- 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
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