LNB Bancorp, Inc. Reports Fourth Quarter and Full Year 2012 Results

LNB Bancorp, Inc. Reports Fourth Quarter and Full Year 2012 Results

  • Fourth quarter 2012 net income of $1.64 million, up 10% from a year-ago.
  • Full year 2012 net income of $6.1 million, up 22% from 2011
  • Loan balances increased $39.5 million over prior year, or 4.7%.
  • Nonperforming assets declined by $7 million, or 19.3% from 2011
  • Repurchased approximately 25% of outstanding preferred shares with funds from earnings

LORAIN, Ohio--(BUSINESS WIRE)-- LNB Bancorp, Inc. (NAS: LNBB) ("LNB" or the "Company") today reported financial results for the fourth quarter and the full year ended December 31, 2012. For the fourth quarter 2012, net income was $1.64 million compared to $1.49 million for the fourth quarter of 2011. Net income available to common shareholders was $1.32 million, or $0.17 per common share, compared to $1.17 million, or $0.15 per common share, for the year-ago quarter.

"We are pleased to report another year of improved operating performance," stated Daniel E. Klimas, president and chief executive officer of LNB Bancorp. "We continue to make progress on improving credit quality. Non-performing assets declined $5.1 million in the fourth quarter and nearly $7 million in 2012 compared to 2011. The ratio of non-performing assets to total assets at December 31, 2012, is 2.48%, down from 3.09% at the end of 2011."

"Loans grew by 4.7% in 2012. We continue to see growth in commercial lending; recently the Small Business Administration (SBA) recognized the Company as the 4th highest SBA lender in the Cleveland metropolitan area, based on 2012 loan totals. Residential mortgage loan volume showed strong growth in 2012, with originations up 97% over 2011. The Company opened new loan offices in Solon and Hudson, expanding our sales efforts beyond Lorain County. We expect mortgage revenue to continue to grow in 2013 assuming the housing market continues to improve."

Net income for the year ended December 31, 2012 was $6.11 million, compared with net income of $5.0 million for 2011. Net income available to common shareholders for 2012 was $4.84 million, or $0.61 per common share, compared to $3.73 million for 2011, or $0.47 per common share.

Fourth Quarter Review

Net income for the fourth quarter of 2012 was $1.64 million, up by $113,000, or 7.4%, from the third quarter of 2012, primarily as a result of a lower loan loss provision expense and net gains from sale of mortgage loans.

Operating revenue, including net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations, was $12.7 million for the fourth quarter of 2012, which was virtually unchanged from the fourth quarter of the prior year. The net interest margin (FTE) for the fourth quarter of 2012 was 3.30%, a decline of 32 basis points from the 2011 fourth quarter.

Noninterest income was $3.4 million for the fourth quarter of 2012 compared to $3.0 million for the prior-year fourth quarter. Noninterest expense was $8.64 million for the fourth quarter of 2012 compared with $8.10 million for the fourth quarter of 2011, an increase of 6.5%.

The provision for loan losses was $1.8 million in the fourth quarter of 2012, down $1 million from the 2011 fourth quarter, reflecting the Company's improvement in credit quality. Net charge-offs were $1.8 million for the fourth quarter of 2012, or 0.79% of average loans (annualized), compared to $3.59 million, or 1.71% of average loans (annualized) in the fourth quarter of 2011.

The Company is focused on active capital management and is committed to maintaining strong capital levels while supporting balance sheet growth and enhancing returns to the Company's shareholders. During the fourth quarter of 2012, the Company repurchased $6.3 million in par value, or approximately 25% of the outstanding shares, of its Fixed Rate Cumulative Perpetual Preferred Stock, Series B, $1,000 per share liquidation preference, in exchange for cash at a price representing a discount to par value. The Series B Preferred Stock was originally issued by LNB in December 2008 as part of the U.S. Department of the Treasury's Capital Purchase Program. The Treasury sold all of the Series B Preferred Stock to private investors through a modified Dutch auction that was completed in June 2012.

Full Year 2012 Review

Total assets at December 31, 2012 were $1.18 billion, up $10 million from year-end 2011. Portfolio loans grew $39.5 million to $882.5 million at December 31, 2012, an increase of 4.7% from 2011. Total deposits at December 31, 2012 were $999.6 million compared with $991.1 million at 2011 year end.

Net interest income on a fully tax-equivalent basis (FTE) for 2012 was $39.9 million compared to $39.8 million for 2011. The net interest margin was 3.49% for 2012 compared to 3.67% for 2011.

Noninterest income for 2012 was $11.7 million for 2012, compared to $11.4 million for 2011.

Noninterest expense was $34.9 million in 2012, up 2% from $34.1 million in 2011. Legal expenses related to the Treasury's sale of TARP preferred shares to private investors and costs associated with the completion of our conversion to a new operating system were one-time expenses during 2012.

The company continues to aggressively manage credit quality. During 2012, nonperforming assets declined by nearly $7 million, or 19.3%, to $29.2 million. At year-end 2012, nonperforming assets comprised 2.48 % of total assets, compared to nonperforming assets of $36.2 million, comprising 3.09% of total assets, at year-end 2011.

Net charge-offs were $6.7 million for 2012, or 0.77 % of average loans, compared to $9.4 million in 2011, or 1.14% of average loans.

The allowance for loan losses was $17.6 million at December 31, 2012, or 2% of total loans, compared to $17.1 million at December 31, 2011, or 2.02% of total loans. For the year 2012, the provision for loan losses was $7.2 million compared to the 2011 provision of $10.4 million.

All regulatory ratios continue to exceed the threshold for "well-capitalized." As of December 31, 2012 Tier 1 leverage ratio totaled 8.79%, Tier 1 risk-based capital ratio totaled 11.21% and Total risk-based capital ratio totaled 12.47%. Tangible leverage improved by 24 basis points to 5.97%.

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. 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, the terms of the CPP, pursuant to which the Company issued securities to the U.S. Treasury;
  • 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 December 31, 2012At December 31, 2011
(Dollars in thousands except share amounts)
Cash and due from Banks$24,139$34,323
Federal funds sold and interest bearing deposits in banks 6,520  6,324 
Cash and cash equivalents30,65940,647
Securities Available for sale, at fair value 203,763  226,012 
Total securities203,763226,012
Restricted stock5,7415,741
Loans held for sale7,6343,448
Portfolio loans882,548843,088
Allowance for loan losses (17,637) (17,063)
Net loans 864,911  826,025 
Bank premises and equipment, net8,7218,968
Other real estate owned1,3661,687
Bank owned life insurance18,61117,868
Goodwill, net21,58221,582
Intangible assets, net594731
Accrued interest receivable3,7263,550
Other assets 10,946  12,163 
Total Assets$1,178,254 $1,168,422 
Demand and other noninterest-bearing$139,895$126,713
Savings, money market and interest-bearing demand377,287359,977
Certificates of deposit 482,411  504,390 
Total deposits 999,593  991,080 
Short-term borrowings1,115227
Federal Home Loan Bank advances46,50842,497
Junior subordinated debentures16,23816,238
Accrued interest payable8821,118
Accrued taxes, expenses and other liabilities 3,774  3,988 
Total Liabilities 1,068,110  1,055,148 
Shareholders' Equity

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

Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 18,880 shares authorized and issued at December 31, 2012 and 25,223 shares at December 31, 2011.18,88025,223
Discount on Series B preferred stock(65)(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 December 31, 2012 and 8,210,443 at December 31, 2011.

Additional paid-in capital39,14139,607
Retained earnings48,76744,080
Accumulated other comprehensive income1,2402,201
Treasury shares at cost, 328,194 shares at December 31, 2012 and at December 31, 2011 (6,092) (6,092)
Total Shareholders' Equity 110,144  113,274 
Total Liabilities and Shareholders' Equity$1,178,254 $1,168,422 

Consolidated Statements of Income (unaudited)
    Three Months Ended

December 31,

Twelve Months Ended

December 31,

(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 corporations9911,2534,6775,847
State and political subdivisions2902651,1571,035
Other debt and equity securities7567285277
Federal funds sold and short-term investments 8  19  35  57 
Total interest income10,92012,00645,94849,349
Interest Expense
Federal Home Loan Bank advances2242638651,053
Short-term borrowings1-12
Junior subordinated debenture 171  175  699  686 
Total interest expense 1,732  2,274  7,509  10,108 
Net Interest Income9,1889,73238,43939,241
Provision for Loan Losses 1,800  2,808  7,242  10,353 
Net interest income after provision for loan losses7,3886,92431,19728,888
Noninterest Income
Investment and trust services3733591,5631,610
Deposit service charges9531,0643,8114,079
Other service charges and fees7687523,0823,246
Income from bank owned life insurance241198742722
Other income 263  144  877  330 
Total fees and other income2,5982,51710,075
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