LNB Bancorp, Inc. Reports Second Quarter 2013 Results

LNB Bancorp, Inc. Reports Second Quarter 2013 Results

  • Net income available to common shareholders of $1.7 million, a 52% increase from second quarter of last year
  • Noninterest income of $3.1 million, a 21% improvement
  • Nonperforming assets declined by $8.7 million, or 24%

LORAIN, Ohio--(BUSINESS WIRE)-- LNB Bancorp, Inc. (NAS: LNBB) ("LNB" or the "Company") today reported financial results for the second quarter 2013. Net income available to common shareholders was $1.7 million, or $0.18 per common share, compared to $1.1 million, or $0.14 per common share, for the year-ago quarter. Net income available to common shareholders for the first six months of 2013 was $2.6 million, or $0.29 per share.

Noninterest income was $3.1 million for the second quarter of 2013 compared to $2.5 million for the prior-year second quarter. This 21% year over year increase was driven primarily by growth in mortgage and indirect auto lending businesses. Noninterest income for the first six months of 2013 was $6.4 million, up $986,000, or 18%, from the same six month period in 2012.

"Although interest rates increased at the end of the quarter, overall we posted a healthy gain on the sale of loans of $587,000 for the quarter, up 186% from $205,000 earned in the second quarter of 2012," stated Daniel E. Klimas, president and chief executive officer of LNB Bancorp. "Noninterest income growth has helped to offset our margin compression. The growth in mortgage revenue was largely the result of strategic investments made in 2012 to expand our sales and credit teams," added Klimas.

Noninterest expense was $8.6 million for the second quarter of 2013 compared with $9.0 million in the same period of 2012, a decrease of 4.7%. "Expense management continues to be a key contributor to our success," stated Klimas.

The Company continues to make progress on improving credit quality as non-performing assets at the end of the second quarter of 2013 declined by $8.7 million from the second quarter of 2012. The ratio of non-performing assets to total assets at June 30, 2013 was 2.28%, down from 3.02% at June 30, 2012. The provision for loan losses was $1.1 million in the second quarter of 2013, down $617,000 from the 2012 second quarter, reflecting the Company's improvement in credit quality. Net charge-offs were $1.0 million for the second quarter of 2013, or 0.47% of average loans (annualized), compared to $1.5 million, or 0.69% of average loans (annualized), in the second quarter of 2012.

Operating revenue, including net interest income on a fully tax equivalent basis ("FTE") plus noninterest income from operations, was $12.2 million for the second quarter of 2013, which was down $397,000, or 3.1%, from the second quarter of the prior year. The net interest margin (FTE) for the second quarter of 2013 was 3.20%, a decline of 3 basis points compared to the first quarter 2013, and a decline of 41 basis points from the 2012 second quarter.

Total assets at June 30, 2013 were $1.22 billion, up $10.3 million, or 0.9%, from June 30, 2012. Total deposits at June 30, 2013 were $1.04 billion, up $15.7 million, or 1.5%, from June 30, 2012.

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, 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 June 30, 2013At December 31, 2012
(Dollars in thousands except share amounts)
Cash and due from Banks$36,663$24,139
Federal funds sold and interest bearing deposits in banks 12,871  6,520 
Cash and cash equivalents49,53430,659
Securities Available for sale, at fair value 228,766  203,763 
Total securities228,766203,763
Restricted stock5,7415,741
Loans held for sale3,4237,634
Portfolio loans882,896882,548
Allowance for loan losses (17,815) (17,637)
Net loans 865,081  864,911 
Bank premises and equipment, net8,4568,721
Other real estate owned1,1491,366
Bank owned life insurance18,94818,611
Goodwill, net21,58221,582
Intangible assets, net527594
Accrued interest receivable3,8963,726
Other assets 11,143  10,946 
Total Assets$1,218,246 $1,178,254 
Demand and other noninterest-bearing$138,728$139,894
Savings, money market and interest-bearing demand396,070377,287
Certificates of deposit 504,481  482,411 
Total deposits 1,039,279  999,592 
Short-term borrowings1,8591,115
Federal Home Loan Bank advances46,60746,508
Junior subordinated debentures16,23816,238
Accrued interest payable825882
Accrued taxes, expenses and other liabilities 4,544  3,775 
Total Liabilities 1,109,352  1,068,110 
Shareholders' Equity

Preferred stock, Series A Voting, no par value, authorized 150,000 shares at June 30, 2013 and December 31, 2012.

Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 9,147 shares authorized and issued at June 30, 2013 and 18,880 shares at December 31, 2012.9,14718,880
Discount on Series B preferred stock(27)(65)

Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 9,631,896 at June 30, 2013 and 8,272,548 at December 31, 2012.

Additional paid-in capital47,66139,141
Retained earnings51,16448,767
Accumulated other comprehensive income(2,591)1,240
Treasury shares at cost, 328,194 shares at June 30, 2013 and at December 31, 2012 (6,092) (6,092)
Total Shareholders' Equity 108,894  110,144 
Total Liabilities and Shareholders' Equity$1,218,246 $1,178,254 

Consolidated Statements of Income (unaudited)
Three Months EndedThree Months EndedSix Months EndedSix Months Ended
June 30,June 30,June 30,June 30,





(Dollars in thousands except share and per share amounts)
Interest Income
U.S. Government agencies and corporations8671,2811,7082,541
State and political subdivisions298291586578
Other debt and equity securities13869222141
Federal funds sold and short-term investments 9  10  16  19 
Total interest income10,57611,84520,85023,522
Interest Expense
Federal Home Loan Bank advances157212311427
Short-term borrowings--1-
Junior subordinated debenture 174  173  340  349 
Total interest expense 1,567  1,912  3,137  3,934 
Net Interest Income9,0099,93317,71319,588
Provision for Loan Losses 1,050  1,667  2,400  3,567 
Net interest income after provision for loan losses7,9598,26615,31316,021
Noninterest Income
Investment and trust services440425815815
Deposit service charges8699291,6851,864
Other service charges and fees8088041,6391,552
Income from bank owned life insurance170169338334
Other income 232  58  553  400 
Total fees and other income2,5192,3855,0304,965
Securities gains, net--178-
Gains on sale of loans5872051,243552
Loss on sale of other assets, net (34) (47) (47) (99)
Total noninterest income3,0722,5436,4045,418
Noninterest Expense
Salaries and employee benefits4,2243,8949,2518,005
Furniture and equipment1,1341,2002,0832,270
Net occupancy5495541,1371,133
Professional fees5865641,0761,059
Marketing and public relations349395638642
Supplies, postage and freight274265581508
Ohio Franchise tax302307610623
FDIC assessments238394480786
Other real estate owned48175125307
Loan and collection expense374308762
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