LNB Bancorp Inc. Reports Operating Results (10-Q)

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Nov 04, 2010
LNB Bancorp Inc. (LNBB, Financial) filed Quarterly Report for the period ended 2010-09-30.

Lnb Bancorp Inc. has a market cap of $35.5 million; its shares were traded at around $4.72 with and P/S ratio of 0.5. The dividend yield of Lnb Bancorp Inc. stocks is 0.8%.LNBB is in the portfolios of Arnold Schneider of Schneider Capital Management.

Highlight of Business Operations:

Net income was $2,730 for the third quarter of 2010. Net income available to common shareholders was $2,410 and earnings per diluted common share for the third quarter of 2010 were $0.32. This compares to a net loss of $4,695 or $0.64 per diluted common share for the third quarter of 2009.

Third quarter 2010 net interest income totaled $9,372, compared to $9,578 for the third quarter of 2009. Net interest income on a fully taxable equivalent (FTE) basis for the third quarter of 2010 was $9,498, a 2.22% decrease compared with $9,714 for the third quarter of 2009. Although net interest income decreased $216 compared to the prior period due to a decline in average earning assets of 7.54%, this was offset by the effect of lower market interest rates on the funding side which resulted in an increase in the net interest margin (FTE) for the third quarter 2010 of 19 basis points to 3.49%, up from 3.30% one year ago.

Noninterest income was $5,044 for the third quarter of 2010, compared to $3,124 for the third quarter of 2009. During the third quarter of 2010, the Corporation exchanged $4,250 principal amount of its non-pooled trust preferred securities for approximately 462,000 newly issued shares of the Corporations common stock. The gain recorded as a result of this exchange was $2,210 and is included in noninterest income as gain on extinguishment of debt. Trust fees decreased $93 compared to the prior period as a result of the elimination of the Corporations brokerage division. Electronic banking fees and other fees slightly decreased year over year. Gains on the sale of loans were down $77, or 22.58%, compared to the third quarter of last year. Gains on the sale of securities were down $88 for the third quarter of 2010 compared to the third quarter of 2009.

During the third quarter of 2010, overall loan demand was weak as total portfolio loans ended the quarter at $795,909 compared to $803,197 at December 31, 2009. Total assets for the third quarter ended at $1,156,602 compared to $1,149,509 at the end of 2009. Total deposits grew to $979,031 at the end of the third quarter of 2010, up from $971,433 at December 31, 2009. The growth in deposits came in the form of core deposits improving liquidity while reducing costs.

Average earning assets for the third quarter of 2010 were $1,081,034. This was a decrease of $88,195 or 7.54% compared to the same quarter last year. Over the past year the Corporation has reduced its balance sheet by eliminating unprofitable sweep products and large public fund money market accounts. As a result, the net interest margin increased compared to the third quarter of 2009. Primarily due to the extended period of lower market interest rates, the yield on average earning assets was 4.62% in the third quarter of 2010 compared to 4.97% for the same period last year. The yield on average loans during the third quarter of 2010 was 5.32%, which was 28 basis points lower than the yield on average loans during the third quarter of 2009 at 5.60%. Interest income from securities was $1,748 (FTE) for the three months ended September 30, 2010, compared to $3,018 during the third quarter of 2009. The yield on average securities was 2.86% and 4.21% for these periods, respectively.

Net interest income (FTE) for the third quarter 2010 and 2009 was $9,498 and $9,714, respectively. Interest income (FTE) for the third quarter of 2010 decreased $2,070 in comparison to the same period in 2009. This decrease is attributable to a $1,553 decrease due to rate and a decrease of $517 due to volume. Interest income on securities of U.S. Government agencies and corporations decreased $1,247, mainly as a result of the reinvestment of funds in shorter-term U.S. Government agencies and seasoned mortgage-backed securities which have less extension risk given the current interest rate environment as well amortization recorded on U.S. government agency securities that were purchased at a high premium and subsequently called due to the low interest rate environment. Interest income on commercial loans decreased $423, primarily due to lower market interest rates. The $212 decrease in interest income on real estate mortgage loans was primarily attributable to the refinancing in the existing seasoned mortgage portfolio given the low interest rate environment and the Corporations practice of selling new mortgage production into the secondary market. The $1,376 and $250 decreases in consumer time deposits and public time deposits, respectively, were due primarily to lower market interest rates. Total interest expense decreased $1,854, with the decrease being attributable to a $1,542 decrease due to rate and a decrease due to volume of $312. Overall, the total decline in net interest income (FTE) of $216 was mainly attributable to a decrease in volume of $205, with only an $11 reduction due to rate which is the difference between interest income and interest expense.

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