EX-99.1 2 a5006316ex991.txt EXHIBIT 99.1 Exhibit 99.1 LNB Bancorp Reports Improved Third Quarter Performance LORAIN, Ohio--(BUSINESS WIRE)--Oct. 26, 2005--LNB Bancorp, Inc. (NASDAQ:LNBB): -- Earnings for quarter up 4 percent from a year ago; a 22 percent increase when excluding gains on the sale of assets in 2004 -- Record levels of assets, loans and deposits -- Meaningful improvement in expense levels Buoyed by record-setting levels of loans and deposits, LNB Bancorp, Inc. (NASDAQ:LNBB) reported improved earnings in third quarter 2005 versus a year ago and each of the first two quarters of 2005. LNB Bancorp earned 33 cents per diluted share in the third quarter of 2005, compared to 31 cents per diluted share earned in the third quarter of 2004. Net income for the third quarter was $2,157,000, up 4 percent from the $2,074,000 earned in the same quarter a year ago. "A better indication of our improved performance can be found by looking at the company's earnings excluding the gains on the sales of assets in the third quarter of 2004," said Daniel E. Klimas, president and chief executive officer of LNB Bancorp. Third quarter 2005 earnings are up 22 percent as compared to the year ago quarter when gains on the sale of assets of $443,000 in the third quarter of 2004 are excluded. "We are tremendously encouraged by our third quarter results, which vividly portray the important steps we took in the first half of the year to improve our long-term performance," said Klimas. "We are particularly heartened to see a continuation of solid revenue growth and expense levels more appropriately in line with our revenue stream," said Klimas. "Our focus is to build upon this momentum for the remainder of the year and beyond. This quarter is another important step toward realizing our vision of being a high growth, efficiently managed independent community bank. "The focus of management and our associates has been on continuing our positive revenue gains and we are highly pleased to see that, while our margins were under pressure in the third quarter, they have remained solid and we experienced record levels of loans and deposits in the third quarter," said Klimas. At the end of the third quarter of 2005, portfolio loans closed at $594.5 million and deposits closed at $655.7 million, both record levels for LNB Bancorp. For the first nine months of 2005, LNB Bancorp earned $4,580,000, or 69 cents per diluted share, compared to $6,310,000, or 95 cents per share, for the same period of 2004. The 2005 performance reflected a number of significant expenses in the second quarter that were designed to the lay the groundwork for improved financial performance in the future. Net interest income For the third quarter of 2005, net interest income was $7,470,000, an increase of 6.2 percent over the same quarter last year. For the first nine months of 2005, net interest income was $22.4 million, an increase of 7.9 percent over the same period in 2004. Net interest margin The net interest margin in the third quarter of 2005 was 3.97 percent, up 2 basis points over the third quarter of 2004. For the first nine months of 2005, the net interest margin was 4.09 percent, compared to 3.96 percent for the same period in 2004. While the net interest margin has remained strong compared to the company's peers, when compared to the company's second quarter margin of 4.17 percent, third quarter performance does reflect the ongoing competitive pressures in the market for both loans and deposits, as well as the flat yield curve. Noninterest Income Total noninterest income was $2,608,000 for the quarter, as compared to $3,111,000 for the same period in 2004, however fee income gains were impressive. For the third quarter of 2005, deposit service charges, trust and investment management services and ATM and debit card fees all improved over the same quarter last year. Of particular note is the increase in deposit service charges, which were up 9.5 percent over the second quarter of 2005 and 1.9 percent over the third quarter in 2004. "Solid gains in new accounts for the quarter were largely instrumental in this strong fee income performance," said Klimas. Included in 2004 is $443,000 of gains on the sales of assets including securities and a bank office building. Noninterest Expense Noninterest expense was $6,764,000 for the third quarter as compared to $6,760,000 for the same period in 2004. The increase was primarily the result of increases in salaries and benefits and outside services, which were up 5.9 percent and 28.8 percent, respectively. Salaries and benefits levels reflect normal increases and higher health care costs, while outside services levels reflect the cost of the company's decision to outsource its internal audit function. Assets Total assets ended the third quarter of 2005 at a new record level of $812.4 million, up $41.6 million or 5.4 percent over September 30, 2004, and $30.8 million or 3.9 percent over December 31, 2004. This growth was primarily in portfolio loans, which ended the quarter at $594.5 million. This new record loan level was a $22.3 million increase over December 31, 2004. On a year-over-year basis, commercial loans rose 12.4 percent, home equity loans gained 8.0 percent, and purchased installment loans were up 63.3 percent. Real estate and other consumer loans were down on a year-over-year basis, but other consumer loans began to grow in the last two months of the quarter. Deposits Total deposits were a record $655.7 million at the end of the third quarter of 2005, an increase of $53.3 million, or 8.9 percent, compared to the third quarter of 2004, and $50.2 million, or 8.3 percent over year end 2004. "We continue to experience solid growth in noninterest and interest bearing checking accounts and in retail time deposits. These deposit sources are being supplemented by deposits from local public entities, as well as deposits gathered through brokers," said Klimas. Asset Quality Overall, asset quality for the company has improved. The provision for loan losses was $300,000 in the third quarter 2005, as compared to $399,000 in the same period 2004. For the nine months ended September 30, 2005, the provision for loan losses was $1,098,000, as compared to $1,349,000 for the same period last year. This decrease is partially due to lower net charge-offs. For the three months ended September 30, 2005, net charge-offs were $203,000 as compared to $1,037,000 for the same quarter in 2004. For the first nine months of 2005, net charge-offs were $594,000 as compared to $1,728,000 for the same period in 2004. Non-performing loans were $7.5 million at the end of the quarter as compared to $7.2 million at June 30, 2005, and $4.9 million at December 31, 2004. At September 30, 2005, the allowance of loan losses was $7,890,000 as compared to $7,793,000 at June 30, 2005 and $7,386,000 at December 31, 2004. "The Board of Directors is encouraged by the performance of the company in this latest quarter, including reaching record levels of assets and deposits," said James R. Herrick, chairman of the Board of Directors of LNB Bancorp. "The difficult, but necessary steps taken by management earlier this year are taking hold and we share their enthusiasm for the future." About LNB Bancorp, Inc. LNB Bancorp, Inc. is an $812.4 million financial holding company with two wholly owned subsidiaries: The Lorain National Bank and Charleston Insurance Agency, Inc. and a 49-percent owned subsidiary, Charleston Title Agency, LLC. LNB Mortgage LLC and North Coast Community Development Corporation are wholly owned subsidiaries of The Lorain National Bank. Brokerage services are provided by the bank through an agreement with Online Brokerage Services. 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 comments, 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 (Dollars in thousands except share and per September 30, December 31, share amounts) 2005 2004 ---------------------------------------------------------------------- Assets (unaudited) Cash and cash equivalents: Cash and due from banks $27,442 $23,123 Short-term investments - 3,695 ---------------------------------------------------------------------- Total cash and cash equivalents 27,442 26,818 ---------------------------------------------------------------------- Investment Securities: Available for sale, at fair value 152,435 145,588 Federal Home Loan Bank and Federal Reserve stock 4,187 4,033 ---------------------------------------------------------------------- Total securities 156,622 149,621 ---------------------------------------------------------------------- Loans: Loans held for sale 3,656 3,067 Portfolio loans 594,493 572,157 Allowance for loan losses (7,890) (7,386) ---------------------------------------------------------------------- Net loans 590,259 567,838 ---------------------------------------------------------------------- Bank premises and equipment, net 10,996 11,493 Other real estate owned 399 420 Intangible assets 3,361 3,801 Other assets 23,358 21,658 ---------------------------------------------------------------------- Total Assets $812,437 $781,649 ---------------------------------------------------------------------- Liabilities Deposits: Noninterest-bearing $96,537 $96,280 Interest bearing 559,203 509,263 ---------------------------------------------------------------------- Total deposits 655,740 605,543 ---------------------------------------------------------------------- Short-term borrowings 20,277 31,619 Federal Home Loan Bank advances 61,099 69,296 Accrued interest, taxes and other liabilities 5,843 4,617 ---------------------------------------------------------------------- Total Liabilities 742,959 711,075 ---------------------------------------------------------------------- Shareholders' Equity Common stock, par value $1 per share, authorized 15,000,000 shares, issued 6,771,867 at September 30, 2005 and 6,766,867 at December 31, 2004 6,772 6,767 Additional paid-in capital 26,334 26,243 Retained earnings 42,295 41,291 Accumulated other comprehensive loss (2,269) (1,297) Treasury stock at cost, 195,694 shares at September 30, 2005 and 125,686 shares at December 31, 2004 (3,654) (2,430) ---------------------------------------------------------------------- Total Shareholders' Equity 69,478 70,574 ---------------------------------------------------------------------- Total Liabilities and Shareholders' Equity $812,437 $781,649 ---------------------------------------------------------------------- Consolidated Statements of Income ---------------------------------------------------------------------- (Dollars in thousands For the Three Months For the Nine Months except share and per Ended September 30, Ended September 30, share amounts) 2005 2004 2005 2004 ---------------------------------------------------------------------- Interest Income (unaudited) (unaudited) Interest and fees on loans $9,712 $8,196 $27,847 $23,848 Interest and dividends on investment securities: Taxable 1,239 1,022 3,413 3,053 Tax Exempt 107 102 333 375 Interest on cash equivalents 37 23 109 56 ---------------------------------------------------------------------- Total interest income 11,095 9,343 31,702 27,332 Interest Expense Deposits 3,021 1,712 7,561 4,933 Short-term borrowings 201 62 395 154 Federal Home Loan Bank advances 403 536 1,387 1,515 ---------------------------------------------------------------------- Total interest expense 3,625 2,310 9,343 6,602 ---------------------------------------------------------------------- Net Interest Income 7,470 7,033 22,359 20,730 Provision for Loan Losses 300 399 1,098 1,349 ---------------------------------------------------------------------- Net interest income after provision for loan losses 7,170 6,634 21,261 19,381 Noninterest Income Deposit service charges 1,152 1,131 3,112 3,146 Trust and investment management services 555 539 1,627 1,611 Mortgage banking revenue 242 108 967 108 Income from investment in life insurance 117 157 426 477 Securities gains, net - 158 174 381 Gains on sales of loans - 17 132 100 Gains (losses) on sales of other assets, net (31) 285 (32) 285 Other noninterest income 573 716 1,768 2,494 ---------------------------------------------------------------------- Total noninterest income 2,608 3,111 8,174 8,602 Noninterest Expense Salaries and employee benefits 3,414 3,223 11,653 9,168 Net occupancy 402 407 1,368 1,190 Furniture and equipment 746 717 2,281 2,046 Electronic banking expenses 136 350 400 1,075 Supplies, postage, and delivery 290 421 934 930 Outside services 394 306 1,224 840 Marketing and public relations 258 264 863 757 Ohio franchise tax 179 181 561 549 Goodwill impairment - - 311 - Other noninterest expense 945 891 3,312 2,443 ---------------------------------------------------------------------- Total noninterest expense 6,764 6,760 22,907 18,998 ---------------------------------------------------------------------- Income before income tax expense 3,014 2,985 6,528 8,985 Income tax expense 857 911 1,948 2,675 ---------------------------------------------------------------------- Net Income $2,157 $2,074 $4,580 $6,310 ---------------------------------------------------------------------- Net Income Per Common Share Basic $0.33 $0.31 $0.69 $0.95 Diluted 0.33 0.31 0.69 0.95 Dividends declared 0.18 0.18 0.54 0.54 Average Common Shares Outstanding Basic 6,625,086 6,641,095 6,635,752 6,628,097 Diluted 6,625,168 6,641,709 6,635,780 6,629,103 ---------------------------------------------------------------------- LNB Bancorp, Inc. Third Quarter 2005 Financial Highlights (Unaudited - Dollars in thousands except Share and Per Share Data) Three Months Ended ---------------------------------------------- September 30, June 30, March 31, September 30, 2005 2005 2005 2004 ---------------------------------------------- END OF PERIOD BALANCES Assets $812,437 $791,078 $781,092 $770,794 Deposits 655,740 638,817 609,098 602,391 Portfolio Loans 594,493 578,331 574,100 560,537 Allowance for Loan Losses 7,890 7,793 7,545 7,351 Shareholders' Equity 69,478 70,316 68,356 70,609 AVERAGE BALANCES Assets: Total Assets $804,797 $783,493 $780,963 $757,782 Earning Assets 751,254 728,769 726,431 713,548 Securities 156,972 143,555 144,501 156,620 Loans 589,684 575,774 572,464 556,026 Liabilities and Shareholders' Equity: Total Deposits $652,513 $623,315 $619,576 $587,065 Interest Bearing Deposits 561,038 526,570 521,514 498,843 Interest Bearing Liabilities 636,721 610,318 606,554 595,172 Total Shareholders' Equity 70,804 70,683 70,707 69,499 INCOME STATEMENT Net Interest Income $7,470 $7,557 $7,332 $7,033 Net Interest Income-FTE 7,519 7,573 7,376 7,080 Provision for Loan Losses 300 399 399 399 Noninterest Income 2,608 2,639 2,927 3,111 Noninterest Expense 6,764 8,472 7,671 6,760 Net Income 2,157 852 1,571 2,074 PER SHARE DATA Basic Net Income Per Common Share $0.33 $0.13 $0.23 $0.31 Diluted Net Income Per Common Share 0.33 0.13 0.23 0.31 Cash Dividends Per Common Share 0.18 0.18 0.18 0.18 Basic Avg Common Shares Outstanding 6,625,086 6,642,390 6,641,181 6,641,095 Diluted Avg Common Shares Outstanding 6,625,168 6,642,390 6,641,181 6,641,709 KEY RATIOS Return on Average Assets (annualized) 1.06% 0.44% 0.82% 1.09% Return on Average Common Equity (annualized) 12.09% 4.83% 9.01% 11.87% Efficiency Ratio 67% 83% 74% 66% Average Equity to Average Assets 8.80% 9.02% 9.05% 9.17% Net Interest Margin (FTE) 3.97% 4.17% 4.12% 3.95% Annualized Net Charge Offs to Average Loans 0.14% 0.11% 0.17% 0.74% Allowance for Loan Losses 1.33% 1.35% 1.31% 1.31% ASSET QUALITY Non-accrual Loans $7,452 $7,233 $6,586 $5,576 Net Charge Offs 203 151 240 1,037 Other Real Estate Owned 399 357 476 125 Total Nonperforming Assets 7,851 7,590 7,062 5,701 LNB Bancorp, Inc. Third Quarter 2005 Financial Highlights (Unaudited - Dollars in thousands except Share and Per Share Data) Nine Months Ended --------------------------- September 30, September 30, 2005 2004 --------------------------- END OF PERIOD BALANCES Assets $812,437 $770,794 Deposits 655,740 602,391 Portfolio Loans 594,493 560,537 Allowance for Loan Losses 7,890 7,351 Shareholders' Equity 69,478 70,609 AVERAGE BALANCES Assets: Total Assets $790,672 $754,269 Earning Assets 736,346 704,748 Securities 150,785 155,511 Loans 580,461 545,057 Liabilities and Shareholders' Equity: Total Deposits $633,154 $583,882 Interest Bearing Deposits 538,185 494,406 Interest Bearing Liabilities 619,215 590,871 Total Shareholders' Equity 70,724 68,995 INCOME STATEMENT Net Interest Income $22,359 $20,730 Net Interest Income-FTE 22,512 20,904 Provision for Loan Losses 1,098 1,349 Noninterest Income 8,174 8,602 Noninterest Expense 22,907 18,998 Net Income 4,580 6,310 PER SHARE DATA Basic Net Income Per Common Share $0.69 $0.95 Diluted Net Income Per Common Share 0.69 0.95 Cash Dividends Per Common Share 0.54 0.54 Basic Avg Common Shares Outstanding 6,635,752 6,628,097 Diluted Avg Common Shares Outstanding 6,635,780 6,629,103 KEY RATIOS Return on Average Assets (annualized) 0.77% 1.12% Return on Average Common Equity (annualized) 8.66% 12.22% Efficiency Ratio 75% 64% Average Equity to Average Assets 8.94% 9.15% Net Interest Margin (FTE) 4.09% 3.96% Annualized Net Charge Offs to Average Loans 0.14% 0.42% Allowance for Loan Losses 1.33% 1.31% ASSET QUALITY Non-accrual Loans $7,452 $5,576 Net Charge Offs 594 1,728 Other Real Estate Owned 399 125 Total Nonperforming Assets 7,851 5,701 CONTACT: LNB Bancorp, Inc. John Fuller, 216-978-7643