-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, KPOGh0hjM6+HEioxYcm2x8j2We43iNwNA0HGKisDwIz/ODfdnhRXRi2C5/FolHqn G9hOzNOv3S8Ir4qOvQIunA== 0001157523-06-007476.txt : 20060727 0001157523-06-007476.hdr.sgml : 20060727 20060727135303 ACCESSION NUMBER: 0001157523-06-007476 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20060727 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060727 DATE AS OF CHANGE: 20060727 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LNB BANCORP INC CENTRAL INDEX KEY: 0000737210 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341406303 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-13203 FILM NUMBER: 06983957 BUSINESS ADDRESS: STREET 1: 457 BROADWAY CITY: LORAIN STATE: OH ZIP: 44052-1769 BUSINESS PHONE: 800-860-1007 8-K 1 a5197453.txt LNB BANCORP, INC. 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): July 27, 2006 LNB BANCORP, INC. (Exact name of registrant as specified in its charter) Ohio 0-13203 34-1406303 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 457 Broadway, Lorain, Ohio 44052-1769 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (440) 244 - 6000 (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) - -------------------------------------------------------------------------------- ================================================================================ Item 2.02 Results of Operations and Financial Condition. On July 27, 2006, the registrant issued a press release announcing its results of operations for the second quarter ended June 30, 2006. The press release is attached as Exhibit No. 99.1 - -------------------------------------------------------------------------------- Item 9.01 Financial Statements and Exhibits. c) Exhibits. The following exhibit is furnished herewith: Exhibit Number Exhibit Description 99.1 Press Release issued by LNB Bancorp, Inc., announcing the results of operations for the second quarter ended June 30, 2006. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned. LNB BANCORP, INC. Date: July 27, 2006 By: /s/ Terry M. White --------------------------- Terry M. White Executive Vice President, Chief Financial Officer and Corporate Secretary EX-99.1 2 a5197453ex991.txt LNB BANCORP, INC. EXHIBIT 99.1 Exhibit 99.1 LNB Bancorp, Inc. Reports Second Quarter Results LORAIN, Ohio--(BUSINESS WIRE)--July 27, 2006--LNB Bancorp, Inc. (NASDAQ:LNBB): -- Earnings of 25 cents per diluted share in second quarter of 2006 versus 13 cents a year ago -- Performance reflects solid investments to grow revenue -- Margin shows signs of stabilizing; asset quality stable LNB Bancorp, Inc. (NASDAQ:LNBB) today reported net income of $1,639,000, or $.25 per diluted share, for the second quarter of 2006, compared to $852,000, or $.13 per diluted share, for the same quarter a year ago. For the first six months of 2006, LNB Bancorp earned $3,087,000, or $.48 per diluted share, versus $2,423,000, or $.36 per diluted share, in the same period of 2005. The difference in earnings from period to period is due in part to the impact of substantial expenses incurred in the second quarter of 2005 in connection with severance costs, technology upgrades and a goodwill impairment charge. Management Perspective "Our second quarter 2006 performance reflects the benefit of important changes and investments made over the past year," said Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc. "We posted solid earnings amid margin pressure and stiff competition in our markets. "While loan growth was still a bit sluggish, there were two important developments during the quarter that give us reason for optimism," said Klimas. "One was the opening of a business development office in Independence, Ohio to serve small to mid-size businesses in Cuyahoga County and the other was the successful recruitment and hiring of a team of professionals to provide investment products and services to our customers." As part of that second move, LNB signed an agreement with Investment Centers of America to provide brokerage services to its customers. "Additionally, we are also looking forward to the opening of two new branches later this year in high growth markets in Lorain County," said Klimas, who said management's focus for the remainder of 2006 will be directed to capitalizing on those investments, growing the balance sheet and effectively managing expenses. Second Quarter Performance Net Interest Income LNB Bancorp's net interest income for the second quarter of 2006 was $7,196,000, compared to $7,557,000 for the same period last year. This decline was due to higher funding costs and slow asset growth during the second quarter of 2006. On a linked quarter basis, second quarter net interest income was down a modest $7,000 from the first quarter of 2006. Net interest income for the first half of 2006 was $14,399,000, compared to $14,889,000 for the same period a year ago. Net Interest Margin The net interest margin for the second quarter of 2006 was 3.82 percent, compared to 4.16 percent for the second quarter of 2005. The net interest margin stabilized somewhat in the second quarter. The second quarter 2006 margin only declined 7 basis points from the first quarter of 2006, while the decline from the fourth quarter of 2005 to first quarter of 2006 was 17 basis points. The net interest margin for the first six months of 2006 was 3.86 percent versus 4.13 percent for the first half of 2005. "The positive impact of a rising rate environment on our commercial and home equity loan portfolios was offset by lower noninterest bearing demand deposits and a shift of interest-bearing deposits from low-cost savings and interest-bearing demand deposits to higher-cost money market and retail time deposits. The flat yield curve and continuing competitive pricing pressures also contributed to the decline in net interest margin," said Klimas. Portfolio Loans Portfolio loans at June 30, 2006 were $598.5 million, up 3.4 percent annualized from December 31, 2005 and up 3.5 percent over a year earlier. With the exception of 1-4 family mortgages, the Corporation experienced year-over-year growth in all loan categories. Deposits Deposits at June 30, 2006 were $678.0 million, compared to $640.2 million at year-end 2005 and $638.8 million a year ago. The increase in deposits in the first six months of 2006 as compared to year-end 2005 and the same period last year, reflect positive trends in money market accounts and retail time deposits, supplemented by growth in public time deposits and brokered time deposits. For the first half of 2006, new demand deposit accounts were up more than 25 percent from the first half of 2005. "This is very positive in terms of growing our relationships with customers in our markets," said Klimas. Asset Quality Asset quality indicators continue to be stable. The net charge-off trend continues to be positive, with second quarter 2006 net charge-offs of $165,000, or .11 percent of average loans annualized, compared to $151,000, or .11 percent average loans annualized for second quarter 2005. On a year-to-date basis, 2006 net-charge-offs were $369,000, or .13 percent of average loans annualized, compared to $391,000, or .14 percent of average loans annualized in the first six months of 2005. Nonperforming loan trends continue to improve. Nonperforming loans at June 30, 2006 were $6,279,000, representing 1.05 percent of total loans, compared to $7,233,000, or 1.25 percent of total loans at June 30, 2005. Potential problem loans, which are classified loans excluding nonperforming loans, were $13.9 million at June 30, 2006, compared to $14.4 million at December 31, 2005. The provision for loan losses for the second quarter and first six months of 2006 was $165,000 and $315,000, respectively, compared to $399,000 and $798,000 for the same periods in 2005. At June 30, 2006, the allowance for loan losses was $6.6 million. The allowance for loan losses to total loans was 1.10 percent and provided 105 percent coverage of nonperforming loans at June 30, 2006, compared to $7.8 million, or 1.35 percent and 108 percent, respectively, at June 30, 2005, and $6.6 million, or 1.13 percent and 102 percent, respectively at December 31, 2005. Noninterest Income Noninterest income was $2,377,000 for the second quarter 2006, compared to $2,639,000 for the same period in 2005. The difference is due in part to the fact that the second quarter of 2005 included revenue from the Corporation's mortgage subsidiary which was closed at year-end 2005. Revenue from the mortgage subsidiary totaled $355,000 in the second quarter of 2005. The two biggest components of noninterest income are deposit service charges and trust and investment management services. Deposit service charges continued to improve throughout the second quarter and were $1,142,000 for the period as compared to $1,052,000 in the same period last year, and $968,000 in the first quarter of 2006. Trust and investment management services were $546,000 for the second quarter 2006 as compared to $555,000 for the same period in 2005, and $509,000 for the first quarter of 2006. Noninterest Expense Noninterest expense was $7,191,000 in the second quarter 2006, compared to $8,472,000 for the second quarter of last year, a decline of 15.1 percent. During the second quarter of 2005, $1,218,000 of noninterest expense was recorded in the salary and benefit and other noninterest expense categories that was specifically attributable to changes in management, job eliminations and strategic repositioning. On a linked quarter basis, noninterest expense in the second quarter of 2006 was down .2 percent from the first quarter of 2006. Salary and benefit expenses were $3,638,000 in the second quarter of 2006, down $622,000 as compared to the same period in 2005. Included in the second quarter of 2005 was $642,000 of severance expense. While most expense categories were about the same or slightly below a year ago, marketing and direct mail postage expenses were up, reflecting the company's aggressive campaign to open and expand account relationships across its markets. Return on Assets and Equity For the second quarter of 2006, return on average assets was .81 percent, compared to .44 percent for the second quarter of 2005. Return on average equity for the second quarter of 2006 was 9.71 percent, compared to 4.83 percent for the second quarter of 2005. On a year-to-date basis, return on average assets was .77 percent in 2006 as compared to .62 percent in 2005. Return on average equity for the first six months of 2006 was 9.09 percent, compared to 6.91 percent in 2005. About LNB Bancorp, Inc. LNB Bancorp, Inc. is an $823.6 million financial 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. Lorain National Bank serves customers through 20 retail-banking locations and 24 ATMs in Lorain, eastern Erie and western Cuyahoga 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 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. 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 June 30, December 31, 2006 2005 -------------------------- (unaudited) (Dollars in thousands except share amounts) ASSETS Cash and due from Banks $ 22,857 $ 23,923 Federal funds sold and short-term investments - - Securities: Available for sale, at fair value 160,951 151,629 Federal Home Loan Bank and Federal Reserve Stock 3,162 3,645 ----------- ----------- Total securities 164,113 155,274 ----------- ----------- Loans: Loans held for sale 2,425 2,586 Portfolio loans 598,511 588,425 Allowance for loan losses (6,568) (6,622) ----------- ----------- Net loans 594,368 584,389 ----------- ----------- Bank premises and equipment, net 12,054 10,833 Other real estate owned 1,572 432 Bank owned life insurance 14,302 13,935 Goodwill and intangible assets, net 3,237 3,321 Accrued interest receivable 3,542 3,053 Other assets 7,578 5,961 ----------- ----------- Total Assets $ 823,623 $ 801,121 =========== =========== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Demand and other noninterest-bearing $ 85,890 $ 87,597 Savings, money market and interest-bearing demand 281,696 265,831 Certificates of deposit 310,430 286,788 ----------- ----------- Total deposits 678,016 640,216 ----------- ----------- Short-term borrowings 22,542 32,616 Federal Home Loan Bank advances 50,091 53,896 Accrued interest payable 2,729 2,126 Accrued taxes, expenses and other liabilities 3,387 3,861 ----------- ----------- Total Liabilities 756,765 732,715 =========== =========== Shareholders' Equity Common stock, par value $1 per share, authorized 15,000,000 shares, issued 6,771,867 shares at June 30, 2006 and December 31, 2005 6,772 6,772 Additional paid-in capital 26,358 26,334 Retained earnings 43,708 42,945 Accumulated other comprehensive loss (4,067) (2,996) Treasury shares at cost, 318,194 shares at June 30, 2006 and 250,694 shares at December 31, 2005 (5,913) (4,649) ----------- ----------- Total Shareholders' Equity 66,858 68,406 ----------- ----------- Total Liabilities and Shareholders' Equity $ 823,623 $ 801,121 =========== =========== Consolidated Statements of Income (unaudited) Three Months Ended Six Months Ended June June 30, 30, -------------------------------------------- 2006 2005 2006 2005 ---------- ---------- ---------- ---------- (Dollars in thousands except share and per share amounts) Interest Income Loans $ 10,448 $ 9,302 $ 20,526 $ 18,135 Securities: U.S. Government agencies and corporations 1,422 1,052 2,761 2,071 State and political subdivisions 103 112 206 226 Other debt and equity securities 49 52 101 102 Federal funds sold and short-term investments 27 37 63 73 ---------- ---------- ---------- ---------- Total interest income 12,049 10,555 23,657 20,607 Interest Expense Deposits: Certificates of deposit, $100 and over 1,584 820 2,954 1,503 Other deposits 2,727 1,590 5,160 3,037 Federal Home Loan Bank advances 335 483 735 984 Short-term borrowings 207 105 409 194 ---------- ---------- ---------- ---------- Total interest expense 4,853 2,998 9,258 5,718 ---------- ---------- ---------- ---------- Net Interest Income 7,196 7,557 14,399 14,889 Provision for Loan Losses 165 399 315 798 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 7,031 7,158 14,084 14,091 Noninterest Income Investment and trust services 546 555 1,055 1,072 Deposit service charges 1,142 1,052 2,110 1,960 Other service charges and fees 489 480 940 941 Mortgage banking revenue - 355 - 725 Income from bank owned life insurance 142 116 287 309 Other income 58 93 104 254 ---------- ---------- ---------- ---------- Total fees and other income 2,377 2,651 4,496 5,261 Securities gains, net - (6) - 174 Gains on sale of loans - - - 132 Gains on sale of other assets, net - (6) 2 (1) ---------- ---------- ---------- ---------- Total noninterest income 2,377 2,639 4,498 5,566 Noninterest Expense Salaries and employee benefits 3,638 4,260 7,216 8,238 Furniture and equipment 753 802 1,490 1,535 Net occupancy 451 449 929 966 Outside services 435 521 854 830 Marketing and public relations 367 298 758 605 Supplies, postage and freight 303 273 601 644 Telecommunications 171 417 370 729 Ohio Franchise tax 197 200 429 382 Electronic banking expenses 161 141 306 264 Other expense 715 1,111 1,447 1,950 ---------- ---------- ---------- ---------- Total noninterest expense 7,191 8,472 14,400 16,143 ---------- ---------- ---------- ---------- Income before income tax expense 2,217 1,325 4,182 3,514 Income tax expense 578 473 1,095 1,091 ---------- ---------- ---------- ---------- Net Income $ 1,639 $ 852 $ 3,087 $ 2,423 ========== ========== ========== ========== Net Income Per Common Share Basic $ 0.25 $ 0.13 $ 0.48 $ 0.36 Diluted 0.25 0.13 0.48 0.36 Dividends declared 0.18 0.18 0.36 0.36 Average Common Shares Outstanding Basic 6,475,651 6,642,390 6,477,154 6,641,789 Diluted 6,475,602 6,642,393 6,477,292 6,641,790 LNB Bancorp, Inc. Supplemental Financial Information (Unaudited - Dollars in thousands except Share and Per Share Data) Three Months Ended Six Months Ended ------------------------------------------------------ June 30, March 31, June 30, June 30, June 30, 2006 2006 2005 2006 2005 ------------------------------------------------------ END OF PERIOD BALANCES Assets $ 823,623 $ 810,093 $ 791,078 $ 823,623 $ 791,078 Deposits 678,016 674,056 638,817 678,016 638,817 Portfolio loans 598,511 588,226 578,331 598,511 578,331 Allowance for loan losses 6,568 6,568 7,793 6,568 7,793 Shareholders' equity 66,858 67,389 70,316 66,858 70,316 AVERAGE BALANCES Assets: Total assets $ 810,942 $ 804,553 $ 783,493 $ 807,763 $ 782,227 Earning assets 754,822 751,537 728,767 753,186 727,600 Securities 163,089 158,027 143,555 160,572 144,028 Portfolio loans 589,454 589,888 575,772 589,667 574,119 Liabilities and shareholders' equity: Total deposits $ 676,845 $ 661,204 $ 623,315 $ 669,066 $ 621,445 Interest bearing deposits 593,418 573,542 526,570 583,533 524,041 Interest bearing liabilities 653,529 642,058 610,318 647,823 608,436 Total shareholders' equity 67,706 69,339 70,683 68,518 70,695 INCOME STATEMENT Net interest income $ 7,196 $ 7,203 $ 7,557 $ 14,399 $ 14,889 Net interest income-FTE(1) 7,243 7,251 7,573 14,494 14,949 Provision for loan losses 165 150 399 315 798 Noninterest income 2,377 2,121 2,639 4,498 5,566 Noninterest expense 7,191 7,209 8,472 14,400 16,143 Taxes 578 517 473 1,095 1,091 - -------------- ---------- ---------- ---------- ---------- ---------- Net income 1,639 1,448 852 3,087 2,423 - -------------- ---------- ---------- ---------- ---------- ---------- Total revenue 9,573 9,324 10,196 18,897 20,455 PER SHARE DATA Basic net income per common share $ 0.25 $ 0.22 $ 0.13 $ 0.48 $ 0.36 Diluted net income per common share 0.25 0.22 0.13 0.48 0.36 Cash dividends per common share 0.18 0.18 0.18 0.36 0.36 Basic average common shares outstanding 6,475,651 6,504,981 6,642,390 6,477,154 6,641,789 Diluted average common shares outstanding 6,475,602 6,504,981 6,642,393 6,477,292 6,641,790 KEY RATIOS Return on average assets(2) 0.81% 0.73% 0.44% 0.77% 0.62% Return on average common equity(2) 9.71% 8.47% 4.83% 9.09% 6.91% Efficiency ratio 74.75% 76.92% 82.96% 75.82% 78.69% Noninterest expense to average assets(2) 3.56% 3.63% 4.34% 3.59% 4.16% Average equity to average assets 8.35% 8.62% 9.02% 8.48% 9.04% Net interest margin(2) 3.82% 3.89% 4.16% 3.86% 4.13% Net interest margin (FTE)(1)(2) 3.85% 3.91% 4.17% 3.88% 4.14% ASSET QUALITY Nonperforming loans $ 6,279 $ 6,481 $ 7,233 $ 6,279 $ 7,233 Other real estate owned 1,572 608 357 1,572 357 Total nonperforming assets 7,851 7,089 7,590 7,851 7,590 Net Charge Offs 165 204 151 369 391 Total nonperforming loans to total loans 1.05% 1.10% 1.25% 1.05% 1.25% Total nonperforming assets to total assets 0.95% 0.88% 0.96% 0.95% 0.96% Net charge- offs to average loans(2) 0.11% 0.14% 0.11% 0.13% 0.14% Allowance for loan losses 1.10% 1.12% 1.35% 1.10% 1.35% Allowance to nonperforming loans 104.60% 101.34% 107.74% 104.60% 107.74% (1) FTE -- fully tax equivalent at 34% tax rate (2) Annualized for the three and six month periods presented CONTACT: For LNB Bancorp, Inc. W. John Fuller, 216-978-7643 -----END PRIVACY-ENHANCED MESSAGE-----