans885,715843,088
Allowance for loan losses (17,587) (17,063)
Net loans 868,128  826,025 
Bank premises and equipment, net8,9548,968
Other real estate owned1,6531,687
Bank owned life insurance18,37017,868
Goodwill, net21,58221,582
Intangible assets, net629731
Accrued interest receivable3,7583,550
Other assets 10,573  12,163 
Total Assets$1,206,629 $1,168,422 
Demand and other noninterest-bearing$143,085$126,713
Savings, money market and interest-bearing demand382,613359,977
Certificates of deposit 496,011  504,390 
Total deposits 1,021,709  991,080 
Short-term borrowings988227
Federal Home Loan Bank advances47,49442,497
Junior subordinated debentures16,23816,238
Accrued interest payable9281,118
Accrued taxes, expenses and other liabilities 3,195  3,988 
Total Liabilities 1,090,552  1,055,148 
Shareholders' Equity

Preferred stock, Series A Voting, no par value, authorized 150,000 shares at September 30, 2012 and December 31, 2011.

Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 25,223 shares authorized and issued at September 30, 2012 and December 31, 2011.25,22325,223
Discount on Series B preferred stock(90)(101)
Warrant to purchase common stock-146

Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 8,272,548 at September 30, 2012 and 8,210,443 at December 31, 2011.

Additional paid-in capital39,06039,607
Retained earnings47,35344,080
Accumulated other comprehensive income2,3502,201
Treasury shares at cost, 328,194 shares at September 30, 2012 and at December 31, 2011(6,092)(6,092)
Total Shareholders' Equity 116,077  113,274 
Total Liabilities and Shareholders' Equity$1,206,629 $1,168,422 

Consolidated Statements of Income (unaudited)

Three Months Ended
September 30,


Nine Months Ended
September 30,

2012 20112012 2011
(Dollars in thousands except share and per share amounts)(Dollars in thousands except share and per share amounts)
Interest Income
U.S. Government agencies and corporations1,1451,5053,6864,594
State and political subdivisions289257867770
Other debt and equity securities6967210210
Federal funds sold and short-term investments 8 15  27  38 
Total interest income11,29012,53634,81237,343
Interest Expense
Federal Home Loan Bank advances214263641790
Short-term borrowings---2
Junior subordinated debenture 179 170  528  511 
Total interest expense 1,843 2,477  5,777  7,834 
Net Interest Income9,44710,05929,03529,509
Provision for Loan Losses 1,875 2,100  5,442  7,545 
Net interest income after provision for loan losses7,5727,95923,59321,964
Noninterest Income
Investment and trust services3753781,1901,251
Deposit service charges9941,0992,8583,015
Other service charges and fees8427692,3942,494
Income from bank owned life insurance167175501524
Other income 214 66  614  186 
Total fees and other income2,5922,4877,5577,470
Securities gains, net46746507
Gains on sale of loans364181916598