EX-99.1 2 a5133333ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 LNB Bancorp, Inc. Reports First Quarter Results LORAIN, Ohio--(BUSINESS WIRE)--April 26, 2006--LNB Bancorp, Inc. (NASDAQ:LNBB): -- Net Income 22-cents per diluted share for 1st quarter 2006 -- Results impacted by margin pressures -- Strong deposit growth, stable credit quality, good expense management LNB Bancorp, Inc. (NASDAQ:LNBB) today reported net income for the three months ended March 31, 2006 of $1,448,000, or $.22 per diluted share, compared to $1,571,000, or $.24 per diluted share for the quarter ended March 31, 2005. Included in net income for the three month period ended March 31, 2005 was $317,000 of gains on the sale of assets. Daniel E. Klimas, president and chief executive officer, said, "We saw strong deposit growth, good expense management and stable credit quality measures in the first quarter, but we did not reach the revenue levels we had anticipated." Klimas said the flattening yield curve put pressure on the net interest margin which, combined with flat loan growth, resulted in a decline in net interest income. While revenue growth in the first quarter did not meet management's expectations, the majority of the company's annual growth traditionally comes in the second through fourth quarters. "Moving into the second quarter, our loan pipeline is increasing," said Klimas. "The financial services industry is extremely competitive in northern Ohio, perhaps the most competitive of any region of the country," said Klimas, who pointed to the fact that there are at least a dozen banking competitors in Lorain County alone. "However, LNB Bancorp has a clear growth strategy that focuses on its strengths as an independent community bank. "Amid this competitive environment, the keys for 2006 will be stabilizing the net interest margin and growing the loan portfolio, while maintaining stable credit quality," he said. "Our balance sheet remains strong, we are focused on successfully executing the strategy we embarked on in 2005 and remain optimistic about our long-term prospects." Klimas emphasized a number of significant investments that are expected to have positive long-term impact. In 2005, strategic investments were made in the residential mortgage, private banking and small business functions. Earlier this year, Lorain National Bank announced plans to construct two new branches in high growth areas of Lorain County and establish a business development office in Cuyahoga County with a special focus on small business. Those offices are expected to be operational in the summer and fall of this year, respectively. Key Performance Measures Net interest income for the first quarter was $7,203,000, compared to $7,332,000 for the first quarter a year ago and $7,671,000 for the fourth quarter of 2005. This was a $129,000, or 1.8 percent, decline from the first quarter of 2005 and a $468,000, or 6.1 percent, decline from the fourth quarter of 2005. The net interest margin for the first quarter this year was 3.89 percent, compared to 4.06 percent recorded for the fourth quarter of 2005, and 4.09 percent for the first quarter of 2005. The first quarter net interest margin decline was the result of the flat yield curve, competitive rates for deposits and loans and a rapid shift from low-cost core funding to higher-priced money market accounts and time deposits. While there was a rapid decline in the net interest margin in January, some stabilization was apparent by the end of the first quarter. Noninterest income was $2,121,000 in the first quarter of 2006, compared with $2,927,000 for the first quarter of 2005 and $2,204,000 for the fourth quarter of 2005. The decline in noninterest income in the first quarter of 2006 as compared to the same period in 2005 was $806,000, or 27.5 percent. Included in the first quarter of 2005 was $370,000 of revenue from LNB Mortgage LLC. With the closing of this subsidiary, these fees are no longer generated. Also included in the first quarter of 2005 were gains on the sale of assets of $317,000. Deposit service charges and ATM fees increased 6.6 percent and 7.2 percent, respectively, in the first quarter of 2006 as compared to the same period in 2005. The decline in noninterest income in the first quarter 2006 as compared to the fourth quarter of 2005 was primarily due to a one-time loan placement fee recorded in the fourth quarter of 2005. Noninterest expense was $7,209,000 in the first quarter of 2006, a $462,000, or 6.0 percent, decline from $7,671,000 during the same period in 2005, and a $151,000, or 2.0 percent, decline from the fourth quarter in 2005. The $462,000 decline between the first quarter of 2006 and the same period in 2005 was primarily due to lower salary and benefit expense and lower communications expense. Salary and benefit expense was lower due to the closing of LNB Mortgage LLC. The noninterest expense improvement in the first quarter of the year from the fourth quarter of 2005 was attributable to decreases in third party services, travel and entertainment, supplies, postage and delivery and communications expense. "While we are making good progress on expense management, continued investments are required to execute our long-term strategy," said Klimas. Credit quality continues to be stable. At March 31, 2006, nonperforming loans were $6,481,000, compared to $6,494,000 and $6,586,000 at December 31, 2005 and March 31, 2005 respectively. At the end of the first quarter of 2006, the ratios of total nonperforming loans to total portfolio loans and total nonperforming assets to total assets were 1.10 percent and 0.88 percent, respectively, as compared to the 1.10 percent and 0.86 percent, respectively, at yearend 2005. The company's senior credit administration team is aggressively pursuing the resolution of these nonperforming loans. Net charge-offs for the first quarter were $204,000 as compared to $1,418,000 and $240,000 in the fourth quarter of 2005 and in the first quarter of 2005, respectively. Net charge-offs (annualized) for the first quarter were 0.14 percent of average portfolio loans, an improvement over 0.95 percent in the fourth quarter of 2005, and 0.17 percent in the first quarter of 2005. The provision for loan losses was $150,000 in the first quarter of 2006 as compared to $150,000 in the fourth quarter of 2005 and $399,000 in the first quarter of 2005. The allowance for loan losses ended the first quarter of 2006 at $6,568,000 compared to $6,622,000 at year-end 2005 and $7,545,000 at the end of the first quarter of 2005. Total assets at the end of the first quarter of 2006 were $810.1 million, an increase of $29.0 million, or 3.7 percent over the same period a year ago and $9.0 million, or 1.1 percent, compared to December 31, 2005. Total deposits at the end of the first quarter this year were $674.1 million, up from $609.1 million in the same period a year ago and $640.2 million at the end of 2005. Total portfolio loans at March 31, 2006 were $588.2 million, up 2.5 percent from March 31, 2005, but flat compared to December 31, 2005. About LNB Bancorp, Inc. LNB Bancorp, Inc. is an $810.1 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 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 March 31, 2006 December 31, 2005 -------------- ----------------- (unaudited) (Dollars in thousands except share amounts) ASSETS Cash and due from Banks $25,081 $23,923 Federal funds sold and short-term investments - - Securities: Available for sale, at fair value 157,883 151,629 Federal Home Loan Bank and Federal Reserve Stock 3,242 3,645 -------------- ---------------- Total securities 161,125 155,274 -------------- ---------------- Loans: Loans held for sale 2,599 2,586 Portfolio loans 588,226 588,425 Allowance for loan losses (6,568) (6,622) -------------- ---------------- Net loans 584,257 584,389 -------------- ---------------- Bank premises and equipment, net 11,413 10,833 Other real estate owned 608 432 Bank owned life insurance 14,161 13,935 Goodwill and intangible assets, net 3,279 3,321 Accrued interest receivable 3,275 3,053 Other assets 6,894 5,961 -------------- ---------------- Total Assets $810,093 $801,121 ============== ================ LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Demand and other noninterest-bearing $87,997 $87,597 Savings, money market and interest- bearing demand 275,304 265,831 Certificates of deposit 310,755 286,788 -------------- ---------------- Total deposits 674,056 640,216 -------------- ---------------- Short-term borrowings 21,901 32,616 Federal Home Loan Bank advances 41,093 53,896 Accrued interest payable 2,153 2,126 Accrued taxes, expenses and other liabilities 3,513 3,861 -------------- ---------------- Total Liabilities 742,716 732,715 ============== ================ Shareholders' Equity Common stock, par value $1 per share, authorized 15,000,000 shares, issued 6,771,867 at March 31, 2006 and December 31, 2005 6,772 6,772 Additional paid-in capital 26,334 26,334 Retained earnings 43,235 42,945 Accumulated other comprehensive loss (3,491) (2,996) Treasury shares at cost, 293,194 at March 31, 2006 and 250,694 at December 31, 2005 (5,473) (4,649) -------------- ---------------- Total Shareholders' Equity 67,377 68,406 -------------- ---------------- Total Liabilities and Shareholders' Equity $810,093 $801,121 ============== ================ Consolidated Statements of Income (unaudited) Three Months Ended March 31, ---------------------------- 2006 2005 ------------- -------------- (Dollars in thousands except share and per share amounts) Interest Income Loans $10,078 $8,833 Securities: U.S. Government agencies and corporations 1,339 1,019 State and political subdivisions 103 114 Other debt and equity securities 52 50 Federal funds sold and short-term investments 36 36 ------------- -------------- Total interest income 11,608 10,052 Interest Expense Deposits: Certificates of deposit, $100 and over 1,370 683 Other deposits 2,434 1,447 Federal Home Loan Bank advances 400 501 Short-term borrowings 201 89 ------------- -------------- Total interest expense 4,405 2,720 ------------- -------------- Net Interest Income 7,203 7,332 Provision for Loan Losses 150 399 ------------- -------------- Net interest income after provision for loan losses 7,053 6,933 Noninterest Income Investment and trust services 509 517 Deposit service charges 968 908 Other service charges and fees 451 461 Mortgage banking revenue - 370 Income from bank owned life insurance 145 193 Other income 46 161 ------------- -------------- Total fees and other income 2,119 2,610 Securities gains, net - 180 Gains on sale of loans - 132 Gains on sale of other assets, net 2 5 ------------- -------------- Total noninterest income 2,121 2,927 Noninterest Expense Salaries and employee benefits 3,578 3,978 Furniture and equipment 737 733 Net occupancy 478 517 Outside services 419 309 Marketing and public relations 391 307 Supplies, postage and freight 298 371 Telecommunications 199 312 Ohio Franchise tax 232 182 Electronic banking expenses 145 123 Other expense 732 839 ------------- -------------- Total noninterest expense 7,209 7,671 ------------- -------------- Income before income tax expense 1,965 2,189 Income tax expense 517 618 ------------- -------------- Net Income $1,448 $1,571 ============= ============== Net Income Per Common Share Basic $0.22 $0.24 Diluted 0.22 0.24 Dividends declared 0.18 0.18 Average Common Shares Outstanding Basic 6,504,981 6,641,173 Diluted 6,504,981 6,641,173 LNB Bancorp, Inc. Supplemental Financial Information (Unaudited - Dollars in thousands except Share and Per Share Data) ----------------------------------- March 31, December 31, March 31, 2006 2005 2005 ----------------------------------- END OF PERIOD BALANCES Assets $810,093 $801,121 $781,092 Deposits 674,056 640,216 609,098 Portfolio loans 588,226 588,425 574,100 Allowance for loan losses 6,568 6,622 7,545 Shareholders' equity 67,377 68,406 68,356 AVERAGE BALANCES Assets: Total assets $804,553 $801,045 $780,963 Earning assets 751,537 750,215 726,431 Securities 158,027 156,503 144,501 Portfolio loans 589,888 591,141 572,464 Liabilities and shareholders' equity: Total deposits $661,204 $643,592 $619,576 Interest bearing deposits 573,542 557,506 521,514 Interest bearing liabilities 642,058 639,109 606,554 Total shareholders' equity 69,339 69,545 70,707 INCOME STATEMENT Net interest income $7,203 $7,671 $7,332 Net interest income-FTE(1) 7,251 7,719 7,386 Provision for loan losses 150 150 399 Noninterest income 2,121 2,203 2,927 Noninterest expense 7,209 7,360 7,671 Taxes 517 531 618 ---------------------------------------------------------------------- Net income 1,448 1,833 1,571 ---------------------------------------------------------------------- Total revenue 9,324 9,874 10,259 PER SHARE DATA Basic net income Per common share $0.22 $0.28 $0.24 Diluted net income per common share 0.22 0.28 0.24 Cash dividends per common share 0.18 0.18 0.18 Basic average common shares outstanding 6,504,981 6,544,706 6,641,181 Diluted average common shares outstanding 6,504,981 6,544,819 6,641,181 KEY RATIOS Return on average assets(2) 0.73% 0.91% 0.82% Return on average common equity(2) 8.47% 10.46% 9.01% Efficiency ratio 76.92% 74.18% 74.38% Noninterest expense to average assets(2) 3.63% 3.65% 3.98% Average equity to average assets 8.62% 8.68% 9.05% Net interest margin 3.89% 4.06% 4.09% Net interest margin (FTE)(1) 3.91% 4.08% 4.12% Quarterly asset growth(2) 4.54% -5.53% -0.29% Quarterly portfolio loan growth(2) -0.13% -3.67% 1.30% Quarterly deposit growth(2) 12.14% -5.95% 9.89% ASSET QUALITY Nonperforming loans $6,481 $6,494 $6,586 Other real estate owned 608 432 476 Total nonperforming assets 7,089 6,926 7,062 Net Charge Offs 204 1,418 240 Total nonperforming loans to total loans 1.10% 1.10% 1.15% Total nonperforming assets to total assets 0.88% 0.86% 0.90% Net charge-offs to average loans(2) 0.14% 0.95% 0.17% Allowance for loan losses 1.12% 1.13% 1.31% Allowance to nonperforming loans 101.34% 101.97% 114.56% (1) FTE -- fully tax equivalent at 34% tax rate (2) Annualized for the three month periods *T CONTACT: For LNB Bancorp, Inc. W. John Fuller, 216-978-7643