LNB Bancorp, Inc. Reports Third Quarter 2009 Results
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-- Net interest income increases 16 percent 3Q09 vs. 3Q08
-- Significant loan loss provision taken
-- LNB takes market share lead in Lorain County
LORAIN, Ohio--(BUSINESS WIRE)-- LNB Bancorp, Inc. (NASDAQ: LNBB) today reported a net loss of $4,376,000 or $.64 per share for the three months ended September 30, 2009, compared with net income of $1,823,000 or $.25 per diluted share reported for the same period a year ago.
"A significant loan loss provision recorded in the third quarter impacted our net earnings," said Daniel E. Klimas, president and chief executive officer of LNB Bancorp. "The pre-provision core earnings* performance for the third quarter was highly impressive with solid revenue gains. Net interest income increased by more than 16 percent in the third quarter this year compared to the third quarter a year ago."
Pre-provision core earnings* equaled $3,965,000 for the third quarter of 2009 compared to $2,889,000 for the third quarter a year ago, an increase of 37.2 percent. Pre-provision core earnings* for the first nine months of 2009 were $10,258,000, compared with $7,674,000 for the first nine months of 2008, an increase of 33.7 percent.
Asset quality issues continue to pose challenges for the industry. The company recorded a loan loss provision of $11,067,000 in the third quarter of 2009 as a result of an increase in problem loans and declining values of collateral in real estate loans in the third quarter of 2009.
"We feel that this provision is a prudent business decision that will help ensure that potential losses are appropriately covered," said Klimas. "Our pre-provision core earnings* performance continues to demonstrate the strength of our company." Klimas added that the current economic environment remains challenging. "We continue to be vigilant as we manage through these uncertain economic conditions," he said.
"One positive sign of the strength of our core business is found in the most recent FDIC report on deposit market share," said Klimas. "For the first time in 15 years, Lorain National Bank has taken the No. 1 position in market share in Lorain County. Such an achievement is testimony of our continued focus on growing our business and the dedication and hard work of our associates."
Total deposits at the end of the third quarter this year were $968,991,000, up from $895,662,000 at the end of last year's third quarter. Total assets at the end of the third quarter 2009 were $1,181,179,000 compared with $1,109,501,000 at the end of the third quarter of 2008. Total portfolio loans at September 30, 2009 were $813,600,000, up from $793,542,000 at September 30, 2008.
For the first nine months of 2009, the company reported a net loss of $2,543,000, or $.48 per share, compared with net income of $2,135,000 or $.29 per diluted share for the same period a year ago. Net loss available to common shareholders was $4,695,000 for the third quarter of 2009 and $3,480,000 for the first nine months of 2009.
Key Performance Measures
Net interest income for the third quarter of 2009 was $9,578,000, a 16 percent increase compared with net interest income of $8,229,000 for the third quarter a year ago and 4.9 percent higher than the net interest income of $9,134,000 in the second quarter of 2009. For the first nine months of 2009, net interest income was $27,610,000, compared to $23,888,000 in the first nine months of 2008, a 15.5 percent increase.
The bank's net interest margin on a fully tax-equivalent basis rose slightly to 3.30 percent in the third quarter this year from 3.28 percent in the second quarter 2009 and up from 3.28 in the third quarter a year ago.
Noninterest income was $3,124,000 for the third quarter of 2009, down slightly from $3,158,000 in the third quarter a year ago. Investment and trust service income and other fees showed increases in comparison to recent quarters when such income had been slowed by the downturn in stock market activity.
Noninterest expense was $8,737,000 for the third quarter of 2009, compared to $8,498,000 in the third quarter of 2008 and $9,480,000 in the second quarter of 2009. Expenses were significantly impacted by a $566,000 increase in FDIC fees in the third quarter of 2009, compared to the same quarter last year.
In terms of asset quality, the allowance for loan losses at September 30, 2009 was $22,556,000 or 2.77 percent of outstanding loans. Net charge-offs for the third quarter of 2009 were $1,489,000, compared with $990,000 in the third quarter a year ago and $1,081,000 for the second quarter of 2009. The allowance to nonperforming loans was 53.68 percent at September 30, 2009, up from 39.17 percent at June 30, 2009.
* Pre-provision core earnings is a non-GAAP financial measure that the Company's management believes is useful in analyzing the Company's underlying performance trends, particularly in periods of economic stress. Pre-provision core earnings is defined as income before income tax expense, adjusted to exclude the impact of provision for loan losses. Pre-provision core earnings is reconciled to the related GAAP financial measure in the "Reconciliation" table included after the consolidated financial statements and supplemental financial information included in this press release.
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 Morgan Bank serve customers through 21 retail-banking locations and 28 ATMs in Lorain, eastern Erie, western Cuyahoga and Summit counties. North Coast Community Development Corporation is a wholly owned subsidiary of The Lorain National Bank. Brokerage services are provided by the bank through an agreement with Investment Centers of America. 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.
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 expressions, 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 significant increases in competitive pressure in the banking and financial services industries; changes in the interest rate environment which could reduce anticipated or actual margins; 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; persisting volatility and limited credit availability in the financial markets, particularly if initiatives undertaken by the U.S. government do not have the intended effect on the financial markets; limitations on the Company's ability to raise funding to the extent required by banking regulators or otherwise; limitations on the Company's ability to return capital to shareholders and dilution of the Company's common shares that may result from the terms of the Capital Purchase Program ("CPP"), pursuant to which the Company issued securities to the United States Department of the Treasury (the "U.S. Treasury"); increases in interest rates or further weakening economic conditions that could constrain borrowers' ability to repay outstanding loans or diminish the value of the collateral securing those loans; 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; asset price deterioration, which has had and may continue to have a negative effect on the valuation of certain asset categories represented on the Company's balance sheet; general economic conditions, either nationally or regionally (especially in northeastern Ohio), becoming less favorable than expected resulting in, among other things, a deterioration in credit quality of assets; increases in deposit insurance premiums or assessments imposed on the Company by the FDIC; difficulty attracting and/or retaining key executives and/or relationship managers at compensation levels necessary to maintain a competitive market position; changes occurring in business conditions and inflation; changes in technology; changes in trade, monetary, fiscal and tax policies; changes in the securities markets, in particular, continued disruption in the fixed income markets and adverse capital market conditions; continued disruption in the housing markets and related conditions in the financial markets; and changes in general economic conditions and competition in the geographic and business areas in which the Company conducts its operations, particularly in light of the recent consolidation of competing financial institutions; as well as the risks and uncertainties described from time to time in the Company's reports as filed with the Securities and Exchange Commission.. We undertake no obligation to review or update any forward-looking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED BALANCE SHEETS
At September 30, 2009 At December 31, 2008
(unaudited)
(Dollars in thousands except share amounts)
ASSETS
Cash and due from Banks $ 18,670 $ 21,723
Federal funds sold and short-term 16,004 15,200
investments
Cash and cash equivalents 34,674 36,923
Interest-bearing deposits in other 357 352
banks
Securities:
Trading securities, at fair value 8,865 11,261
Available for sale, at fair value 273,144 223,052
Total Securities 282,009 234,313
Restricted stock 4,985 4,884
Loans held for sale 1,707 3,580
Loans:
Portfolio loans 813,600 803,551
Allowance for loan losses (22,556 ) (11,652 )
Net loans 791,044 791,899
Bank premises and equipment, net 10,311 11,504
Other real estate owned 1,071 1,108
Bank owned life insurance 16,282 15,742
Goodwill, net 21,582 21,582
Intangible assets, net 1,040 1,142
Accrued interest receivable 4,337 4,290
Other assets 11,780 8,816
Total Assets $ 1,181,179 $ 1,136,135
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other $ 93,200 $ 93,994
noninterest-bearing
Savings, money market and 290,553 292,679
interest-bearing demand
Certificates of deposit 585,238 534,502
Total deposits 968,991 921,175
Short-term borrowings 31,422 22,928
Federal Home Loan Bank advances 43,005 53,357
Junior subordinated debentures 20,620 20,620
Accrued interest payable 2,820 3,813
Accrued taxes, expenses and other 9,323 7,183
liabilities
Total Liabilities 1,076,181 1,029,076
Shareholders' Equity
Preferred Shares, Series A Voting,
no par value, authorized 750,000 - -
shares, none issued at September
30, 2009 and December 31, 2008
Preferred stock, Series B, no par
value, 25,223 shares authorized and 25,223 25,223
issued at September 30, 2009 and
December 31, 2008
Discount on Series B preferred (134 ) (146 )
stock
Warrant to purchase common stock 146 146
Common stock, par value $1 per
share, authorized 15,000,000
shares, issued shares 7,623,857 at 7,624 7,624
September 30, 2009 and December 31,
2008
Additional paid-in capital 37,852 37,783
Retained earnings 36,733 41,682
Accumulated other comprehensive 3,646 839
income
Treasury shares at cost, 328,194
shares at September 30, 2009 and at (6,092 ) (6,092 )
December 31, 2008
Total Shareholders' Equity 104,998 107,059
Total Liabilities and Shareholders' $ 1,181,179 $ 1,136,135
Equity
Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
(Dollars in thousands except share and per share amounts)
Interest Income
Loans $ 11,536 $ 11,976 $ 34,507 $ 36,514
Securities:
U.S. Government
agencies and 2,554 1,861 7,566 5,795
corporations
State and political 261 203 760 551
subdivisions
Trading securities 88 209 334 738
Other debt and equity 65 82 183 214
securities
Federal funds sold
and short-term 19 54 52 130
investments
Total interest income 14,523 14,385 43,402 43,942
Interest Expense
Deposits 4,326 5,135 13,829 17,041
Federal Home Loan 351 646 1,131 1,769
Bank advances
Short-term borrowings 43 93 111 354
Junior subordinated 225 282 721 890
debenture
Total interest 4,945 6,156 15,792 20,054
expense
Net Interest Income 9,578 8,229 27,610 23,888
Provision for Loan 11,067 471 15,360 5,609
Losses
Net interest income
(loss) after (1,489 ) 7,758 12,250 18,279
provision for loan
losses
Noninterest Income
Investment and trust 496 441 1,405 1,560
services
Deposit service 1,211 1,258 3,332 3,559
charges
Other service charges 766 704 2,108 2,030
and fees
Income from bank 213 154 540 735
owned life insurance
Other income 51 67 216 736
Total fees and other 2,737 2,624 7,601 8,620
income
Securities gains, net 88 223 674 506
Gains on sale of 341 298 963 642
loans
Gains (loss) on sale (42 ) 13 (13 ) (122 )
of other assets, net
Total noninterest 3,124 3,158 9,225 9,646
income
Noninterest Expense
Salaries and employee 3,610 3,828 11,130 11,467
benefits
Furniture and 1,039 1,049 3,370 3,080
equipment
Net occupancy 571 556 1,785 1,816
Outside services 657 522 2,001 1,996
Marketing and public 228 247 767 829
relations
Supplies, postage and 311 408 951 1,092
freight
Telecommunications 208 189 596 635
Ohio Franchise tax 232 225 689 670
FDIC assessments 743 177 2,032 237
Other real estate 89 285 263 892
owned
Electronic banking 209 237 598 747
expenses
Loan and collection 385 256 963 716
expense
Other expense 455 519 1,432 1,683
Total noninterest 8,737 8,498 26,577 25,860
expense
Income (loss) before
income tax expense (7,102 ) 2,418 (5,102 ) 2,065
(benefit)
Income tax expense (2,726 ) 595 (2,559 ) (70 )
(benefit)
Net Income (Loss) $ (4,376 ) $ 1,823 $ (2,543 ) $ 2,135
Dividends and
accretion on 319 - 937 -
preferred stock
Net Income (Loss)
Available to Common $ (4,695 ) $ 1,823 $ (3,480 ) $ 2,135
Shareholders
Net Income (Loss) Per
Common Share
Basic $ (0.64 ) $ 0.25 $ (0.48 ) $ 0.29
Diluted (0.64 ) 0.25 (0.48 ) 0.29
Dividends declared 0.01 0.09 0.19 0.45
Average Common Shares
Outstanding
Basic 7,295,663 7,295,663 7,295,663 7,295,663
Diluted 7,295,663 7,295,663 7,295,663 7,295,663
LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
Three Months Ended Nine Months Ended
September 30, June 30, September 30, September 30, September 30,
2009 2009 2008 2009 2008
END OF PERIOD
BALANCES
Assets $ 1,181,179 $ 1,232,095 $ 1,109,501 $ 1,181,179 $ 1,109,501
Deposits 968,991 1,014,724 895,662 968,991 895,662
Portfolio 813,600 803,549 793,542 813,600 793,542
loans
Allowance for 22,556 12,978 11,355 22,556 11,355
loan losses
Shareholders' 104,998 107,679 80,340 104,998 80,340
equity
AVERAGE
BALANCES
Assets:
Total assets $ 1,236,055 $ 1,202,197 $ 1,082,869 $ 1,202,958 $ 1,064,967
Earning 1,169,229 1,133,466 1,010,388 1,134,258 989,045
assets
Securities 350,352 325,030 219,642 322,550 218,246
Total loans 818,877 808,436 790,746 811,708 763,577
Liabilities
and
shareholders'
equity:
Total $ 1,018,968 $ 995,775 $ 870,622 $ 988,443 $ 863,643
deposits
Interest
bearing 924,479 903,018 783,264 895,861 777,790
deposits
Interest
bearing 1,021,900 990,496 907,753 991,361 885,453
liabilities
Total
shareholders' 108,307 108,255 79,292 108,091 83,532
equity
INCOME
STATEMENT
Net interest $ 9,578 $ 9,134 $ 8,229 $ 27,610 $ 23,888
income
Net interest
income-FTE 9,714 9,274 8,342 28,006 24,202
(1)
Provision for 11,067 2,484 471 15,360 5,609
loan losses
Noninterest 3,124 3,244 3,158 9,225 9,646
income
Noninterest 8,737 9,480 8,498 26,577 25,860
expense
Taxes (2,726 ) (102 ) 595 (2,559 ) (70 )
Net income (4,376 ) 516 1,823 (2,543 ) 2,135
(loss)
Less
Preferred
stock 319 319 - 937 -
dividend and
accretion
Net income
(loss)
available to (4,695 ) 197 1,823 (3,480 ) 2,135
common
shareholders
PER SHARE
DATA
Basic net
income (loss) $ (0.64 ) $ 0.03 $ 0.25 $ (0.48 ) $ 0.29
per common
share
Diluted net
income (loss) (0.64 ) 0.03 0.25 (0.48 ) 0.29
per common
share
Cash
dividends per 0.01 0.09 0.09 0.19 0.45
common share
Basic average
common shares 7,295,663 7,295,663 7,295,663 7,295,663 7,295,663
outstanding
Diluted
average 7,295,663 7,295,663 7,295,663 7,295,663 7,295,663
common shares
outstanding
KEY RATIOS
Return on
average -1.40 % 0.17 % 0.67 % -0.28 % 0.27 %
assets (2)
Return on
average -16.03 % 1.91 % 9.15 % -3.15 % 3.48 %
common equity
(2)
Efficiency 68.06 % 75.73 % 73.90 % 71.38 % 76.40 %
ratio
Noninterest
expense to 2.80 % 3.16 % 3.12 % 2.95 % 3.23 %
average
assets (2)
Average
equity to 8.76 % 9.00 % 7.32 % 8.99 % 7.66 %
average
assets
Net interest 3.25 % 3.23 % 3.24 % 3.25 % 3.20 %
margin
Net interest
margin (FTE) 3.30 % 3.28 % 3.28 % 3.30 % 3.24 %
(1)
ASSET QUALITY
Nonperforming $ 42,018 $ 33,133 $ 17,445 $ 42,018 $ 17,445
loans
Other real 1,071 1,170 1,799 1,071 1,799
estate owned
Total
nonperforming 43,089 34,303 19,244 43,089 19,244
assets
Net Charge 1,489 1,081 990 4,456 2,074
Offs
Total
nonperforming 5.16 % 4.12 % 2.20 % 5.16 % 2.20 %
loans to
total loans
Total
nonperforming 3.65 % 2.78 % 1.73 % 3.65 % 1.73 %
assets to
total assets
Net
charge-offs 0.72 % 0.54 % 0.50 % 0.73 % 0.36 %
to average
loans (2)
Allowance for 2.77 % 1.62 % 1.43 % 2.77 % 1.43 %
loan losses
Allowance to
nonperforming 53.68 % 39.17 % 65.09 % 53.68 % 65.09 %
loans
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized
Reconciliation of Pre-Provision Core Earnings*
Three Months Ended Nine Months Ended
September 30, September 30,
2009 2008 2009 2008
Pre-provision Core Earnings* $ 3,965 $ 2,889 $ 10,258 $ 7,674
Provision for Loan Losses 11,067 471 15,360 5,609
Income (loss) before income tax expense (7,102 ) 2,418 (5,102 ) 2,065
(benefit)
* Pre-provision core earnings is a non-GAAP financial measure that the Company's
management believes is useful in analyzing the Company's underlying performance
trends, particularly in periods of economic stress. Pre-provision core earnings
is defined as income before income tax expense, adjusted to exclude the impact
of provision for loan losses.
Source: LNB Bancorp, Inc.
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