LNB Bancorp, Inc. Reports First Quarter 2014 Results

  • First quarter net income available to common shareholders of $1.57 million, an increase of 19.8% as compared to the same quarter one year ago
  • New SBA Lending Group generated over $12 million in loans, first quarter gain on sale of $495,000
  • Nonperforming assets declined by $7.8 million, a decrease of 26% from the first quarter a year ago

LORAIN, Ohio--()--LNB Bancorp, Inc. (NASDAQ: LNBB) (“LNB” or the “Company”) today reported financial results for the first quarter 2014. Net income available to common shareholders for the first quarter 2014 was $1,571,000, or $0.16 per common share, compared to $856,000, or $0.10 per common share, for the year-ago quarter which included Supplemental Executive Retirement Plan (SERP) compensation expense of $455,000, net of tax. Excluding the SERP expense, the adjusted net income available to common shareholders totaled $1,311,000 in the first quarter of 2013. The adjusted net income available to common shareholders increased $260,000, or 19.8%, from the first quarter 2013 to the first quarter 2014.

“Gain on the sale of loans was $703,000 for the quarter, compared to $656,000 for the first quarter of 2013. This increase is primarily due to the gain on the sale of SBA (Small Business Administration) loans of $495,000, offset by a decline in mortgage loan sales. We continue to see strong results from our new SBA Lending Group. Since the group’s inception in the fourth quarter of 2013, they have generated over $12 million in loans to medical, dental, veterinary and funeral home businesses. Our new SBA Lending income exceeded the reduction of our fee income from mortgage loan sales. Our mortgage fee income has declined as the market transitioned from heavy refinance volume to a lower level of activity based primarily on purchases,” stated Daniel E. Klimas, president and chief executive officer of LNB Bancorp.

Net interest income was $9.0 million for the first quarter of 2014, compared to $8.7 million in the first quarter of the prior year, an increase of 3.0%. The net interest margin (FTE) for the first quarter of 2014 was 3.21%, a decline of 2 basis points from the first quarter of 2013.

Loan balances grew by 2.2% compared to the first quarter of 2013, led by the commercial and indirect auto loan portfolios.

The Company continued to make progress on improving credit quality as non-performing assets declined nearly $8 million from the same quarter in 2013. The ratio of non-performing assets to total assets at March 31, 2014, was 1.74%, down from 2.41% at March 31, 2013.

The provision for loan losses was $900,000 in the first quarter of 2014, down $450,000 from the first quarter of 2013, reflecting the Company’s improvement in credit quality. Net charge-offs were $908,000 for the first quarter of 2014, or 0.41% of average loans (annualized), compared to $1.2 million, or 0.54% of average loans (annualized), in the first quarter of 2013.

Trust and Investment Management fee income was $400,000 in the first quarter, an increase of 6.7% compared to the first quarter in 2013. “During the first quarter we saw a nice increase in new relationships and we look to continue growing this business in 2014,” stated Daniel E. Klimas. Noninterest income was $2.9 million for the first quarter of 2014 compared to $3.3 million for the prior-year first quarter. This year over year decrease was driven primarily by a slower mortgage loan market, lower account fee income due in part to the severe winter affecting consumers and no gains taken in the first quarter on the securities portfolio.

Noninterest expense was $8.9 million for the first quarter of 2014 compared with $9.3 million for the first quarter of 2013. Excluding the pre-tax expense for SERP compensation of $690,000 in the first quarter of 2013, noninterest expenses would have shown a 3.1% increase compared to the first quarter of 2013, largely as a result of the additional expense associated with the new SBA Lending business.

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 12.15%, Tier 1 leverage ratio of 8.61% and tangible common equity to tangible assets of 6.90% at March 31, 2014.

As previously announced, on January 17, 2014, the Company completed the repurchase and redemption of all of its remaining outstanding shares of Fixed Rate Cumulative Perpetual Preferred Stock, Series B.

Total assets at March 31, 2014 were $1.26 billion, up $24 million, or 2.0%, from March 31, 2013. Total deposits at March 31, 2014 were $1.08 billion, up $28 million, or 2.6%, from March 31, 2013.

About LNB Bancorp, Inc.

LNB Bancorp, Inc. is a $1.3 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 March 31, 2014 At December 31, 2013
(unaudited)
(Dollars in thousands except share amounts)
ASSETS
Cash and due from banks $ 38,939 $ 36,717
Federal funds sold and interest bearing deposits in banks   29,302     15,555  
Cash and cash equivalents 68,241 52,272
Securities available for sale, at fair value 217,510 216,122
Restricted stock 5,741 5,741
Loans held for sale 1,811 4,483
Loans:
Portfolio loans 910,189 902,299
Allowance for loan losses   (17,497 )   (17,505 )
Net loans   892,692     884,794  
Bank premises and equipment, net 8,013 8,198
Other real estate owned 979 579
Bank owned life insurance 19,532 19,362
Goodwill, net 21,582 21,582
Intangible assets, net 424 457
Accrued interest receivable 3,774 3,621
Other assets   15,094     13,046  
Total Assets $ 1,255,393   $ 1,230,257  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing $ 149,530 $ 148,961
Savings, money market and interest-bearing demand 430,142 393,778
Certificates of deposit   497,179     502,850  
Total deposits   1,076,851     1,045,589  
Short-term borrowings 3,725 4,576
Federal Home Loan Bank advances 46,760 46,708
Junior subordinated debentures 16,238 16,238
Accrued interest payable 701 789
Accrued taxes, expenses and other liabilities   4,004     4,901  
Total Liabilities   1,148,279     1,118,801  
Shareholders' Equity
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, no shares were issued at March 31, 2014 and 7,689 shares were 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 10,001,717 at March 31, 2014 and 10,001,717 at December 31, 2013.

10,002 10,002
Additional paid-in capital 51,166 51,098
Retained earnings 55,440 53,966
Accumulated other comprehensive income (loss) (3,317 ) (5,188 )
Treasury shares at cost, 336,745 shares at March 31, 2014 and 328,194 at December 31, 2013   (6,177 )   (6,092 )
Total Shareholders' Equity   107,114     111,456  
Total Liabilities and Shareholders' Equity $ 1,255,393   $ 1,230,257  
 

 
 
Consolidated Statements of Income (unaudited)
 
       

Three Months Ended
March 31,

 

Three Months Ended
March 31,

2014

2013

(Dollars in thousands except share and per share amounts)
Interest Income
Loans $ 8,928 $ 9,054
Securities:
U.S. Government agencies and corporations 1,028 841
State and political subdivisions 303 289
Other debt and equity securities 117 70
Federal funds sold and short-term investments   17     20  
Total interest income 10,393 10,274
 
Interest Expense
Deposits 1,082 1,249
Federal Home Loan Bank advances 155 155
Short-term borrowings 27 -
Junior subordinated debenture   168     166  
Total interest expense   1,432     1,570  
Net Interest Income 8,961 8,704
Provision for Loan Losses   900     1,350  
Net interest income after provision for loan losses 8,061 7,354
 
Noninterest Income
Investment and trust services 400 375
Deposit service charges 770 816
Other service charges and fees 753 831
Income from bank owned life insurance 169 168
Other income   151     321  
Total fees and other income 2,243 2,511
Securities gains, net - 178
Gains on sale of loans 703 656
Loss on sale of other assets, net   (34 )   (13 )
Total noninterest income 2,912 3,332
 
Noninterest Expense
Salaries and employee benefits 4,595 5,027
Furniture and equipment 1,148 949
Net occupancy 613 588
Professional fees 494 490
Marketing and public relations 400 289
Supplies, postage and freight 214 307
Telecommunications 151 162
Ohio Franchise tax 224 308
FDIC assessments 272 242
Other real estate owned 24 77
Loan and collection expense 298 388
Other expense   426     454  
Total noninterest expense   8,859     9,281  
Income before income tax expense 2,114 1,405
Income tax expense   508     292  
 
Net Income $ 1,606   $ 1,113  
Dividends and accretion on preferred stock   35     257  
Net Income Available to Common Shareholders $ 1,571   $ 856  
 
Net Income Per Common Share
Basic $ 0.16 $ 0.10
Diluted 0.16 0.10
Dividends declared 0.01 0.01
Average Common Shares Outstanding
Basic

9,668,297

8,201,120
Diluted

9,705,432

8,212,038
 

 
 
LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
               
Three Months Ended
March 31, December 31, September 30, June 30, March 31,
END OF PERIOD BALANCES         2014   2013   2013   2013   2013
Cash and Cash Equivalents $ 68,241 $ 52,272 $ 47,090 $ 49,534 $ 54,954
Securities 217,510 216,122 215,290 228,766 223,173
Restricted stock 5,741 5,741 5,741 5,741 5,741
Loans held for sale 1,811 4,483 2,110 3,423 6,250
Portfolio loans 910,189 902,299 891,300 882,896 889,931
Allowance for loan losses   17,497   17,505   17,791   17,815   17,806
Net loans 892,692 884,794 873,509 865,081 872,125
Other assets   69,398   66,845   66,762   65,701   68,940
Total assets $ 1,255,393 $ 1,230,257 $ 1,210,502 $ 1,218,246 $ 1,231,183
Total deposits 1,076,851 1,045,589 1,032,245 1,039,279 1,049,176
Other borrowings 66,723 67,522 64,539 64,704 64,684
Other liabilities   4,705   5,690   5,757   5,369   7,118
Total liabilities 1,148,279 1,118,801 1,102,541 1,109,352 1,120,978
Total shareholders' equity   107,114   111,456   107,961   108,894   110,205
Total liabilities and shareholders' equity $ 1,255,393 $ 1,230,257 $ 1,210,502 $ 1,218,246 $ 1,231,183
 
AVERAGE BALANCES
Assets:
Total assets $ 1,234,380 $ 1,221,830 $ 1,213,502 $ 1,233,694 $ 1,195,630
Earning assets* 1,150,500 1,137,943 1,130,695 1,147,869 1,113,292
Securities 217,753 214,860 222,229 225,644 207,791
Portfolio loans 906,843 899,899 883,321 882,499 884,893
Liabilities and shareholders' equity:
Total deposits $ 1,055,980 $ 1,041,763 $ 1,036,149 $ 1,053,952 $ 1,016,968
Interest bearing deposits 910,340 891,589 896,937 914,652 879,208
Interest bearing liabilities 978,073 956,866 961,636 979,260 943,566
Total shareholders' equity 106,681 109,814 108,025 110,619 110,416
 
INCOME STATEMENT
Total Interest Income $ 10,393 $ 10,525 $ 10,304 $ 10,576 $ 10,274
Total Interest Expense   1,432   1,490   1,529   1,567   1,570
Net interest income 8,961 9,035 8,775 9,009 8,704
Provision for loan losses 900 1,025 950 1,050 1,350
Other income 2,243 2,524 2,062 2,519 2,511
Net gain on sale of assets 669 732 404 553 821
Noninterest expense   8,859   8,983   8,301   8,622   9,281
Income before income taxes 2,114 2,283 1,990 2,409 1,405
Income tax expense   508   577   471   586   292
Net income 1,606 1,706 1,519 1,823 1,113
Preferred stock dividend and accretion   35   163   109   117   257
Net income available to common shareholders $ 1,571 $ 1,543 $ 1,410 $ 1,706 $ 856
Common cash dividend declared and paid $ 97 $ 93 $ 93 $ 93 $ 79
 
Net interest income-FTE (1) $ 9,117 $ 9,192 $ 8,934 $ 9,169 $ 8,860
Total Operating Revenue (4) $ 12,029 $ 12,448 $ 11,400 $ 12,241 $ 12,192
 

        Three Months Ended
March 31,   December 31,   September 30,   June 30,   March 31,
          2014   2013   2013   2013   2013
PER SHARE DATA
Basic net income per common share $ 0.16 $ 0.16 $ 0.15 $ 0.18 $ 0.10
Diluted net income per common share 0.16 0.16 0.15 0.18 0.10
Cash dividends per common share 0.01 0.01 0.01 0.01 0.01
Book value per common shares outstanding 11.08 10.73 10.62 10.36 10.87
Tangible book value per common shares outstanding** 8.81 8.45 8.25 8.35 8.49
Period-end common share market value 11.42 10.03 9.40 8.59 8.31
Market as a % of tangible book 129.69 % 118.69 % 113.93 % 102.90 % 97.93 %
Basic average common shares outstanding 9,668,297 9,379,355 9,303,702 9,303,702 8,201,120
Diluted average common shares outstanding 9,705,432 9,404,651 9,323,657 9,319,142 8,212,038
Common shares outstanding 9,664,972 9,673,523 9,303,702 9,303,702 9,303,702
 
KEY RATIOS
Return on average assets (2) 0.53 % 0.55 % 0.50 % 0.59 % 0.38 %
Return on average common equity (2) 6.11 % 6.16 % 5.58 % 6.61 % 4.09 %
Efficiency ratio 73.65 % 72.16 % 72.82 % 70.44 % 76.12 %
Noninterest expense to average assets (2) 2.91 % 2.92 % 2.71 % 2.80 % 3.15 %
Average equity to average assets 8.64 % 8.99 % 8.90 % 8.97 % 9.23 %
Net interest margin (FTE) (1) 3.21 % 3.20 % 3.13 % 3.20 % 3.23 %
Common stock dividend payout ratio 6.18 % 6.10 % 6.61 % 5.46 % 9.59 %
Common stock market capitalization $ 110,374 $ 97,025 $ 87,455 $ 79,919 $ 77,314
 
 
ASSET QUALITY
Allowance for Loan Losses
Allowance for loan losses, beginning of period $ 17,505 $ 17,791 $ 17,815 $ 17,806 $ 17,637
Provision for loan losses 900 1,025 950 1,050 1,350
Charge-offs 998 1,570 1,354 1,667 1,428
Recoveries   90     259     380     626     247  
Net charge-offs   908     1,311     974     1,041     1,181  
Allowance for loan losses, end of period $ 17,497   $ 17,505   $ 17,791   $ 17,815   $ 17,806  
 
Nonperforming Assets
Nonperforming loans $ 20,918 $ 21,986 $ 24,977 $ 26,605 $ 28,514
Other real estate owned   979     579     951     1,149     1,215  
Total nonperforming assets $ 21,897   $ 22,565   $ 25,928   $ 27,754   $ 29,729  
 
Ratios
Total nonperforming loans to total loans 2.30 % 2.44 % 2.80 % 3.01 % 3.20 %
Total nonperforming assets to total assets 1.74 % 1.83 % 2.14 % 2.28 % 2.41 %
Net charge-offs to average loans (2) 0.41 % 0.58 % 0.44 % 0.47 % 0.54 %
Provision for loan losses to average loans (2) 0.40 % 0.45 % 0.43 % 0.48 % 0.62 %
Allowance for loan losses to portfolio loans 1.92 % 1.94 % 2.00 % 2.02 % 2.00 %
Allowance to nonperforming loans 83.65 % 79.62 % 71.23 % 66.96 % 62.45 %
Allowance to nonperforming assets 79.91 % 77.58 % 68.62 % 64.19 % 59.89 %
 
CAPITAL & LIQUIDITY
Period-end tangible common equity to assets** 6.90 % 6.77 % 6.46 % 6.49 % 6.53 %
Average equity to assets 8.64 % 8.99 % 8.90 % 8.97 % 9.23 %
Average equity to loans 11.76 % 12.20 % 12.23 % 12.53 % 12.48 %
Average loans to deposits 85.88 % 86.38 % 85.25 % 83.73 % 87.01 %
Tier 1 leverage ratio (3) 8.61 % 9.22 % 8.95 % 8.73 % 8.88 %
Tier 1 risk-based capital ratio (3) 10.90 % 11.63 % 11.40 % 11.36 % 11.05 %
Total risk-based capital ratio (3) 12.15 % 12.89 % 12.65 % 12.62 % 12.31 %
 
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized
(3) 3-31-14 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.
 

Contacts

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

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Contacts

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