By 1
Contact: Peter R. Catanese
Senior Vice President
440.244.7126
LNB Bancorp, Inc. Reports Fourth Quarter and Full Year 2012 Results
• Fourth quarter 2012 net income of $1.64 million, up 10% from a year-ago.
• Full year 2012 net income of $6.1 million, up 22% from 2011
• Loan balances increased $39.5 million over prior year, or 4.7%.
• Nonperforming assets declined by $7 million, or 19.3% from 2011
• Repurchased approximately 25% of outstanding preferred shares with funds from earnings
Lorain, Ohio - LNB Bancorp, Inc. (NASDAQ: LNBB) ("LNB" or the "Company") today reported
financial results for the fourth quarter and the full year ended December 31, 2012. For the fourth quarter
2012, net income was $1.64 million compared to $1.49 million for the fourth quarter of 2011. Net income available to common shareholders was $1.32 million, or $0.17 per common share, compared to $1.17 million, or $0.15 per common share, for the year-ago quarter.
"We are pleased to report another year of improved operating performance," stated Daniel E. Klimas, president and chief executive officer of LNB Bancorp. "We continue to make progress on improving credit quality. Non-performing assets declined $5.1 million in the fourth quarter and nearly $7 million in
2012 compared to 2011. The ratio of non-performing assets to total assets at December 31, 2012, is
2.48%, down from 3.09% at the end of 2011."
"Loans grew by 4.7% in 2012. We continue to see growth in commercial lending; recently the Small Business Administration (SBA) recognized the Company as the 4th highest SBA lender in the Cleveland metropolitan area, based on 2012 loan totals. Residential mortgage loan volume showed strong growth in
2012, with originations up 97% over 2011. The Company opened new loan offices in Solon and Hudson, expanding our sales efforts beyond Lorain County. We expect mortgage revenue to continue to grow in
2013 assuming the housing market continues to improve."
Net income for the year ended December 31, 2012 was $6.11 million, compared with net income of $5.0 million for 2011. Net income available to common shareholders for 2012 was $4.84 million, or $0.61 per common share, compared to $3.73 million for 2011, or $0.47 per common share.
2
Fourth Quarter ReviewNet income for the fourth quarter of 2012 was $1.64 million, up by $113,000, or 7.4%, from the third quarter of 2012, primarily as a result of a lower loan loss provision expense and net gains from sale of mortgage loans.
Operating revenue, including net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations, was $12.7 million for the fourth quarter of 2012, which was virtually unchanged from the fourth quarter of the prior year. The net interest margin (FTE) for the fourth quarter of 2012 was
3.30%, a decline of 32 basis points from the 2011 fourth quarter.
Noninterest income was $3.4 million for the fourth quarter of 2012 compared to $3.0 million for the prior- year fourth quarter. Noninterest expense was $8.64 million for the fourth quarter of 2012 compared with
$8.10 million for the fourth quarter of 2011, an increase of 6.5%.
The provision for loan losses was $1.8 million in the fourth quarter of 2012, down $1 million from the
2011 fourth quarter, reflecting the Company's improvement in credit quality. Net charge-offs were $1.8 million for the fourth quarter of 2012, or 0.79% of average loans (annualized), compared to $3.59 million, or 1.71% of average loans (annualized) in the fourth quarter of 2011.
The Company is focused on active capital management and is committed to maintaining strong capital levels while supporting balance sheet growth and enhancing returns to the Company's shareholders. During the fourth quarter of 2012, the Company repurchased $6.3 million in par value, or approximately
25% of the outstanding shares, of its Fixed Rate Cumulative Perpetual Preferred Stock, Series B, $1,000 per share liquidation preference, in exchange for cash at a price representing a discount to par value. The Series B Preferred Stock was originally issued by LNB in December 2008 as part of the U.S. Department of the Treasury's Capital Purchase Program. The Treasury sold all of the Series B Preferred Stock to private investors through a modified Dutch auction that was completed in June 2012.
Full Year 2012 ReviewTotal assets at December 31, 2012 were $1.18 billion, up $10 million from year-end 2011. Portfolio loans grew $39.5 million to $882.5 million at December 31, 2012, an increase of 4.7% from 2011. Total deposits at December 31, 2012 were $999.6 million compared with $991.1 million at 2011 year end.
Net interest income on a fully tax-equivalent basis (FTE) for 2012 was $39.9 million compared to $39.8 million for 2011. The net interest margin was 3.49% for 2012 compared to 3.67% for 2011.
Noninterest income for 2012 was $11.7 million for 2012, compared to $11.4 million for 2011.
Noninterest expense was $34.9 million in 2012, up 2% from $34.1 million in 2011. Legal expenses related to the Treasury's sale of TARP preferred shares to private investors and costs associated with the completion of our conversion to a new operating system were one-time expenses during 2012.
3
The company continues to aggressively manage credit quality. During 2012, nonperforming assets declined by nearly $7 million, or 19.3%, to $29.2 million. At year-end 2012, nonperforming assets comprised 2.48 % of total assets, compared to nonperforming assets of $36.2 million, comprising 3.09% of total assets, at year-end 2011.
Net charge-offs were $6.7 million for 2012, or 0.77 % of average loans, compared to $9.4 million in 2011, or 1.14% of average loans.
The allowance for loan losses was $17.6 million at December 31, 2012, or 2% of total loans, compared to
$17.1 million at December 31, 2011, or 2.02% of total loans. For the year 2012, the provision for loan losses was $7.2 million compared to the 2011 provision of $10.4 million.
All regulatory ratios continue to exceed the threshold for "well-capitalized." As of December 31, 2012
Tier 1 leverage ratio totaled 8.79%, Tier 1 risk-based capital ratio totaled 11.21% and Total risk-based capital ratio totaled 12.47%. Tangible leverage improved by 24 basis points to 5.97%.
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 StatementsThis 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;
4
• 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, the terms of the CPP, pursuant to which the Company issued securities to the
U.S. Treasury;
• 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.
ls
CONSOLIDATED BALANCESHEEIS
ASSEIS
At December 31, 2012 At December 31, 2011
{unaudite
(Dollars in thousands except share amounts)
Cash and due fromBanks $ 24,139 $ 34,323
Federal fimds sold and interest bearing deposits in banks 6,520 6,324
Cash and cash equivalents 30,659 40,647
Securities Available for sale, at fair value 203,763226,012
Total securities 203,763 226,012
Restricted stock 5,741 5,741
Loans held for sale 7,634 3,448
Loans:
Portfolio loans 882,548 843,088
Allowance forloan losses {17,63Z) U 7,o63) Netloans 864,911 826,025
Bank premises and equipment, net 8,721 8,968
Other real estate owned 1,366 1,687
Bank owned life insurance 18,611 17,868
Ck>odwill, net 21,582 21,582
Intangible assets, net 594 731
Accrued interest receivable 3,726 3,550
Other ass ets 10,946 12,163
Total Assets $ 1,178,254 $ 1,168,422
Deposits
LIABILITIES AND SHARHIOLDERS' EQUITY
Demand and other noninterest-bearing $ 139,895 $ 126,713
Savings, money market and interest-bearing demand 377,287 359,977
Certificates of deposit 482,411 504,390
Total deposits 999,593 991,080
Short-term borrowings 1,115 227
Federal Home Loan Bank advances 46,508 42,497
Junior subordinated debentures 16,238 16,238
Accrued interest payable 882 1,118
Accrued ta s, expenses and other liabilities 3,774 3,988
Total Liabilities 1,068,110 1,055,148
Shareholders' Equity
Preferred stock, Series A Voting, no parvalue, authorized 150,000 shares at December 31, 2012 and December 31, 2011.
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value,
18,880 shares authorized and issued at December 31, 2012 and 25,223 shares at
December31, 2011. 18,880 25,223
Discount on Series B preferred stock (65) (101) Warrant to purchase comrnon stock 146
CDmrnon stock, par value $1 per share, authorized 15,000,000 shares,
issued shares 8,272,548 at December 31, 2012 and 8,210,443 at December 31, 2011. 8,273 8,210
Additional paid-in capital 39,141 39,607
Retained eamings 48,767 44,080
Accurnulated other comprehensive income 1,240 2,201
Treasury shares at cost, 328,194 shares at December 31, 2012 and at December 31, 2011
Total Shareholders' EÀpity
Total Liabilities andShareholders' Equity
Consolidated StJJtements oflncome (unaudited)
Three Months l!ìlded Twelve Months l!ìlded
December 31, December 31,
2012 2011 2012 2011
(Dollars in thousands excep t share andper share amounts) (Dollars in thousands except share and per share amounts)
Inter est Income
Loan s 9,556 $ 10,402 39,794 $ 42,133
Securitie s :
U.S. Go vemment agencies and cotporation s 991 1,253 4,677 5,847
State an d politica! subdivis ions 290 265 1,157 1,035
Other debt an d equity securities 75 67 285 277
Federalfunds sold and short-tenn in vestrnents 8 19 35 57
Total interest incarne 10,920 12,006 45,948 49,349
Inter est Expens e
Deposits 1,336 1,836 5,944 8,367
Federa!Horne Lo an Bank adv ances 224 263 865 1,053
Short-tenn borrowings 2
Junior s ubordinated debenture 171 175 699 686
Total interest eJVen s e 1,732 2,274 7,509 10,108
Net Inter est Income 9,188 9,732 38,439 39,241
Proision for Loan Losses 1,800 2,808 7,242 10,353
Net interes t incarne afterprovision for lo an lo ss e s 7,388 6,924 31,197 28,888
Noninter est lncome
Inve stment an d trust services 373 359 1,563 1,610
Depos i! service charges 953 1,064 3,811 4,079
Othersetvice charges andfees 768 752 3,082 3,246
Incarne frorn bank oiM!ed life ins urance 241 198 742 722
Other incarne 263 144 877 330
Total fees an d other incarne 2,598 2,517 10,075 9,987
Securitie s gains, net 143 325 189 832
Gain s an sale ofloan s 659 291 1,575 889
Lo ss on sale ofotherass et s,net 24) (135) 92) (293)
Total noninterest incarne 3,376 2,998 11,747 11,415
Noninter est Expens e
Salaries an d ernployee benefits 4,535 3,795 16,768 15,944
Fumiture an d equipment 1,038 789 4,060 3,088
Net occupancy 543 541 2,207 2,310
Profe ss ional fees 561 473 2,034 1,854
Marl
Supplies, postage an d freight 308 281 1,091 1,107
Telecommunications 195 180 731 727
Oh io Franchise tax 305 399 1,232 1,298
FDIC ass essrnent s 172 380 1,304 1,749
Otherreal estate olMIed 156 80 57 0 1,021
Electronic banking eJVen s es 40 231 722 899
Lo an an d collection expen se 99 278 1,150 1,364
Other eJqJens e 405 436 1 803 l 781
Total noninterest el
Incarne before incarne t ax eJVens e 2,130 1,818 8,041 6,159
Incarne tax expense 491 329 1,934 1,156
Netlncome 1,639 $ 1,489 6,107 $ 5,003
Dividends an d accretion on preferred stock 310 320 1,266 1,276
Net Income Awi.lable to Common Sharehol ders 1,329 $ 1,169 4,841 $ 3,727
Netlncome Per Conunon Share
Basic 0.17 $ 0.15 0.61 $ 0.47
Diluted 0.17 0.15 0.61 0.47
Div idends declared 0.01 0.01 0.04 0.04
Average Common Shares Outstanding
Basic 7,944,354 7,880,249 7,939,433 7,880,249
Diluted 7,949,118 7,880,249 7,943,888 7,880,249
17Supplem:ntal Financiallnformation
(Unaudited- Dollar.; in thousands except Share and Per Share Data)
Three Months Fnded Twelve Months Fnded Decenil er 31, Septenil er 30, June 30, March31, December31, Deceniler31, Decenil er 31,
END OF PERIODBALANCES 2012 2012 2012 2012 2011 2012 2011 Cash and Cash Equivalents 30,659 28,527 56,619 44,112 40,647 30,659 40,647
Securities 203,763 235,334 228,788 231,851 226,012 203,763 226,012
Restricted stock 5,741 5,741 5,741 5,741 5,741 5,741 5,741
Loans held for s aie 7,634 3,380 1,207 4,462 3,448 7,634 3,448
Portfolio loans 882,548 885,715 867,459 862,220 843,088 882,548 843,088
Allowance fo rloan losses 17,63717,58717,30017,11517,06317,63717,063
Netloans 864,911 868,128 850,159 845,105 826,025 864,911 826,025
Other ass ets 65,546 65,519 65,431 67,823 66,549 65,546 66,549
Total as sets 1,178,254 1,206,629 1,207,945 1,199,094 1,168,422 1,178,254 1,168,422
Total deposits 999,593 1,021,709 1,023,553 1,016,166 991,080 999,593 991,080
Other borrowings 63,861 64,720 64,560 64,628 58,962 63,861 58,962
Other liabilities 4,656 4,123 4,2% 4,240 5,106 4,656 5,106
Totalliabilities 1,068,110 1,090,552 1,092,409 1,085,034 1,055,148 1,068,110 1,055,148
Total shareholders' equity 110,144 116,077 115,537 114,061 113,274 110,144 113,274
Totalliabilities and s hareholders'equity 1,178,254 1,206,629 1,207,945 1,199,094 1,168,422 1,178,254 1,168,422
AVERAGE BALANOAssets:
Total assets 1,198,845 1,202,425 1,206,297 1,176,454 1,168,340 1,1%,005 1,167,661
Eaming as sets* 1,124,703 1,128,665 1,122,918 1,093,618 1,082,438 1,117,489 1,085,412
Securities 224,876 233,153 226,476 222,832 224,778 226,827 229,920
Portfolio loans 883,228 876,817 866,909 856,364 833,811 869,455 823,962 liabilities and shareholders' equity:
Total deposits 1,013,808 1,016,029 1,022,428 993,839 991,105 1,011,511 991,523 lnterest bearing deposits 870,551 872,309 885,922 869,107 866,037 874,434 869,737 lnteres t b earing liabilities 935,239 939,268 950,647 933,033 925,530 939,520 929,461
Total shareholders' equity 116,573 115,666 115,281 114,156 112,925 115,423 111,809
INCOME STATEMENTTotallnterest lncom: 10,920 11,290 11,845 11,677 12,006 45,948 49,349
Totallnterest Eìqlense 1,732 1,843 1,912 2,022 2,274 7,509 10,108
Net interest incom: 9,188 9,447 9,933 9,655 9,732 38,439 39,241
Itovision for loan los ses 1,800 1,875 1,667 1,900 2,808 7,242 10,353
Other incom: 2,598 2,592 2,384 2,581 2,517 10,075 9,987
Net gain on sale ofassets 778 441 159 294 481 1,672 1,428
Noninterest expense 8,634 8,542 9,047 8,544 8,104 34,903 34,144
Income before incom: taxes 2,130 2,063 1,762 2,086 1,818 8,041 6,159
Incom: tax e1pense 491 538 324 581 329 1,934 1,156
Netincom: 1,639 1,525 1,438 1,505 1,489 6,107 5,003
Iteferred stock dividend and accretion 3103193183193201,2661,276
Net income available to common s hareholders 1,329 1,206 1,120 1,186 1,169 4,841 3,727
Comnon cash dividend declared and paid 79 79 79 79 79 317 316
Net interest incom:-FTE (l) 9,339 9,592 10,093 9,806 9,877 39,050 39,833
Ite-provision core earnings 3,930 3,938 3,429 3,986 4,626 15,283 16,512
Three Months Fnded
Twelve Months Fnde d
DecenDer 31,
September 30,
June 30,
March31,
December31,
DecenDer31,
DecenDer 31,
PERSHAREDATA
Bas ic net incom: per comnon share
Diluted net incolllO per conmon share
Cash dividends perconmon share
2012
0.17
0.17
0.01
2012
0.15
0.15
0.01
2012
0.14
0.14
0.01
2012
0.15
0.15
0.01
2011
0.15
0.15
0.01
2012
0.61
0.61
0.04
2011
0.47
0.47
0.04
Book value per corranon shares outstanding
Tangible book value per connnon s hares outstanding** Period-end connnon s hare marketvalue
Market as a o/o ofbook
Basic average coiiimn shares outstanding Diluted average comrmn shares outstanding Connnon s hares outs tanding
KEYRATIOS
Retum o n averag e ass et s (2)
Retum on average conmon equity (2)
Efficiency ratio
Noninterest expens e t o average a ss ets (2)
Averag e e quity to averag e ass ets Net interes t margin (FTE) (l) Connnon s tock dividend p ayout ratio Connnon s tock market c apitalizlltion
ASSET QUALITY Allowanct for Loan Los s es
Allowance forloanlosse s , beginning ofperiod
Provis ion for loan lo s se s
Charge-offi
Recoveries
11.50
8.70
5.90
51.32%
7,944,354
7,949,537
7,944,354
0.54%
5.59%
67.91%
2.87o/o
9.72%
3.30%
5.98%
46,872
17,587
1,800
2,201
451
11.45
8.65
6.09
53.20%
7,944,354
7,949,118
7,944,354
0.50%
5.25%
67.66%
2.83%
9.62%
3.38%
6.59%
48,381
17,300
1,875
1,681
93
11.38
8.58
6.58
57.82%
7,944,354
7,950,539
7,944,354
0.48%
5.02%
71.60%
3.02%
9.56%
3.61%
7.10%
52,274
17,115
1,667
1,621
139
11.19
8.39
6.94
61.99%
7,924,562
7,925,368
7,944,354
0.51%
5.30%
67.38%
2.92%
9.70%
3.61%
6.68%
55,134
17,063
1,900
2,076
228
11.18
8.35
4.70
42.04%
7,882,249
7,882,249
7,882,249
0.51%
5.23%
62.94%
2.75%
9.67%
3.62%
6.74%
37,047
17,845
2,808
3,747
157
11.50
8.70
5.90
51.32%
7,939,433
7,943,888
7,944,354
0.51%
5.29%
68.71%
2.92%
9.65%
3.49%
6.56%
46,872
17,063
7,242
7,579
911
11.18
8.35
4.70
42.04%
7,880,249
7,880,249
7,882,249
0.43%
4.47o/o
66.63%
2.92%
9.58%
3.67o/o
8.46%
37,047
16,136
10,353
10,109
683
Net charge-offs
1,750 1,588 1,482 1,848
3,590
6,668 9,426
Allowance forloanlo ss e s, end ofperiod 17,637 17,587 17,300 17,115
17,063
17,637
17,063
CAPIIAL & UQUIDIIY
Period-end tangible coiiiilOn equity to as s ets **
A verag e equity to ass et s
A verage equity to loans
A verage loans to deposits
Tier lleverage ratio (3)
Tier l ris k-bas ed capitai ratio (3)
Totalrisk-based capitai ratio (3)
Nonperf
5.97o/o
9.72%
13.20%
87.12%
8.79%
11.21%
12.47o/o
27,796
1,366
5.79%
9.62%
13.19%
86.30%
9.17o/o
11.71%
12.97o/o
32,584
1,653
5.73%
9.56%
13.30%
84.79%
8.78%
11.46%
13.97o/o
34,993
1,506
5.65%
9.70%
13.33%
86.17%
8.87%
11.37%
13.94%
36,870
1,845
5.73%
9.67%
13.54%
84.13%
8.80%
11.39%
14.01%
34,471
1,687
5.97o/o
9.65%
13.28o/o
85.96o/o
8.79%
11.21%
12.47o/o
27,796
1,366
5.73%
9.58%
13.57o/o
83.10%
8.80%
11.39%
14.01%
34,471
1,687
To tal nonperforming as s ets
29,162 34,237 36,499 38,715 36,158 29,162
36,158
Ratios
Total nonperforming loans to totalloans Total nonperforming a ss ets to total a ss ets Net charge-offs to average loans (2)
Provision forloanlosses to average loans (2)
Allowance forio an loss es to portfolio loans
Allowanc e to nonp erforming lo an s
Allowanc e to nonp erforming ass ets
(1) FT E -- fully t ax ecpivalent at 34% t ax :rate
(2) Annualtzed
(3) 1 2-31-12 :raho is estim ated
* E a:r ning Ass et s mclus Loans Held fo rS'aie
3.15%
2.48%
0.79%
0.81%
2.00%
63.45%
60.48%
3.68%
2.84%
0.72%
0.85%
1.99%
53.97o/o
51.37o/o
4.03%
3.02%
0.69%
0.77o/o
1.99%
49.44%
47.40%
4.28%
3.23%
0.87%
0.89%
1.98%
46.42%
44.21%
4.09%
3.09%
1.71%
1.34%
2.02%
49.50%
47.19%
3.15%
2.48%
0.77o/o
0.83%
2.00%
63.45%
60.48o/o
4.09%
3.09%
1.14%
1.26%
2.02%
49.50%
47.19%
Reconciliation of Pre-Provision Core Earnings*
Three Months Eì11led
December 31,
Twelve Months Eì:tded
December 31,
2012 2011 2012 2011
Pre-p-ovision Core Earnings*
Provision for Lo an Losses
$ 3,930 $ 4,626
l 8002,808
$ 15,283 $ 16,512
7,242 10,353
Income before income tax e nse
$ 2,130 ;;.$ ,;;,;,1,8;;;,;1;,;;,8 $
8,041 ;;.$ 6,..,1;;;;5,;;,9
* Pre-provi>ion core earnings is a non-GAAP financial measure that the Company's management believes E useful in analyzing the Company's nnderlying performance trends, partcularly in periods of economie stress. Pre-provision core earnings is defined as income before income tax expense, adjusted to exclude the impact ofprovision for loan losses.
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