LNBB (MM)

• Net Income Available to Common Shareholders of $2.1 million, a 48% year-over-year increase
• Loans increased by $15.1 million or 6.7% annualized during the quarter
• Improved asset quality and lower net charge-offs resulted in a reduced provision for loan losses
• 36% increase in noninterest income from higher gains on sale of loans and improved trust income

LNB Bancorp, Inc. (NASDAQ: LNBB) (“LNB” or the “Company”) today reported financial results for the third quarter 2014. Net income available to common shareholders for the quarter ending September 30, 2014 was $2.1 million, or $0.22 per common share, compared to $1.4 million, or $0.15 per common share, for the third quarter 2013, an increase of 48%, or 47% on a per common share basis. For the nine months ended September 30, 2014, net income available to common shareholders was $5.7 million, or $0.59 per common share, compared to $4.0 million, or $0.44 per common share for the year ago period. This represents an increase in net income available to common shareholders of $1.7 million, or 43%, and $0.15, or 34%, per common share.

Loan balances at September 30, 2014 increased by $31 million compared to the third quarter of 2013, led by the consumer and commercial loan portfolios. Loan balances grew by $15.1 million for the three month period ended September 30, 2014 compared to the second quarter of 2014 (linked quarter), resulting in an annualized growth rate of 6.7%.

The Company continued to make progress on improving credit quality as non-performing assets for the third quarter declined $7 million as compared to the same quarter in 2013. The ratio of non-performing assets to total assets at September 30, 2014, was 1.53%, down from 2.14% at September 30, 2013.

“Overall, we are very pleased with the third quarter results. We’ve seen solid loan growth and improvement in credit quality continued, reducing charge-offs and the provision for loan losses,” stated Daniel E. Klimas, president and chief executive officer.

Noninterest income was $3.4 million for the third quarter of 2014 compared to $2.5 million for the prior-year third quarter. This year-over-year increase was driven primarily by gains on the sale of SBA (Small Business Administration) and consumer loans and an increase in Trust Department revenues, which more than offset the decline in gains on the sale of mortgage loans and lower deposit and service charge fees.

Gain on the sale of loans was $1.1 million for the quarter, compared to $374,000 for the third quarter of 2013. This increase is primarily due to the gain on the sale of SBA loans as this initiative continued to contribute nicely to the Company’s operating performance.

The provision for loan losses was $720,000 in the third quarter of 2014, down $230,000, or 24%, from the 2013 third quarter, reflecting the Company’s improvement in credit quality and covering slightly more than net charge-offs for the quarter. Net charge-offs were $718,000 for the third quarter of 2014, or 0.31% of average loans (annualized), compared to $974,000, or 0.44% of average loans (annualized), in the third quarter of 2013. The allowance for loan losses was $17.4 million, or 1.89% of total loans, at September 30, 2014 compared with $17.8 million, or 2.00% of total loans, at September 30, 2013. The allowance for loan losses coverage of nonperforming loans at the end of the third quarter improved to 96% from 71% at the end of the same quarter a year ago. “The credit quality indicators continued to improve, resulting in a lower provision this past quarter,” stated Klimas.

Noninterest expense was $8.8 million for the third quarter of 2014 compared with $8.3 million for the third quarter of 2013, an increase of 6.0%. Salaries and benefits costs were higher due to additions of staff in revenue producing areas. Noninterest expense for the first nine months of 2014 totaled $26.5 million, a $271,000 decrease from the same period a year ago.

The Company continued to maintain capital levels in excess of the regulatory requirements to be categorized as “well capitalized” with a total risk-based capital ratio of 12.34%, Tier 1 leverage ratio of 9.01% and tangible common equity to tangible assets ratio of 7.47% at September 30, 2014.

Total assets at September 30, 2014 were $1.24 billion, up $31 million, or 2.5%, from September 30, 2013. Total deposits at September 30, 2014 were $1.06 billion, up $25 million, or 2.4%, from September 30, 2013.

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, any capital-raising or acquisition activities of the Company; 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.

    CONSOLIDATED BALANCE SHEETS   At September 30, 2014 At December 31, 2013 (unaudited) (Dollars in thousands except share amounts) ASSETS Cash and due from Banks $ 29,804 $ 36,717 Federal funds sold and interest bearing deposits in banks   6,363     15,555   Cash and cash equivalents 36,167 52,272 Securities Available for sale, at fair value   218,847     216,122   Total securities 218,847 216,122 Restricted stock 5,741 5,741 Loans held for sale 1,497 4,483 Loans: Portfolio loans 922,514 902,299 Allowance for loan losses   (17,432 )   (17,505 ) Net loans   905,082     884,794   Bank premises and equipment, net 8,831 8,198 Other real estate owned 745 579 Bank owned life insurance 19,876 19,362 Goodwill, net 21,582 21,582 Intangible assets, net 356 457 Accrued interest receivable 3,714 3,621 Other assets   18,661     13,046  

Total Assets

$ 1,241,099   $ 1,230,257     LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Demand and other noninterest-bearing $ 153,952 $ 148,961 Savings, money market and interest-bearing demand 451,150 393,778 Certificates of deposit   451,682     502,850   Total deposits   1,056,784     1,045,589   Short-term borrowings 2,674 4,576 Federal Home Loan Bank advances 46,867 46,708 Junior subordinated debentures 16,238 16,238 Accrued interest payable 674 789 Accrued taxes, expenses and other liabilities   4,797     4,901   Total Liabilities   1,128,034     1,118,801   Shareholders' Equity

Preferred stock, Series A Voting, no par value, authorized 150,000 shares at September 30, 2014 and December 31, 2013.

 

- -

Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, no shares were issued at September 30, 2014 and 7,689 shares authorized and issued at December 31, 2013

- 7,689 Discount on Series B preferred stock - (19 )

Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 10,002,139 at September 30, 2014 and 10,001,717 at December 31, 2013

 

10,002 10,002 Additional paid-in capital 51,336 51,098 Retained earnings 59,356 53,966 Accumulated other comprehensive income (loss) (1,452 ) (5,188 ) Treasury shares at cost, 336,745 shares at September 30, 2014 and 328,194 at December 31, 2013   (6,177 )   (6,092 ) Total Shareholders' Equity   113,065     111,456   Total Liabilities and Shareholders' Equity $ 1,241,099   $ 1,230,257       Consolidated Statements of Income (unaudited)      

Three Months EndedSeptember 30,

 

Three Months EndedSeptember 30,

 

Nine Months EndedSeptember 30,

 

Nine Months EndedSeptember 30,

2014 2013 2014 2013 (Dollars in thousands except share and per share amounts) Interest Income Loans $ 8,960 $ 8,973 $ 27,076 $ 27,291 Securities: U.S. Government agencies and corporations 1,007 908 3,075 2,616 State and political subdivisions 311 301 924 887 Other debt and equity securities 66 115 250 337 Federal funds sold and short-term investments   6     7     30     23   Total interest income 10,350 10,304 31,355 31,154   Interest Expense Deposits 1,026 1,200 3,131 3,685 Federal Home Loan Bank advances 158 158 470 469 Short-term borrowings 20 - 73 1 Junior subordinated debenture   170     171     508     511   Total interest expense   1,374     1,529     4,182     4,666   Net Interest Income 8,976 8,775 27,173 26,488 Provision for Loan Losses   720     950     2,513     3,350   Net interest income after provision for loan losses 8,256 7,825 24,660 23,138   Noninterest Income Investment and trust services 425 363 1,281 1,178 Deposit service charges 850 923 2,469 2,608 Other service charges and fees 771 820 2,262 2,459 Income from bank owned life insurance 172 174 514 512 Other income   71     (218 )   328     335   Total fees and other income 2,289 2,062 6,854 7,092 Securities gains (losses), net - - (5 ) 178 Gains on sale of loans 1,056 374 2,649 1,617 Gains (loss) on sale of other assets, net   16     30     26     (17 ) Total noninterest income 3,361 2,466 9,524 8,870   Noninterest Expense Salaries and employee benefits 4,649 4,200 13,754 13,451 Furniture and equipment 1,200 1,076 3,525 3,159 Net occupancy 568 564 1,784 1,701 Professional fees 421 337 1,341 1,413 Marketing and public relations 333 300 1,123 938 Supplies, postage and freight 243 228 675 809 Telecommunications 164 164 477 501 Ohio Franchise tax 224 304 671 914 Intangible asset amortization 34 - 101 102 FDIC assessments 255 293 788 773 Other real estate owned 5 155 66 280 Loan and collection expense 331 268 1,001 1,030 Other expense   391     412     1,169     1,133   Total noninterest expense   8,818     8,301     26,475     26,204   Income before income tax expense 2,799 1,990 7,709 5,804 Income tax expense   713     471     1,994     1,349     Net Income $ 2,086   $ 1,519   $ 5,715   $ 4,455   Dividends and accretion on preferred stock   -     109     35     483   Net Income Available to Common Shareholders $ 2,086   $ 1,410   $ 5,680   $ 3,972     Net Income Per Common Share Basic $ 0.22 $ 0.15 $ 0.59 $ 0.44 Diluted 0.22 0.15 0.59 0.44 Dividends declared 0.01 0.01 0.03 0.03 Average Common Shares Outstanding Basic 9,626,536 9,213,170 9,622,737 8,840,945 Diluted 9,659,593 9,225,462 9,637,356 8,850,129   LNB Bancorp, Inc. Supplemental Financial Information (Unaudited - Dollars in thousands except Share and Per Share Data)                 Three Months Ended Nine Months Ended END OF PERIOD BALANCES  

September 30,2014

  June 30,2014   March 31,2014   December 31,2013   September 30,2013 September 30,2014   September 30,2013 Cash and Cash Equivalents $ 36,167 $ 47,795 $ 68,241 $ 52,272 $ 47,090 $ 36,167 $ 47,090 Securities 218,847 219,422 217,510 216,122 215,290 218,847 215,290 Restricted stock 5,741 5,741 5,741 5,741 5,741 5,741 5,741 Loans held for sale 1,497 2,856 1,811 4,483 2,110 1,497 2,110 Portfolio loans 922,514 907,365 910,189 902,299 891,300 922,514 891,300 Allowance for loan losses   17,432     17,430     17,497     17,505     17,791     17,432     17,791   Net loans 905,082 889,935 892,692 884,794 873,509 905,082 873,509 Other assets   73,765     71,093     69,398     66,845     66,762     73,765     66,762   Total assets $ 1,241,099   $ 1,236,842   $ 1,255,393   $ 1,230,257   $ 1,210,502   $ 1,241,099   $ 1,210,502   Total deposits 1,056,784 1,048,938 1,076,851 1,045,589 1,032,245 1,056,784 1,032,245 Other borrowings 65,779 66,413 66,723 67,522 64,539 65,779 64,539 Other liabilities   5,471     11,003     4,705     5,690     5,757     5,471     5,757   Total liabilities 1,128,034 1,126,354 1,148,279 1,118,801 1,102,541 1,128,034 1,102,541 Total shareholders' equity   113,065     110,488     107,114     111,456     107,961     113,065     107,961   Total liabilities and shareholders' equity $ 1,241,099   $ 1,236,842   $ 1,255,393   $ 1,230,257   $ 1,210,502   $ 1,241,099   $ 1,210,502     AVERAGE BALANCES Assets: Total assets $ 1,228,769 $ 1,236,203 $ 1,234,380 $ 1,221,830 $ 1,213,502 $ 1,233,096 $ 1,214,339 Earning assets* 1,151,577 1,154,063 1,150,500 1,137,943 1,130,695 1,152,051 1,130,682 Securities 217,791 223,198 217,753 214,860 222,229 219,581 218,900 Portfolio loans 915,773 907,851 906,843 899,899 883,321 910,188 883,565 Liabilities and shareholders' equity: - Total deposits $ 1,044,021 $ 1,056,144 $ 1,055,980 $ 1,041,763 $ 1,036,149 $ 1,052,004 $ 1,035,760 Interest bearing deposits 883,713 905,838 910,340 891,589 896,937 899,866 896,997 Interest bearing liabilities 951,142 972,784 978,073 956,866 961,636 967,234 961,554 Total shareholders' equity 111,394 108,624 106,681 109,814 108,025 108,917 109,678   INCOME STATEMENT Total Interest Income $ 10,350 $ 10,612 $ 10,393 $ 10,525 $ 10,304 $ 31,355 $ 31,154 Total Interest Expense   1,374     1,376     1,432     1,490     1,529     4,182     4,666   Net interest income 8,976 9,236 8,961 9,035 8,775 27,173 26,488 Provision for loan losses 720 893 900 1,025 950 2,513 3,350 Other income 2,289 2,322 2,243 2,524 2,062 6,854 7,092 Net gain on sale of assets 1,072 929 669 732 404 2,670 1,778 Noninterest expense   8,818     8,798     8,859     8,983     8,301     26,475     26,204   Income before income taxes 2,799 2,796 2,114 2,283 1,990 7,709 5,804 Income tax expense   713     773     508     577     471     1,994     1,349   Net income 2,086 2,023 1,606 1,706 1,519 5,715 4,455 Preferred stock dividend and accretion   -     -     35     163     109     35     483   Net income available to common shareholders $ 2,086   $ 2,023   $ 1,571   $ 1,543   $ 1,410   $ 5,680   $ 3,972   Common cash dividend declared and paid $ 97   $ 97   $ 97   $ 93   $ 93   $ 290   $ 265     Net interest income-FTE (1) $ 9,135 $ 9,396 $ 9,117 $ 9,192 $ 8,934 $ 27,646 $ 26,962 Total Operating Revenue (4) $ 12,496 $ 12,647 $ 12,029 $ 12,448 $ 11,400 $ 37,170 $ 35,832     Three Months Ended Nine Months Ended September 30, June 30, March 31, December 31, September 30, September 30, September 30,     2014   2014   2014   2013   2013 2014   2013 PER SHARE DATA Basic net income per common share $ 0.22 $ 0.21 $ 0.16 $ 0.16 $ 0.15 $ 0.59 $ 0.44 Diluted net income per common share 0.22 0.21 0.16 0.16 0.15 0.59 0.44 Cash dividends per common share 0.01 0.01 0.01 0.01 0.01 0.03 0.03 Book value per common shares outstanding 11.70 11.43 11.08 10.73 10.62 11.70 10.62 Tangible book value per common shares outstanding** 9.43 9.16 8.81 8.45 8.25 9.43 8.25 Period-end common share market value 14.29 12.18 11.42 10.03 9.40 14.29 9.40 Market as a % of tangible book 151.57 % 132.97 % 129.69 % 118.69 % 113.93 % 151.57 % 113.93 % Basic average common shares outstanding 9,626,536 9,664,972 9,668,297 9,379,355 9,213,170 9,622,737 8,840,945 Diluted average common shares outstanding 9,659,593 9,682,444 9,705,432 9,404,651 9,225,462 9,637,356 8,850,129 Common shares outstanding 9,665,394 9,664,972 9,664,972 9,673,523 9,303,702 9,665,394 9,303,702   KEY RATIOS Return on average assets (ROA) (2) 0.67 % 0.66 % 0.53 % 0.55 % 0.50 % 0.62 % 0.49 % Return on average common equity (ROE) (2) 7.43 % 7.47 % 6.11 % 6.16 % 5.58 % 7.02 % 5.43 % Efficiency ratio 70.57 % 69.57 % 73.65 % 72.16 % 72.82 % 71.23 % 73.13 % Noninterest expense to average assets (2) 2.85 % 2.85 % 2.91 % 2.92 % 2.71 % 2.87 % 2.89 % Net interest margin (FTE) (1) 3.15 % 3.27 % 3.21 % 3.20 % 3.13 % 3.21 % 3.19 % Common stock dividend payout ratio 4.63 % 4.79 % 6.18 % 6.10 % 6.54 % 5.08 % 6.83 % Common stock market capitalization $ 138,118 $ 117,719 $ 110,374 $ 97,025 $ 87,455 $ 138,118 $ 87,455     ASSET QUALITY Allowance for Loan Losses Allowance for loan losses, beginning of period $ 17,430 $ 17,497 $ 17,505 $ 17,791 $ 17,815 17,505 17,637 Provision for loan losses 720 893 900 1,025 950 2,513 3,350 Charge-offs 856 1,033 998 1,570 1,354 2,888 4,449 Recoveries   138     73     90     259     380     302     1,253   Net charge-offs   718     960     908     1,311     974     2,586     3,196   Allowance for loan losses, end of period $ 17,432   $ 17,430   $ 17,497   $ 17,505   $ 17,791   $ 17,432   $ 17,791     Nonperforming Assets Nonperforming loans $ 18,193 $ 19,907 $ 20,918 $ 21,986 $ 24,976 $ 18,193 $ 24,976 Other real estate owned   745     1,016     979     579     951     745     951   Total nonperforming assets $ 18,938   $ 20,923   $ 21,897   $ 22,565   $ 25,927   $ 18,938   $ 25,927     Ratios Total nonperforming loans to total loans 1.97 % 2.19 % 2.30 % 2.44 % 2.80 % 1.97 % 2.80 % Total nonperforming assets to total assets 1.53 % 1.69 % 1.74 % 1.83 % 2.14 % 1.53 % 2.14 % Net charge-offs to average loans (2) 0.31 % 0.42 % 0.41 % 0.58 % 0.44 % 0.38 % 0.48 % Provision for loan losses to average loans (2) 0.31 % 0.39 % 0.40 % 0.45 % 0.43 % 0.37 % 0.51 % Allowance for loan losses to portfolio loans 1.89 % 1.92 % 1.92 % 1.94 % 2.00 % 1.89 % 2.00 % Allowance to nonperforming loans 95.82 % 87.56 % 83.65 % 79.62 % 71.23 % 95.82 % 71.23 % Allowance to nonperforming assets 92.05 % 83.31 % 79.91 % 77.58 % 68.62 % 92.05 % 68.62 %   CAPITAL & LIQUIDITY Period-end tangible common equity to assets** 7.47 % 7.29 % 6.90 % 6.77 % 6.46 % 7.47 % 6.46 % Average equity to assets 9.07 % 8.79 % 8.64 % 8.99 % 8.90 % 8.83 % 9.03 % Average equity to loans 12.16 % 11.96 % 11.76 % 12.20 % 12.23 % 11.97 % 12.41 % Average loans to deposits 87.72 % 85.96 % 85.88 % 86.38 % 85.25 % 86.52 % 85.31 % Tier 1 leverage ratio (3) 9.01 % 8.77 % 8.61 % 9.22 % 8.95 % 9.01 % 8.95 % Tier 1 risk-based capital ratio (3) 11.09 % 11.17 % 10.90 % 11.63 % 12.40 % 11.09 % 12.40 % Total risk-based capital ratio (3) 12.34 % 12.43 % 12.15 % 12.89 % 12.65 % 12.34 % 12.65 %  

(1)

 

FTE -- fully tax equivalent at 34% tax rate

(2)

Annualized

(3)

9-30-14 ratio is estimated.

(4)

Net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations

*

Earning Assets includes Loans Held for Sale

**

Non-GAAP measures.

**Non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures. The Corporations use of these non-GAAP financial measures, includes the period-end tangible common equity to assets ratio, in their analysis of the company's performance. Period-end tangible common equity excludes preferred stock as well as goodwill and other intangible assets, net, from total stockholders' equity. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Corporation. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Corporation’s performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

LNB Bancorp, Inc.Peter R. Catanese, Senior Vice President, 440-244-7126