-----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, PUlBMVagLHKzTJgd5t+HEa9uIuhJxj00PXNi4vzBTx7d0vEnSv0khdgPnSpbBGrd FBwitUz7QF+dobZVqSqvyA== 0001157523-07-000752.txt : 20070130 0001157523-07-000752.hdr.sgml : 20070130 20070130123301 ACCESSION NUMBER: 0001157523-07-000752 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20070130 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20070130 DATE AS OF CHANGE: 20070130 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: 07563680 BUSINESS ADDRESS: STREET 1: 457 BROADWAY CITY: LORAIN STATE: OH ZIP: 44052-1769 BUSINESS PHONE: 800-860-1007 8-K 1 a5321978.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 January 30, 2007 (Date of report/date of earliest even reported) ---------------- LNB Bancorp, Inc. (Exact name of registrant as specified in charter) ---------------- Ohio 0-13203 34-1406303 (State or other jurisdiction (Commission File Number) (I.R.S. Employer of incorporation) Identification No.) 457 Broadway Lorain, Ohio 44052-1769 (Address of principal executive offices) (440) 244-6000 (Registrant's telephone number) N/A (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): |X| 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 January 30, 2007, the registrant issued a press release announcing its results of operations for the fourth quarter and year-end 2006. The press release is attached as Exhibit No. 99.1 Item 9.01. Financial Statements and Exhibits. (c) Exhibits. Exhibit No. Description - ----------- ----------- 99.1 Press Release issued by LNB Bancorp, Inc., announcing the results of operations for the fourth quarter and year-end 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 hereunto duly authorized. Date: January 30, 2007 LNB BANCORP, INC. By /s/ Terry M. White ----------------------- Terry M. White Chief Financial Officer ================================================================================ EXHIBIT INDEX Exhibit No. Description - ----------- ----------- 99.1 Press Release issued by LNB Bancorp, Inc., announcing the results of operations for the fourth quarter and year-end 2006 EX-99.1 2 a5321978ex991.txt LNB BANCORP, INC. EXHIBIT 99.1 Exhibit 99.1 LNB Bancorp, Inc. Reports 2006 Fourth Quarter and Year End Results -- Record Loans, Assets, Deposits Levels Reached in 2006 -- Positive Developments in Expansion Strategy -- Focus Continues on Effective Asset Quality Management LORAIN, Ohio--(BUSINESS WIRE)--Jan. 30, 2007--LNB Bancorp, Inc. (NASDAQ:LNBB), today reported financial results for its fourth quarter and full year ended December 31, 2006. Net income for the fourth quarter of 2006 totaled $918,000 compared to $1,833,000 for the fourth quarter of 2005. Diluted net income per share for the fourth quarter of 2006 was $0.14 versus $0.28 for the same period in 2005. For the full year ended December 31, 2006, the Company reported net income of $5,424,000, compared with $6,413,000 in 2005. Diluted earnings per share in 2006 were $.84 as compared to $.97 in 2005. "We had many strong positives to the past year with record assets, loans and deposits and important strategic investments in Lorain County and surrounding markets," said Daniel E. Klimas, president and chief executive officer of LNB Bancorp. "It is disappointing that margin pressures and asset quality issues negatively impacted our overall performance. "Returning to a strong asset quality basis is of the utmost importance as we look at 2007 and we will aggressively pursue resolution to this important issue," said Klimas. "The local economic weakness that we reported in the third quarter report, continued into the fourth quarter. This weakness is most pronounced in our residential and commercial real estate development portfolio, and resulted in a sizable increase in our nonperforming loans and in potential problem loans, despite the fact that our net charge-offs in 2006 were the lowest since 2002. While we are confident in our ability to manage through this environment, it was prudent to add substantially to our allowance for loan losses in the third and fourth quarters." Looking at 2006, Klimas said, "We are particularly encouraged by the successful rollout of our expansion strategy which included strengthening our Lorain County presence as well as expanding into attractive markets in nearby counties. In 2006, we opened a new branch in North Ridgeville and early this month we opened another in southern Elyria. Both offices are located in high growth areas of the county. We also opened a business development office in Cuyahoga County which serves small and medium-sized businesses throughout the region." On January 16, 2007, LNB Bancorp announced that it had signed a definitive agreement with Morgan Bancorp, Inc. of Hudson, Ohio for a merger transaction in which LNB Bancorp is to acquire Morgan and its wholly-owned subsidiary, Morgan Bank, N.A. Completion of the merger is anticipated in the third quarter of 2007, pending certain regulatory and Morgan shareholder approvals. Morgan Bank, which has assets of about $129 million, operates from one branch location in Hudson, a strategically-located, affluent community. "Both LNB and Morgan share the same commitment to a strong community bank culture and complementary product strengths. We believe we can export many of the product and business capabilities we each have to help the merged company grow and prosper in the future. Further, this merger will greatly enhance those expansion initiatives, while providing top line growth and better leveraging of our expense base," said Klimas. The transaction is expected to be accretive to earnings in the first full year of operation. Fourth Quarter Review Net interest income was $6,888,000 in the fourth quarter of 2006, compared with $7,671,000 in the same period a year before. This decrease was primarily due to margin pressures. The net interest margin in the fourth quarter of 2006 was 3.63 percent, compared with 4.06 percent in the fourth quarter of 2005. Noninterest income was $2,800,000 for the three months ended December 31, 2006, a 27 percent increase compared with $2,203,000 in the same period in 2005. Investment and trust services and deposit service charges were improved totaling $542,000 and $1,199,000, respectively, in the quarter as compared to $313,000 and $1,107,000 in the fourth quarter of 2005. Improved income on investment in life insurance also contributed to this result. In the fourth quarter of 2006 the Company also recognized a gain on the sale of its Westlake loan production office, which totaled $231,000. The Westlake operation has been relocated to a leased facility in nearby Avon, Ohio. The Company continues to show steady progress in managing expenses. For the fourth quarter of 2006, noninterest expense was $7,306,000 compared to $7,360,000 in the same period of 2005. Third party services, marketing and telecommunications all were substantially lower. These improvements were somewhat offset by increased salaries, equipment and occupancy related to the expansion into Cuyahoga County and the new Lorain County offices. Also impacting the fourth quarter was increased costs to manage the higher level of other real estate. Net charge-offs for the fourth-quarter of 2006 were $369,000 compared to $1,418,000 in the same period of 2005. Included in the fourth quarter 2005 results were charge-offs of $1,173,000 associated with the sale of four loan relationships. The provision for loan losses was $1,365,000 in the fourth quarter of 2006 as compared to $600,000 in the third quarter of 2006 and compared with $150,000 for the same period of 2005. The increase in the provision for loan losses in the third and fourth quarters of 2006 reflect the trends in the problem loan and potential problem loan portfolios to a greater extent than the current trends in actual charge-offs. Full year 2006 Review Net interest income decreased 4.7 percent in 2006 as compared with the same period a year ago. The net interest margin for 2006 was 3.74 percent--down 32 basis points from 4.06 percent in 2005. The flat yield curve, combined with a shift in deposit mix from non-interest bearing and savings accounts to money market accounts and time deposits contributed greatly to this decline. The competition for loans and deposits in the market also adversely impacted interest income and the net interest margin. Partially offsetting these factors was 3.3 percent growth in average earning assets. Noninterest income was $9,751,000 for the 12 months ended December 31, 2006, compared with $10,377,000 for 2005. Included in the 2005 results was $959,000 in mortgage revenue from LNB Mortgage, LLC which was closed at year-end 2005. In 2006 investment and trust services and deposit service charges were up 7.2 percent and 7.4 percent, respectively, over the 2005. Also contributing were ATM and merchant fees and income from investment in life insurance which were up 4.6 percent and 23.2 percent, respectively, over the prior year. Noninterest expense was $28,985,000 in 2006 as compared to $30,267,000 in 2005, a decrease of $1,282,000, or 4.4 percent. Most expenses declined in 2006 as compared to 2005. The exceptions were modest increases in net occupancy, Ohio franchise tax, other real estate expense and marketing and public relations. Nonperforming loans increased to $12.8 million at December 31, 2006, compared with $6.5 million at December 31, 2005, and from $7.0 million at September 30, 2006. The nonperforming loans have either been charged down to conservative collateral levels or have specific loan loss allocations established. In addition to this activity the level of potential problem loans increased to $22.1 million from $14.4 million at December 31, 2005 and is now at approximately the same level as December 31, 2004. Net charge-offs for full-year 2006 were $1,602,000, compared to $2,012,000 in 2005. In 2006, net charge-offs were .27 percent of average loans, compared with 0.34 percent in 2005. As a result of the nonperforming loan and potential problem loan trends, the provision for loan losses totaled $2,280,000 in 2006 versus $1,248,000 in 2005. The Company's allowance for loan losses at December 31, 2006, was $7,300,000 as compared with $6,622,000 on December 31, 2005. The ratio of the allowance for loan losses to nonperforming loans was 57 percent on December 31, 2006, a decrease from 102 percent at the end of last year. Total loans at year-end were $628.3 million as compared to $588.4 million at year-end 2005. This was a 6.8 percent increase and reflects growth in commercial, mortgage and consumer lending. Total average assets increased to $819.6 million in 2006 compared with $793.3 million in 2005. Total average loans were $601.1 million in 2006 versus $584.8 million in 2005. Average total deposits for 2006 were $679.8 million versus $635.8 million in 2005. Average shareholders' equity for 2006 was $68.7 million versus $70.4 million in 2005. "We will focus on a commitment to effectively manage asset quality in this difficult economic environment and take prudent steps to proactively reserve for these issues. At the same time we will continue to pursue our strategy of growing our businesses and markets and positioning the company for solid performance in the future," Klimas said. About LNB Bancorp, Inc. LNB Bancorp, Inc. is an $851.1 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 22 retail-banking locations and 26 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. Additional Information About the Merger and Where to Find It LNB and Morgan will be filing relevant documents concerning the transaction with the Securities and Exchange Commission, including a registration statement on Form S-4 which will include a proxy statement/prospectus. Shareholders will be able to obtain a free copy of the proxy statement/prospectus, as well as other filings containing information about LNB and Morgan, at the Securities and Exchange Commission's internet site (http://www.sec.gov). Copies of the proxy statement/prospectus and the filings with the Securities and Exchange Commission that will be incorporated by reference in the proxy statement/prospectus can also be obtained, without charge, by directing a request to LNB Bancorp, Inc., 457 Broadway, Lorain, Ohio 44052, Attention: Investor Relations, (440) 244-7185, or Morgan Bancorp, Inc., 178 West Streetsboro Street, Hudson, Ohio 44236. The final proxy statement/prospectus will be mailed to shareholders of Morgan. Shareholders are urged to read the proxy statement/prospectus, and other relevant documents filed with the Securities and Exchange Commission regarding the proposed transaction when they become available, because they will contain important information. The directors and executive officers of LNB and Morgan and other persons may be deemed to be participants in the solicitation of proxies in respect of the proposed merger. Information regarding LNB's directors and executive officers is available in its proxy statement filed with the SEC on March 17, 2006. Information regarding Morgan's directors and executive officers and other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available. CONSOLIDATED BALANCE SHEETS At December 31, ----------------------------- 2006 2005 --------------- ------------- (Dollars in thousands except share amounts) ASSETS Cash and due from Banks $29,122 $23,923 Federal funds sold and short-term investments - - Securities: Available for sale, at fair value 155,810 151,629 Federal Home Loan Bank and Federal Reserve Stock 3,248 3,645 --------------- ------------- Total securities 159,058 155,274 --------------- ------------- Loans: Loans held for sale - 2,586 Portfolio loans 628,333 588,425 Allowance for loan losses (7,300) (6,622) --------------- ------------- Net loans 621,033 584,389 --------------- ------------- Bank premises and equipment, net 12,599 10,833 Other real estate owned 1,289 432 Bank owned life insurance 14,755 13,935 Goodwill and intangible assets, net 3,157 3,321 Accrued interest receivable 3,939 3,053 Other assets 6,146 5,961 --------------- ------------- Total Assets $851,098 $801,121 =============== ============= LIABILITIES Deposits Demand and other noninterest-bearing $91,216 $87,597 Savings, money market and interest- bearing demand 278,401 265,831 Certificates of deposit 347,644 286,788 --------------- ------------- Total deposits 717,261 640,216 --------------- ------------- Short-term borrowings 22,163 32,616 Federal Home Loan Bank advances 35,086 53,896 Accrued interest payable 3,698 2,126 Accrued taxes, expenses and other liabilities 4,193 3,861 --------------- ------------- Total Liabilities 782,401 732,715 =============== ============= Shareholders' Equity Common stock, par value $1 per share, authorized 15,000,000 shares, issued 6,771,867 shares at December 31, 2006 and 2005 6,772 6,772 Additional paid-in capital 26,382 26,334 Retained earnings 43,728 42,945 Accumulated other comprehensive loss (2,093) (2,996) Treasury shares at cost, 328,194 shares at December 31, 2006 and 250,694 shares at December 31, 2005 (6,092) (4,649) --------------- ------------- Total Shareholders' Equity 68,697 68,406 --------------- ------------- Total Liabilities and Shareholders' Equity $851,098 $801,121 =============== ============= CONSOLIDATED STATEMENTS OF INCOME Year Ended December 31, -------------------------------- 2006 2005 2004 ---------- ---------- ---------- (Dollars in thousands except share and per share amounts) Interest Income Loans $42,800 $38,145 $32,560 Securities: U.S. Government agencies and corporations 5,699 4,487 3,784 State and political subdivisions 464 439 459 Other debt and equity securities 202 224 301 Federal funds sold and short-term investments 77 137 120 ---------- ---------- ---------- Total interest income 49,242 43,432 37,224 Interest Expense Deposits: Certificates of deposit, $100 and over 6,884 3,937 1,448 Other deposits 11,261 6,976 5,366 Federal Home Loan Bank advances 1,585 1,862 2,066 Short-term borrowings 905 627 222 ---------- ---------- ---------- Total interest expense 20,635 13,402 9,102 ---------- ---------- ---------- Net Interest Income 28,607 30,030 28,122 Provision for Loan Losses 2,280 1,248 1,748 ---------- ---------- ---------- Net interest income after provision for loan losses 26,327 28,782 26,374 Noninterest Income Investment and trust services 2,079 1,940 2,091 Deposit service charges 4,533 4,219 4,187 Other service charges and fees 1,948 1,895 2,794 Mortgage banking revenue - 959 364 Income from bank owned life insurance 739 600 632 Other income 216 479 592 ---------- ---------- ---------- Total fees and other income 9,515 10,092 10,660 Securities gains (losses), net (1) 173 (777) Gains on sale of loans 5 132 181 Gains (loss) on sale of other assets, net 232 (20) 378 ---------- ---------- ---------- Total noninterest income 9,751 10,377 10,442 Noninterest Expense Salaries and employee benefits 14,894 15,057 12,995 Furniture and equipment 2,984 3,001 2,784 Net occupancy 1,905 1,830 1,633 Outside services 1,609 1,925 1,182 Marketing and public relations 1,279 1,249 1,047 Supplies, postage and freight 1,236 1,245 1,208 Telecommunications 751 1,167 713 Ohio Franchise tax 817 772 729 Electronic banking expenses 618 542 1,257 Other expense 2,892 3,479 2,742 ---------- ---------- ---------- Total noninterest expense 28,985 30,267 26,290 ---------- ---------- ---------- Income before income tax expense 7,093 8,892 10,526 Income tax expense 1,669 2,479 3,051 ---------- ---------- ---------- Net Income $5,424 $6,413 $7,475 ========== ========== ========== Net Income Per Common Share Basic $0.84 $0.97 $1.13 Diluted 0.84 0.97 1.13 Dividends declared 0.72 0.72 0.72 Average Common Shares Outstanding Basic 6,461,892 6,612,803 6,631,392 Diluted 6,462,094 6,612,852 6,632,324 LNB Bancorp, Inc. Supplemental Financial Information (Unaudited - Dollars in thousands except Share and Per Share Data) Three Months Ended Twelve Months Ended -------------------------------------------------- 31-Dec 30-Sep 31-Dec 31-Dec 31-Dec 2006 2006 2005 2006 2005 -------------------------------------------------- END OF PERIOD BALANCES Assets $851,098 $831,544 $801,121 $851,098 $801,121 Deposits 717,261 688,488 640,216 717,261 640,216 Portfolio loans 628,333 607,036 588,425 628,333 588,425 Allowance for loan losses 7,300 6,304 6,622 7,300 6,622 Shareholders' equity 68,697 68,571 68,406 68,697 68,406 AVERAGE BALANCES Assets: Total assets $801,295 $825,815 $801,045 $819,635 $793,287 Earning assets 752,410 767,769 750,215 763,899 739,520 Securities 157,429 164,583 159,073 162,780 154,758 Portfolio loans 594,980 603,186 591,141 601,119 584,762 Liabilities and shareholders' equity: Total deposits $673,993 $681,781 $643,592 $679,818 $635,785 Interest bearing deposits 586,507 599,254 557,508 596,041 543,055 Interest bearing liabilities 637,482 668,589 639,113 660,748 624,230 Total shareholders' equity 70,001 68,308 69,545 68,735 70,427 INCOME STATEMENT Net interest income $6,888 $7,320 $7,671 $28,607 $30,030 Net interest income-FTE (1) 6,977 7,405 7,720 28,876 30,231 Provision for loan losses 1,365 600 150 2,280 1,248 Noninterest income 2,800 2,453 2,203 9,751 10,377 Noninterest expense 7,306 7,279 7,360 28,985 30,267 Taxes 99 475 531 1,669 2,479 - ---------------------------------------------------------------------- Net income 918 1,419 1,833 5,424 6,413 - ---------------------------------------------------------------------- Total revenue 9,688 9,773 9,874 38,358 40,407 PER SHARE DATA Basic net income per common share $0.14 $0.22 $0.28 $0.84 $0.97 Diluted net income per common share 0.14 0.22 0.28 0.84 0.97 Cash dividends per common share 0.18 0.18 0.18 0.72 0.72 Basic average common shares outstanding 6,443,673 6,450,086 6,544,706 6,461,892 6,612,803 Diluted average common shares outstanding 6,443,684 6,450,235 6,544,819 6,462,094 6,612,852 KEY RATIOS Return on average assets (2) 0.45% 0.68% 0.91% 0.66% 0.81% Return on average common equity (2) 5.20% 8.24% 10.46% 7.89% 9.11% Efficiency ratio 74.73% 73.84% 74.17% 75.04% 74.53% Noninterest expense to average assets (2) 3.62% 3.50% 3.65% 3.54% 3.82% Average equity to average assets 8.74% 8.27% 8.68% 8.39% 8.88% Net interest margin 3.63% 3.78% 4.06% 3.74% 4.06% Net interest margin (FTE) (1) 3.68% 3.83% 4.08% 3.78% 4.09% ASSET QUALITY Nonperforming loans $12,812 $7,023 $6,494 $12,812 $6,494 Other real estate owned 1,289 1,702 432 1,289 432 Total nonperforming assets 14,101 8,725 6,926 14,101 6,926 Net Charge Offs 369 863 1,418 1,602 2,012 Total nonperforming loans to total loans 2.04% 1.16% 1.10% 2.04% 1.10% Total nonperforming assets to total assets 1.66% 1.05% 0.86% 1.66% 0.86% Net charge-offs to average loans (2) 0.25% 0.57% 0.95% 0.27% 0.34% Allowance for loan losses to total loans 1.16% 1.04% 1.13% 1.16% 1.13% Allowance for loan losses to nonperforming loans 56.98% 89.76% 101.97% 56.98% 101.97% (1) FTE -- fully tax equivalent at 34% tax rate (2) Annualized CONTACT: For LNB Bancorp, Inc. W. John Fuller, 216-978-7643 -----END PRIVACY-ENHANCED MESSAGE-----