Lorain National Bank reportedly up for sale; Huntington, First National …

CLEVELAND, Ohio — Lorain National Bank, this region’s 13th-largest bank, is reportedly up for sale.

Dan Klimas became president and CEO of Lorain National Bank in 2005. 
The bank, which ran in to major financial problems in 2007 but has largely recovered, is working with investment bank Sandler O’Neill, according to Bloomberg, which cited anonymous sources.

Lorain National requested first-round bids and might sell within a month, according to the report.

Bank officials declined to comment, spokesman Pete Catanese said Thursday.

The sale of the 109-year-old bank, however, would make sense. While its profits are up 28 percent this year overall and up 34 percent per share, it’s getting tougher and tougher for smaller banks today.

Banks are feeling squeezed by rising regulatory and technology costs and low interest rate margins, but aren’t seeing much loan growth.

“A lot of banks are looking to sell now,” said banking analyst Fred Cummings, president of Elizabeth Park Capital Management in Pepper Pike.

Lorain National has 20 branches in Lorain, Eric, Cuyahoga and Summit counties. It has $1.2 billion in assets and currently has a market value of about $150 million.

It​ was the last bank in Northeast Ohio to pay back its so-called bailout money through the government’s Troubled Asset Relief Program. Two years ago, ​four years after the bank borrowed the money, ​the government auctioned off LNB’s ​$25 million ​debt to private investors, and, LNB bought back warrants the government owned, which were essentially options to buy shares of LNB’s stock. That lifted LNB out from under government ownership.

Cummings said several local banks might be interested in buying Lorain National and speculated that First National Bank of Pennsylvania, which bought ParkView of Solon last year, as well as Huntington, FirstMerit and Westfield all could be weighing the purchase.

A bank such as First National could use Lorain National to double its presence and immediately have a strong west side presence, he said. A bank such as Huntington, which already has some branches in the area, could use the purchase to gain deposits and branches, while it could cut costs by closing some branches.

Cummings said that the costs of new regulations imposed the last few years will make it challenging for many banks under $2 billion in assets to survive. Of the roughly 40 banks operating in Greater Cleveland, fewer than a dozen exceed $2 billion in assets.

Lorain National is said to be under pressure to sell from activist investor PL Capital LLC. The existence of an activist investor “changes the dynamics here.”

Umberto Fedeli, a major shareholder in Lorain National who is also president and chief executive of Independence insurance broker The Fedeli Group, said, “If it’s the right acquirer, it could be good for shareholders.”

The bank was founded in 1905 as Lorain Banking Co. It merged with the National Bank of Lorain to form Lorain National Bank in 1961. Lorain National acquired Morgan Bank of Hudson in 2007.

Shares of Lorain National have more than tripled in the last three years and are up more than 50 percent this year. Shares closed at $15.72 Thursday.

Besides last year’s big First National-ParkView Federal Savings deal, other bank mergers the last couple of years have included:

  • Westfield of Westfield Center bought two-branch Valley Savings of Cuyahoga Falls this year and bought Western Reserve Bank, with branches in Medina and Brecksville, in 2012.

  • Michigan-based Talmer bought First Place Bank of Warren, which had 11 branches in Greater Cleveland.

  • People’s Bank of Marietta bought Ohio Commerce Bank of Beachwood.

  • FirstMerit Corp. of Akron nearly doubled its size by buying Citizens Republic Bancorp, which has branches in three states, including 14 Greater Cleveland.

Analysts had predicted a wave of mergers and acquisitions starting a few years ago, but it’s been a little slower to materialize than expected, primarily because of evolving regulations and the tepid economic recovery.

That may be changing now. “I think bank consolidation is a trend that’s going to continue,” Fedeli said.