Exhibit 99.1
LNB Bancorp, Inc. Reports First Quarter 2008 Results
- Net income 20-cents per diluted share for 1st quarter 2008
- Normalized earnings show 20.0 percent increase 1Q08 vs. 1Q07
- Strategic investments bolster income growth opportunities
LORAIN, Ohio--(BUSINESS WIRE)--LNB Bancorp, Inc. (NASDAQ: LNBB) today reported net income for the three months ended March 31, 2008 of $1,447,000, or $.20 per diluted share, compared with $1,535,000, or $.24 per diluted share reported for the same period a year ago. When normalizing net income to exclude certain nonrecurring items (as further described below), net income for the first quarter of 2008 would have been $1,467,000, compared to net income of $1,223,000 for the first quarter of 2007, an increase of $244,000 or 20.0 percent.
“Our performance in the first quarter this year was solid, despite the continuing interest rate pressures facing our industry,” said Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc., “Our balance sheet remains strong and we continue to effectively manage our asset quality.”
The first quarter 2008 net income of $1,447,000 included two nonrecurring items. One item was a payment of $460,000 received in a partial redemption of stock issued by VISA to LNB as a member institution, which was recorded by LNB as other income. The other nonrecurring item was expenses of $491,000 incurred for outside services related to the special meeting of shareholders held on March 18, 2008. The first quarter 2007 net income of $1,535,000 included one nonrecurring item, as during the quarter the Company made an early election to measure certain financial instruments in accordance with SFAS No. 159 “The Fair Value Option for Financial Assets and Financial Liabilities.” The value of the investments measured at fair value net of tax increased net income $312,000 during the first quarter of 2007, thereby resulting in a gain being recognized in the income statement.
“For the remainder of the year, we are uncertain as to whether the economic pressures will ease, but we are encouraged by our ability to continue to grow income in this tough environment which we believe is in large part due to the strategic investments we made over the past two years,” said Klimas.
First quarter 2007 results do not reflect the acquisition of Morgan Bancorp, Inc. of Hudson, Ohio, which occurred in the second quarter of 2007.
Key Performance Measures
Net interest income for the first quarter of 2008 was $7,520,000, a 10.1 percent increase compared with net interest income of $6,829,000 for the first quarter a year ago. “This performance is gratifying in light of a continued falling interest rate environment,” said Klimas. The Federal Open Market Committee has cut the federal funds rate 200 basis since the beginning of this year and 300 basis points since September 2007. This has impacted the bank’s net interest margin, which fell to 3.05 percent in the first quarter 2008, compared to 3.50 percent a year ago and 3.24 percent at the end of the fourth quarter of 2007.
Interest income from loans was $12,576,000 for the first quarter of 2008, up 13.4 percent from $11,088,000 in the first quarter of 2007. This was despite the fact that the yield on loans decreased 50 basis points between the first quarter of 2008 and the first quarter of 2007. Average commercial loans grew by $58 million and average consumer loans by $71 million in the first quarter of 2008 over the same quarter a year ago.
Noninterest income was $3,334,000 for the first quarter of 2008, up from $2,989,000 for the same period in 2007, and $3,073,000 in the fourth quarter of 2007. The two biggest components of noninterest income are deposit service charges and trust and investment management services. Deposit service charges and electronic banking fee income continued to grow in the first quarter of 2008 with an increase of $167,000 over the same period last year. Deposit service charges and electronic banking fees during the first quarter of 2008 totaled $1,755,000, a 10.5 percent increase over the same period last year. Trust and investment management services were $532,000 for the first quarter of 2008, compared to $522,000 for the same period in 2007. Included in noninterest income was the $460,000 payment from VISA.
Noninterest expense was $8,524,000 in the first quarter 2008, compared to $7,358,000 during the same period a year ago. The largest portions of this increase were due, as mentioned, to the expenses associated with the special shareholder meeting as well as increased expenses related to the bank’s more active management of its loan portfolio.
Asset quality continues to be effectively managed. The allowance for loan losses at March 31, 2008 was $8,000,000, or 1.06 percent of outstanding loans. This was a slight increase from the $7,820,000, or 1.04 percent for the period ended December 31, 2007. Net charge-offs for the first quarter of 2008 were $294,000, down from $425,000 in the first quarter a year ago and $708,000 during the fourth quarter of 2007.
Total assets at the end of the first quarter 2008 were $1,067,002,000 compared with $852,841,000 at the end of the first quarter of 2007. Total deposits at the end of the first quarter this year were $865.1 million, up from $722.6 million at the end of last year’s first quarter. Total portfolio loans at March 31, 2008 were $752.4 million, up from $621.9 million at March 31, 2007.
About LNB Bancorp, Inc.
LNB Bancorp, Inc. is a $1.1 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 and Morgan Bank serve customers through 21 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 |
| | | |
| March 31, 2008 | | December 31, 2007 |
| (unaudited) | | |
| (Dollars in thousands except share amounts) |
| ASSETS | | | |
Cash and due from Banks | $ 22,178 | | | $ 23,523 | |
| Federal funds sold and short-term investments | 4,300 | | | - | |
Securities: | | | |
| Trading securities, at fair value | 37,220 | | | 33,402 | |
| Available for sale, at fair value | 180,713 | | | 179,424 | |
| Federal Home Loan Bank and Federal Reserve Stock | 4,741 | | | 4,579 | |
| Total securities | 222,674 | | | 217,405 | |
| Loans held for sale | 7,748 | | | 4,724 | |
| Loans: | | | |
| Portfolio loans | 752,443 | | | 753,598 | |
Allowance for loan losses | (8,000 | ) | | (7,820 | ) |
| Net loans | 744,443 | | | 745,778 | |
| Bank premises and equipment, net | 12,908 | | | 13,328 | |
| Other real estate owned | 2,680 | | | 2,478 | |
| Bank owned life insurance | 15,670 | | | 15,487 | |
Goodwill, net | 21,570 | | | 21,570 | |
Intangible assets, net | 1,245 | | | 1,280 | |
| Accrued interest receivable | 4,183 | | | 4,074 | |
| Other assets | 7,403 | | | 6,998 | |
| Total Assets | $ 1,067,002 | | | $ 1,056,645 | |
| | | |
| LIABILITIES AND SHAREHOLDERS' EQUITY | | | |
Deposits | | | |
| Demand and other noninterest-bearing | $ 88,424 | | | $ 88,812 | |
| Savings, money market and interest-bearing demand | 325,731 | | | 331,306 | |
| Certificates of deposit | 450,910 | | | 436,823 | |
| Total deposits | 865,065 | | | 856,941 | |
Short-term borrowings | 27,876 | | | 42,105 | |
Federal Home Loan Bank advances | 59,207 | | | 44,207 | |
Junior subordinated debentures | 20,620 | | | 20,620 | |
| Accrued interest payable | 4,351 | | | 4,620 | |
| Accrued taxes, expenses and other liabilities | 6,520 | | | 5,499 | |
| Total Liabilities | 983,639 | | | 973,992 | |
| Shareholders' Equity | | | |
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 7,623,857 shares at March 31, 2008 and December 31, 2007 | 7,624 | | | 7,624 | |
Preferred Shares, Series A Voting, no par value, authorized 750,000 shares, none issued at March 31, 2008 and December 31, 2007. | - | | | - | |
| Additional paid-in capital | 37,720 | | | 37,712 | |
| Retained earnings | 42,360 | | | 42,951 | |
| Accumulated other comprehensive loss | 1,751 | | | 458 | |
| Treasury shares at cost, 328,194 shares at March 31, 2008 and December 31, 2007 | (6,092 | ) | | (6,092 | ) |
| Total Shareholders' Equity | 83,363 | | | 82,653 | |
| Total Liabilities and Shareholders' Equity | $ 1,067,002 | | | $ 1,056,645 | |
| Consolidated Statements of Income (unaudited) |
| | | |
| Three Months Ended March 31, |
| 2008 | | 2007 |
| (Dollars in thousands except share and per share amounts) |
| Interest Income | | | |
| Loans | $ 12,576 | | | $ 11,088 |
| Securities: | | | |
U.S. Government agencies and corporations | 1,970 | | | 1,564 |
| State and political subdivisions | 162 | | | 135 |
| Trading securities | 293 | | | - |
| Other debt and equity securities | 65 | | | 55 |
| Federal funds sold and short-term investments | 48 | | | 30 |
| Total interest income | 15,114 | | | 12,872 |
| | | | |
| Interest Expense | | | |
| Deposits | 6,509 | | | 5,481 |
| Federal Home Loan Bank advances | 570 | | | 326 |
| Short-term borrowings | 175 | | | 236 |
| Trust Preferred Securities | 340 | | | - |
| Total interest expense | 7,594 | | | 6,043 |
| Net Interest Income | 7,520 | | | 6,829 |
Provision for Loan Losses | 474 | | | 383 |
| Net interest income after provision for loan losses | 7,046 | | | 6,446 |
| Noninterest Income | | | |
| Investment and trust services | 532 | | | 522 |
| Deposit service charges | 1,111 | | | 1,082 |
| Other service charges and fees | 644 | | | 506 |
| Income from bank owned life insurance | 183 | | | 167 |
| Other income | 599 | | | 67 |
| Total fees and other income | 3,069 | | | 2,344 |
| Securities gains (losses), net | 214 | | | 473 |
| Gains on sale of loans | 187 | | | 151 |
| Gain(Loss) on sale of other assets, net | (136 | ) | | 21 |
| Total noninterest income | 3,334 | | | 2,989 |
| Noninterest Expense | | | |
Salaries and employee benefits | 3,778 | | | 3,823 |
| Furniture and equipment | 996 | | | 707 |
| Net occupancy | 657 | | | 555 |
| Outside services | 883 | | | 355 |
| Marketing and public relations | 308 | | | 262 |
| Supplies, postage and freight | 349 | | | 310 |
| Telecommunications | 244 | | | 188 |
| Ohio Franchise tax | 220 | | | 215 |
| Intangible asset amortization | 34 | | | 28 |
| Electronic banking expenses | 210 | | | 189 |
| Loan and collection expense | 228 | | | 94 |
| Other expense | 615 | | | 632 |
| Total noninterest expense | 8,522 | | | 7,358 |
| Income before income tax expense | 1,858 | | | 2,077 |
| Income tax expense | 411 | | | 542 |
| Net Income | $ 1,447 | | | $ 1,535 |
| Net Income Per Common Share | | | |
| Basic | $ 0.20 | | | $ 0.24 |
| Diluted | 0.20 | | | 0.24 |
| Dividends declared | 0.18 | | | 0.18 |
| Average Common Shares Outstanding | | | |
| Basic | 7,295,663 | | | 6,443,673 |
| Diluted | 7,295,663 | | | 6,443,673 |
| LNB Bancorp, Inc. |
| Supplemental Financial Information |
| (Unaudited - Dollars in thousands except Share and Per Share Data) |
| | | |
| Three Months Ended |
| March 31, | March 31, | December 31, |
| 2008 | 2007 | 2007 |
| END OF PERIOD BALANCES | | | |
| Assets | $ 1,067,002 | | $ 852,841 | | $ 1,056,645 | |
| Deposits | 865,065 | | 722,592 | | 856,941 | |
| Portfolio loans | 752,443 | | 621,940 | | 753,598 | |
| Allowance for loan losses | 8,000 | | 7,258 | | 7,820 | |
| Shareholders' equity | 83,363 | | 69,133 | | 82,653 | |
| | | |
| AVERAGE BALANCES | | | |
| Assets: | | | |
| Total assets | $ 1,063,204 | | $ 848,208 | | $ 1,032,796 | |
| Earning assets | 988,375 | | 792,163 | | 956,860 | |
| Securities | 226,039 | | 158,932 | | 214,137 | |
| Portfolio loans | 762,336 | | 630,814 | | 742,723 | |
| Liabilities and shareholders' equity: | | | |
| Total deposits | $ 881,856 | | $ 715,624 | | $ 858,921 | |
| Interest bearing deposits | 776,941 | | 634,150 | | 772,660 | |
| Interest bearing liabilities | 884,069 | | 689,319 | | 853,309 | |
| Total shareholders' equity | 83,925 | | 69,309 | | 82,775 | |
| | | |
| INCOME STATEMENT | | | |
| Net interest income | $ 7,520 | | $ 6,829 | | $ 7,815 | |
| Net interest income-FTE (1) | 7,615 | | 6,918 | | 7,916 | |
| Provision for loan losses | 474 | | 383 | | 578 | |
| Noninterest income | 3,334 | | 2,989 | | 3,073 | |
| Noninterest expense | 8,522 | | 7,358 | | 8,050 | |
| Taxes | 411 | | 542 | | 592 | |
| Net income | 1,447 | | 1,535 | | 1,668 | |
| Total revenue | 10,854 | | 9,818 | | 10,888 | |
| | | |
| PER SHARE DATA | | | |
| Basic net income per common share | $ 0.20 | | $ 0.24 | | $ 0.23 | |
| Diluted net income per common share | 0.20 | | 0.24 | | 0.23 | |
| Cash dividends per common share | 0.18 | | 0.18 | | 0.18 | |
| Basic average common shares outstanding | 7,295,663 | | 6,443,673 | | 7,295,663 | |
| Diluted average common shares outstanding | 7,295,663 | | 6,443,673 | | 7,295,663 | |
| | | |
| KEY RATIOS | | | |
| Return on average assets (2) | 0.55 | % | 0.73 | % | 0.64 | % |
| Return on average common equity (2) | 6.93 | % | 8.98 | % | 7.99 | % |
| Efficiency ratio | 77.83 | % | 74.27 | % | 73.26 | % |
| Noninterest expense to average assets (2) | 3.22 | % | 3.52 | % | 3.09 | % |
| Average equity to average assets | 7.89 | % | 8.17 | % | 8.01 | % |
| Net interest margin | 3.06 | % | 3.50 | % | 3.24 | % |
| Net interest margin (FTE) (1) | 3.10 | % | 3.54 | % | 3.28 | % |
| | | |
| ASSET QUALITY | | | |
| Nonperforming loans | $ 15,044 | | $ 16,675 | | $ 10,831 | |
| Other real estate owned | 2,680 | | 1,073 | | 2,478 | |
| Total nonperforming assets | 17,724 | | 17,748 | | 13,309 | |
| Net Charge Offs | 294 | | 425 | | 708 | |
| Total nonperforming loans to total loans | 2.00 | % | 2.68 | % | 1.44 | % |
| Total nonperforming assets to total assets | 1.66 | % | 2.08 | % | 1.26 | % |
| Net charge-offs to average loans (2) | 0.16 | % | 0.27 | % | 0.38 | % |
| Allowance for loan losses | 1.06 | % | 1.17 | % | 1.04 | % |
| Allowance to nonperforming loans | 53.18 | % | 43.53 | % | 72.20 | % |
| | | |
| | | |
| (1) FTE -- fully tax equivalent at 34% tax rate |
| (2) Annualized |
CONTACT:
For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643
