LNB Bancorp, Inc. (NASDAQ: LNBB) today reported net income for the three months ended March 31, 2010 of $1,331,000, or $.14 per diluted share, compared with $1,317,000, or $.14 per diluted share reported for the same period a year ago.

“We are pleased that our pre-provision core earnings* increased by 10 percent in the first quarter of 2010, compared with the first quarter a year ago, as we saw improvement once again in net interest income and net interest margin,” said Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc. “Such a strong core earnings performance provides a solid foundation for the future.

“We continue to take significant reserves to provide for additional losses in our credit portfolio amid this difficult economic environment,” said Klimas.

Key Performance Measures

Net interest income on a fully taxable equivalent basis for the first quarter of 2010 was $9,904,000, a 9.8 percent increase compared with $9,019,000 for the first quarter a year ago. The increase in net interest income was driven largely by the effect of lower market interest rates on the funding side while average earning assets decreased 1.02 percent on a year over year basis. As a result, the first quarter 2010 net interest margin improved 36 basis points to 3.69 percent, up from 3.33 percent one year ago.

The provision for loan losses totaled $2,109,000 for the quarter ended March 31, 2010 compared to $1,809,000 for the same period one year ago and $3,657,000 in the fourth quarter of 2009.

Noninterest income was $2,651,000 for the first quarter of 2010, compared to $2,857,000 for the first quarter of 2009. Trust fees, electronic banking fees and other fees increased year over year. Gains on the sale of loans were down $62,000, or 24.41 percent compared to the first quarter of last year. Gains on the sale of securities were down nearly $299,000 in the first quarter of 2010, compared to the first quarter of 2009.

Noninterest expense was $8,693,000 for the first quarter of 2010, compared with $8,360,000 for the first quarter of 2009, an increase of $333,000 or 3.98 percent. The increase attributable to the premium assessment from the Federal Deposit Insurance Corporation accounted for $215,000 of the increase. The efficiency ratio, which is the measure of cost to generate revenue, improved from 70.39 percent in 2009 to 69.24 percent in 2010.

During the first quarter, overall loan demand was weak as total loans ended the quarter at $792,585,000 compared to $803,197,000 at December 31, 2009 and $802,267,000 at March 31, 2009. Total assets for the first quarter ended at $1,158,763,000 compared to $1,188,335,000 at the end of the first quarter of 2009. Total deposits grew modestly to $979,053,000 at the end of the first quarter of 2010, up from $978,120,000 in the first quarter of 2009. The growth in deposits came in the form of core deposits, which had the effect of improving the Company’s liquidity while reducing its costs.

Given the current economic conditions the Company continues to work through asset quality challenges. At March 31, 2010 the Company’s non-performing assets totaled $44,374,000 or 3.83 percent of total assets compared to $40,101,000 or 3.49 percent at December 31, 2009 and $22,769,000 or 1.92 percent at March 31, 2009. As a result of the increase, the allowance for possible loan losses increased from $11,575,000 at March 31, 2009 to $18,792,000 at December 31, 2009 and $19,183,000 at March 31, 2010. The allowance to total loans at March 31, 2010 equaled 2.42 percent compared to 2.34 percent and 1.44 percent at December 31, 2009 and March 31, 2009, respectively.

Net charge-offs to average loans for the quarter ending March 31, 2010 was 0.87 percent compared to 0.95 percent one year ago. In addition to the effect of the overall economy and the level of unemployment, a significant factor impacting asset quality has been the lower market valuation of the underlying collateral, primarily in construction and development and commercial real estate loans and the need to provide additional allowances due to these lower valuations.

* 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 20 retail-banking locations and 27 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. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Actual results and events may differ materially from those expressed or anticipated as a result of risks and uncertainties which include fluctuations in interest rates, inflation, government regulations, and economic conditions and competition in the geographic and business areas in which LNB Bancorp, Inc. conducts its operations, as well as the risks and uncertainties described from time to time in LNB Bancorp’s reports as filed with the Securities and Exchange Commission. Except to the extent required by law, 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 March 31, 2010 At December 31, 2009
(unaudited)
(Dollars in thousands except share amounts)
ASSETS
Cash and due from Banks $ 18,717 $ 16,318
Federal funds sold and short-term investments 35,650   10,615  
Cash and cash equivalents 54,367 26,933
Interest-bearing deposits in other banks 360 359
Securities:
Trading securities, at fair value - 8,445
Available for sale, at fair value 248,112 247,037
Federal Home Loan Bank and Federal Reserve Stock 4,985 4,985
Total Securities 253,097 260,467
Loans held for sale 3,691 3,783
Loans:
Portfolio loans 792,585 803,197
Allowance for loan losses (19,183 ) (18,792 )
Net loans 773,402   784,405  
Bank premises and equipment, net 9,782 10,105
Other real estate owned 1,467 1,264
Bank owned life insurance 16,607 16,435
Goodwill, net 21,582 21,582
Intangible assets, net 971 1,005
Accrued interest receivable 3,882 4,072
Other assets 19,555   19,099  
Total Assets $ 1,158,763   $ 1,149,509  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing $ 111,896 $ 118,505
Savings, money market and interest-bearing demand 304,711 305,045
Certificates of deposit 562,445   547,883  
Total deposits 979,052   971,433  
Short-term borrowings 1,589 1,457
Federal Home Loan Bank advances 42,504 42,505
Junior subordinated debentures 20,620 20,620
Accrued interest payable 1,951 2,074
Accrued taxes, expenses and other liabilities 7,666   7,279  
Total Liabilities 1,053,382   1,045,368  
Shareholders' Equity

Preferred Shares, Series A Voting, no par value, authorized 750,000 shares, none issued at March 31, 2010 and December 31, 2009.
- -
Preferred stock, Series B, no par value, 25,233 shares authorized and issued at March 31, 2010 and December 31, 2009. 25,223 25,223
Discount on Series B preferred stock (127 ) (131 )
Warrant to purchase common stock 146 146

Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 7,691,355 at March 31, 2010 and 7,623,857 at December 31, 2009.
7,691 7,624
Additional paid-in capital 37,808 37,862
Retained earnings 37,821 36,883
Accumulated other comprehensive income 2,911 2,626

Treasury shares at cost, 328,194 shares at March 31, 2010 and at December 31, 2009
(6,092 ) (6,092 )
Total Shareholders' Equity 105,381   104,141  
Total Liabilities and Shareholders' Equity $ 1,158,763   $ 1,149,509  

Consolidated Statements of Income (unaudited)
 
Three Months Ended

March 31,
2010   2009

(Dollars in thousands exceptshare and per share amounts)
Interest Income
Loans $ 10,792 $ 11,611
Securities:
U.S. Government agencies and corporations 2,136 2,475
State and political subdivisions 246 233
Trading securities 49 127
Other debt and equity securities 61 63
Federal funds sold and short-term investments 9   14
Total interest income 13,293 14,523
 
Interest Expense
Deposits 2,980 4,902
Federal Home Loan Bank advances 318 432
Short-term borrowings 1 36
Junior subordinated debenture 215   255
Total interest expense 3,514   5,625
Net Interest Income 9,779 8,898
Provision for Loan Losses 2,109   1,809
Net interest income after provision for loan losses 7,670 7,089
 
Noninterest Income
Investment and trust services 445 350
Deposit service charges 939 1,026
Other service charges and fees 794 637
Income from bank owned life insurance 171 162
Other income 93   83
Total fees and other income 2,442 2,258
Securities gains, net 38 337
Gains on sale of loans 192 254
Gains (loss) on sale of other assets, net (21 ) 8
Total noninterest income 2,651 2,857
 
Noninterest Expense
Salaries and employee benefits 3,918 3,718
Furniture and equipment 933 1,142
Net occupancy 615 644
Outside services 553 555
Marketing and public relations 246 244
Supplies, postage and freight 342 334
Telecommunications 212 203
Ohio Franchise tax 281 232
FDIC assessments 528 313
Other real estate owned 81 71
Electronic banking expenses 184 189
Loan and collection expense 323 210
Other expense 477   505
Total noninterest expense 8,693   8,360
Income before income tax expense 1,628 1,586
Income tax expense 297   269
Net Income $ 1,331   $ 1,317
Dividends and accretion on preferred stock 319   299
Net Income Available to Common Shareholders $ 1,012   $ 1,018
 
Net Income Per Common Share
Basic $ 0.14 $ 0.14
Diluted 0.14 0.14
Dividends declared 0.01 0.09
Average Common Shares Outstanding
Basic 7,322,662 7,295,663
Diluted 7,322,662 7,295,663

LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
 
Three Months Ended
March 31, March 31, December 31,
2010 2009 2009
END OF PERIOD BALANCES
Assets $ 1,158,763 $ 1,188,335 $ 1,149,509
Deposits 979,053 978,120 971,433
Portfolio loans 792,585 802,267 803,197
Allowance for loan losses 19,183 11,575 18,792
Shareholders' equity 105,381 108,108 104,141
 
AVERAGE BALANCES
Assets:
Total assets $ 1,160,455 $ 1,169,895 $ 1,156,506
Earning assets 1,088,093 1,099,313 1,097,052
Securities 288,997 291,624 263,855
Total loans 799,096 807,689 814,522
Liabilities and shareholders' equity:
Total deposits $ 979,643 $ 949,825 $ 974,780
Interest bearing deposits 868,392 859,370 861,795
Interest bearing liabilities 934,908 961,018 926,948
Total shareholders' equity 105,026 107,705 105,334
 
INCOME STATEMENT
Net interest income $ 9,779 $ 8,898 $ 10,112
Net interest income-FTE (1) 9,904 9,019 10,240
Provision for loan losses 2,109 1,809 3,657
Noninterest income 2,651 2,857 2,731
Noninterest expense 8,693 8,360 8,753
Taxes 297   269   (109 )
Net income 1,331   1,317   542  
Less Preferred stock dividend and amortization 319   299   319  
Net income available to common shareholders 1,012   1,018   223  
 
PER SHARE DATA
Basic net income per common share $ 0.14 $ 0.14 $ 0.03
Diluted net income per common share 0.14 0.14 0.03
Cash dividends per common share 0.01 0.09 0.01
Basic average common shares outstanding 7,322,662 7,295,663 7,295,663
Diluted average common shares outstanding 7,322,662 7,295,663 7,295,797
 
KEY RATIOS
Return on average assets (2) 0.47 % 0.46 % 0.19 %
Return on average common equity (2) 5.14 % 4.96 % 2.04 %
Efficiency ratio 69.24 % 70.39 % 67.48 %
Noninterest expense to average assets (2) 3.04 % 2.90 % 3.00 %
Average equity to average assets 9.05 % 9.21 % 9.11 %
Net interest margin 3.64 % 3.28 % 3.66 %
Net interest margin (FTE) (1) 3.69 % 3.33 % 3.70 %
 
ASSET QUALITY
Nonperforming loans $ 42,907 $ 21,301 $ 38,837
Other real estate owned 1,467 1,468 1,264
Total nonperforming assets 44,374 22,769 40,101
Net Charge Offs 1,718 1,886 7,421
Total nonperforming loans to total loans 5.41 % 2.66 % 4.84 %
Total nonperforming assets to total assets 3.83 % 1.92 % 3.49 %
Net charge-offs to average loans (2) 0.87 % 0.95 % 3.61 %
Allowance for loan losses 2.42 % 1.44 % 2.34 %
Allowance to nonperforming loans 44.71 % 54.34 % 48.39 %
 
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized

Reconciliation of Pre-Provision Core Earnings*
 
Three Months Ended

March 31,
 
2010 2009
 
Pre-provision Core Earnings* $ 3,737 $ 3,395
Provision for Loan Losses 2,109 1,809
Income before income tax expense $ 1,628 $ 1,586
 
 
* 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.

Copyright Business Wire 2010

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