EX-99.1 2 a5527379ex99_1.txt EXHIBIT 99.1 Exhibit 99.1 LNB Bancorp, Inc. Reports Improved Third Quarter Results -- Third quarter earnings increase 18 percent from a year ago -- Credit quality shows improvement over first half of the year -- Morgan Bancorp acquisition contributes to enhanced revenue performance LORAIN, Ohio--(BUSINESS WIRE)--Oct. 25, 2007--LNB Bancorp, Inc. (NASDAQ:LNBB) today announced net income for the third quarter of 2007. Net income for the quarter was $1,673,000 or $0.23 per diluted share, up from net income of $1,419,000 or $0.22 per diluted share, for the third quarter of 2006. "The performance this past quarter is a positive indication of the solid progress we are continuing to make with our long-term strategy," said Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc. "Our third quarter performance was a marked improvement from the first half of this year, despite continuing to operate in a weak economic environment." Klimas said the most significant factors behind this upswing were the contribution of our newly-acquired Morgan Bancorp and improved credit quality. "While non-performing loans remain up over a year ago, they are significantly lower compared to both the first and second quarters of this year. This improvement in overall credit quality is very heartening and is a reflection of the additional controls we implemented over our credit administration process at the end of 2006 and in to 2007," said Klimas. "We anticipate that we will continue to operate in a difficult economic environment for the remainder of the year and into 2008, but we will continue to be diligent in our efforts to grow revenue, effectively manage our expenses and improve credit quality," said Klimas. With the completion of the merger with Morgan Bancorp of Hudson, Ohio in May 2007, the Company expanded its market area to include Summit County. "This acquisition has enhanced our income and opportunities for growth," said Klimas. "In addition, we continue to see solid progress with the investments we have made in the past 18 months in both facilities and personnel as we create a community bank of scale," Klimas said. "We genuinely appreciate the efforts of our associates and value the strategic support of our board of directors in these positive developments." Third quarter net interest income totaled $7.8 million, up $508,000 from the same period a year ago and an increase of $630,000 from the second quarter of 2007. Average earning assets grew by 12.1 percent, or $104.4 million, from the third quarter of 2006 to the third quarter of 2007. Net interest income for the first nine months of 2007 was $21.9 million, compared to $21.7 million for the same period a year ago. The third quarter continued to prove to be a difficult banking environment with a continued flat yield curve and a challenging competitive environment. The net interest margin was 3.31 percent for the quarter, down six basis points from 3.37 percent for the second quarter of 2007 and 47 basis points from 3.78 percent for the third quarter of 2006. The net interest margin for the first nine months of 2007 was 3.39 percent versus 3.83 percent for the first nine months of 2006. During the second quarter of 2007, the Company completed two private offerings of trust preferred securities which reduced the net interest margin 15 basis points for the quarter and 8 basis points for the first nine months of 2007. Noninterest income was $3.0 million for the third quarter of 2007, an increase of $551,000, or 22.5 percent, compared to the third quarter of 2006. The increase was largely from net gains recorded on the sale of indirect loans and mortgage loans to the secondary market. The Company retains the servicing rights for these loans. The sale of high quality indirect loans was a primary activity of Morgan Bank prior to the acquisition and is continued by the Company. Other types of non-interest income grew as well, including service charges on deposit accounts and ATM charges reflecting continued momentum in fee-based services. Noninterest income for the first nine months of this year was $8,426,000, a 21.2 percent increase from the $6,951,000 for the same period in 2006. Non-interest expense was $8.3 million for the quarter as compared to $7.3 million for the third quarter of 2006. Increases in salaries and benefits, occupancy and furniture and equipment primarily are associated with the Morgan acquisition as well as other facilities opened in over the past 18 months. While making these significant investments for the future, the Company has had success in limiting related increases in overhead expense. The $1,047,000 increase in non-interest expense also includes operating costs associated with the new offices, as well as increases in legal and other carrying costs associated with non-performing assets. The Company also expects to achieve considerable savings in technology costs as LNB and Morgan systems are merged in the fourth quarter. The provision for loan losses was $441,000 for the quarter, down from $600,000 for the third quarter of 2006. Annualized net charge-offs were 0.32 percent of average loans for the quarter compared to 0.57 percent for the third quarter of 2006. Non-performing assets to total assets were 1.37 percent at September 30, 2007 compared to 1.54 percent at June 30, 2007 and 1.05 percent at September 30, 2006. Of the $14.0 million of non-performing assets at September 30, 2007, approximately $3.1 million is other real estate or repossessed assets in which collateral held is considered collectible. The allowance for loan losses was 1.09 percent of total loans at September 30, 2007 compared to 1.04 percent at September 30, 2006. Net income for the first nine months of 2007 totaled $3,844,000, or $0.56 per diluted share, compared to net income of $4,506,000, or $0.70 per diluted share, for the nine months ended September 30, 2006. While we are seeing some success in our long-term growth strategy as reflected in 5.6 percent revenue growth for the first nine months of 2007 as compared to the same period last year, earnings were impacted by the struggling local economy and the impact this has had on local commercial real estate development. This has led to higher loan loss provisions in 2007, and additional costs to resolve problem loans in this sector. In the third quarter, progress in these efforts is reflected in a lower level of nonperforming loans at September 30, 2007 as compared to June 30, 2007. The local economic conditions are not expected to improve substantially in the fourth quarter, but the Company continues to work on strategies to further reduce nonperforming loans. Total assets increased by $187.7 million from September 30, 2006 to $1.0 billion at September 30, 2007. Over the same twelve month period, portfolio loans increased by $120.1 million to $727.2 million, and total deposits increased $145.8 million to $834.3 million. Since December 31, 2006, portfolio loans increased $98.9 million and total deposits increased $117.1 million. The Morgan Bancorp acquisition during the second quarter of this year contributed $93.1 million in loans and $101.9 million in deposits. About LNB Bancorp, Inc. LNB Bancorp, Inc. is a $1.0 billion 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. The Lorain National Bank serves customers through 22 retail-banking locations and 29 ATMs in Lorain, eastern Erie, western Cuyahoga and Summit 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 September 30, 2007 December 31, 2006 ---------------------- -------------------- (unaudited) (Dollars in thousands except share amounts) ASSETS Cash and due from Banks $ 23,887 $ 29,122 Federal funds sold and short-term investments 500 - Securities: Trading securities 32,000 - Available for sale, at fair value 166,681 155,810 Federal Home Loan Bank and Federal Reserve Stock 5,380 3,248 ---------------------- -------------------- Total securities 204,061 159,058 Loans: Loans held for sale 2,703 - Portfolio loans 727,194 628,333 Allowance for loan losses (7,951) (7,300) ---------------------- -------------------- Net loans 721,946 621,033 ---------------------- -------------------- Bank premises and equipment, net 13,647 12,599 Other real estate owned 3,053 1,289 Bank owned life insurance 15,286 14,755 Goodwill and intangible assets, net 23,492 3,157 Accrued interest receivable 4,279 3,939 Other assets 9,046 6,146 ---------------------- -------------------- Total Assets $ 1,019,197 $ 851,098 ====================== ==================== LIABILITIES AND SHAREHOLDERS' EQUITY Deposits Demand and other noninterest-bearing $ 87,218 $ 91,216 Savings, money market and interest-bearing demand 360,107 278,401 Certificates of deposit 386,998 347,644 ---------------------- -------------------- Total deposits 834,323 717,261 ---------------------- -------------------- Short-term borrowings 28,039 22,163 Federal Home Loan Bank advances 45,206 35,086 Junior subordinated debentures 20,620 - Accrued interest payable 4,190 3,698 Accrued taxes, expenses and other liabilities 5,479 4,193 ---------------------- -------------------- Total Liabilities 937,857 782,401 ====================== ==================== Shareholders' Equity Common stock, par value $1 per share, authorized 15,000,000 shares, issued 7,623,857 shares at September 30, 2007 and 6,771,867 at December 31, 2006 7,624 6,772 Additional paid-in capital 37,606 26,382 Retained earnings 42,597 43,728 Accumulated other comprehensive loss (395) (2,093) Treasury shares at cost, 328,194 shares at September 30, 2007 and December 31, 2006 (6,092) (6,092) ---------------------- -------------------- Total Shareholders' Equity 81,340 68,697 ---------------------- -------------------- Total Liabilities and Shareholders' Equity $ 1,019,197 $ 851,098 ====================== ==================== Consolidated Statements of Income (unaudited) Three Months Ended Nine Months Ended September 30, September 30, --------------------- --------------------- 2007 2006 2007 2006 ---------- ---------- ---------- ---------- (Dollars in thousands except share and per share amounts) Interest Income Loans $ 13,437 $ 11,164 $ 36,610 $ 31,690 Securities: U.S. Government agencies and corporations 2,148 1,488 5,310 4,249 State and political subdivisions 157 124 443 330 Other debt and equity securities 78 49 204 150 Federal funds sold and short-term investments 51 10 338 73 ---------- ---------- ---------- ---------- Total interest income 15,871 12,835 42,905 36,492 Interest Expense Deposits: Certificates of deposit, $100 and over 2,278 1,864 6,576 4,818 Other deposits 4,427 2,913 11,860 8,073 Federal Home Loan Bank advances 635 492 1,235 1,227 Short-term borrowings 347 246 812 655 Other interest expense 356 - 567 - ---------- ---------- ---------- ---------- Total interest expense 8,043 5,515 21,050 14,773 ---------- ---------- ---------- ---------- Net Interest Income 7,828 7,320 21,855 21,719 Provision for Loan Losses 441 600 1,677 915 ---------- ---------- ---------- ---------- Net interest income after provision for loan losses 7,387 6,720 20,178 20,804 Noninterest Income Investment and trust services 547 482 1,593 1,537 Deposit service charges 1,239 1,224 3,457 3,334 Other service charges and fees 605 504 1,706 1,444 Income from bank owned life insurance 182 187 531 474 Other income 128 56 273 160 ---------- ---------- ---------- ---------- Total fees and other income 2,701 2,453 7,560 6,949 Securities gains, net 2 - 261 - Gains on sale of loans 277 - 546 - Gains (losses) on sale of other assets, net 24 - 59 2 ---------- ---------- ---------- ---------- Total noninterest income 3,004 2,453 8,426 6,951 Noninterest Expense Salaries and employee benefits 4,104 3,770 11,862 10,986 Furniture and equipment 952 737 2,566 2,227 Net occupancy 593 484 1,683 1,413 Outside services 488 406 1,317 1,260 Marketing and public relations 321 311 936 1,069 Supplies, postage and freight 353 311 986 912 Telecommunications 232 207 623 577 Ohio Franchise tax 188 207 604 636 Other real estate owned 58 28 305 59 Electronic banking expenses 150 160 593 466 Other charge-offs and losses 192 131 387 291 Other expense 703 527 1,839 1,783 ---------- ---------- ---------- ---------- Total noninterest expense 8,334 7,279 23,701 21,679 ---------- ---------- ---------- ---------- Income before income tax expense 2,057 1,894 4,903 6,076 Income tax expense 384 475 1,059 1,570 ---------- ---------- ---------- ---------- Net Income $ 1,673 $ 1,419 $ 3,844 $ 4,506 ========== ========== ========== ========== Net Income Per Common Share Basic $ 0.23 $ 0.22 $ 0.56 $ 0.70 Diluted 0.23 0.22 0.56 0.70 Dividends declared 0.18 0.18 0.54 0.54 Average Common Shares Outstanding Basic 7,295,663 6,450,086 6,889,953 6,468,032 Diluted 7,295,663 6,450,235 6,889,953 6,468,291 LNB Bancorp, Inc. Supplemental Financial Information (Unaudited - Dollars in thousands except Share and Per Share Data) Three Months Ended ---------------------------------------- September 30, June 30, September 30, 2007 2007 2006 ---------------------------------------- END OF PERIOD BALANCES Assets $ 1,019,197 $1,002,345 $ 831,544 Deposits 834,323 822,901 688,488 Portfolio loans 727,194 729,308 607,036 Allowance for loan losses 7,951 8,115 6,304 Shareholders' equity 81,340 79,524 68,571 AVERAGE BALANCES Assets: Total assets $ 1,019,758 $ 927,820 $ 825,815 Earning assets 937,937 855,746 767,769 Securities 200,085 177,496 164,583 Portfolio loans 737,853 678,250 603,186 Liabilities and shareholders' equity: Total deposits $ 820,578 $ 778,059 $ 681,781 Interest bearing deposits 734,185 694,830 599,254 Interest bearing liabilities 841,952 758,286 668,589 Total shareholders' equity 81,964 77,953 68,308 INCOME STATEMENT Net interest income $ 7,828 $ 7,198 $ 7,320 Net interest income-FTE(1) 7,927 7,292 7,405 Provision for loan losses 441 853 600 Noninterest income 3,004 2,433 2,453 Noninterest expense 8,334 8,009 7,279 Taxes 384 133 475 ---------------------------------------------------------------------- Net income 1,673 636 1,419 ---------------------------------------------------------------------- Total revenue 10,832 9,631 9,773 PER SHARE DATA Basic net income per common share $ 0.23 $ 0.09 $ 0.22 Diluted net income per common share 0.23 0.09 0.22 Cash dividends per common share 0.18 0.18 0.18 Basic average common shares outstanding 7,295,663 6,921,162 6,450,086 Diluted average common shares outstanding 7,295,663 6,921,162 6,450,235 KEY RATIOS Return on average assets(2) 0.65% 0.27% 0.68% Return on average common equity(2) 8.10% 3.27% 8.24% Efficiency ratio 76.24% 82.35% 73.84% Noninterest expense to average assets(2) 3.24% 3.46% 3.50% Average equity to average assets 8.04% 8.40% 8.27% Net interest margin 3.31% 3.37% 3.78% Net interest margin (FTE)(1) 3.35% 3.42% 3.83% ASSET QUALITY Nonperforming loans $ 10,942 $ 13,259 $ 7,023 Other real estate owned 3,053 2,132 1,702 Total nonperforming assets 13,995 15,391 8,725 Net Charge Offs 594 1,094 864 Total nonperforming loans to total loans 1.50% 1.82% 1.16% Total nonperforming assets to total assets 1.37% 1.54% 1.05% Net charge-offs to average loans(2) 0.32% 0.65% 0.57% Allowance for loan losses 1.09% 1.11% 1.04% Allowance to nonperforming loans 72.66% 61.20% 89.76% Nine Months Ended --------------------------- September 30, September 30, 2007 2006 --------------------------- END OF PERIOD BALANCES Assets $ 1,019,197 $ 831,544 Deposits 834,323 688,488 Portfolio loans 727,194 607,036 Allowance for loan losses 7,951 6,304 Shareholders' equity 81,340 68,571 AVERAGE BALANCES Assets: Total assets $ 932,543 $ 813,847 Earning assets 862,483 758,102 Securities 179,785 163,877 Portfolio loans 682,697 594,225 Liabilities and shareholders' equity: Total deposits $ 771,805 $ 673,353 Interest bearing deposits 688,088 588,833 Interest bearing liabilities 763,744 654,823 Total shareholders' equity 76,455 68,447 INCOME STATEMENT Net interest income $ 21,855 $ 21,719 Net interest income-FTE(1) 22,137 21,899 Provision for loan losses 1,677 915 Noninterest income 8,426 6,951 Noninterest expense 23,701 21,679 Taxes 1,059 1,570 ---------------------------------------------------------------------- Net income 3,844 4,506 ---------------------------------------------------------------------- Total revenue 30,281 28,670 PER SHARE DATA Basic net income per common share $ 0.56 $ 0.70 Diluted net income per common share 0.56 0.70 Cash dividends per common share 0.54 0.54 Basic average common shares outstanding 6,889,953 6,468,032 Diluted average common shares outstanding 6,889,953 6,468,291 KEY RATIOS Return on average assets(2) 0.55% 0.74% Return on average common equity(2) 6.72% 8.80% Efficiency ratio 77.55% 75.14% Noninterest expense to average assets(2) 3.40% 3.56% Average equity to average assets 8.20% 8.41% Net interest margin 3.39% 3.83% Net interest margin (FTE)(1) 3.43% 3.86% ASSET QUALITY Nonperforming loans $ 10,942 $ 7,023 Other real estate owned 3,053 1,702 Total nonperforming assets 13,995 8,725 Net Charge Offs 2,124 1,233 Total nonperforming loans to total loans 1.50% 1.16% Total nonperforming assets to total assets 1.37% 1.05% Net charge-offs to average loans(2) 0.42% 0.28% Allowance for loan losses 1.09% 1.04% Allowance to nonperforming loans 72.66% 89.76% (1) FTE -- fully tax equivalent at 34% tax rate (2) Annualized CONTACT: For LNB Bancorp, Inc. W. John Fuller, 216-978-7643