LNB Bancorp (LNBB) 8-K LNB Bancorp, Inc. Reports Second Quarter 2008 Results

Exhibit 99.1

LNB Bancorp, Inc. Reports Second Quarter 2008 Results

• Increases in net interest income amid economic challenges
• Net interest margin shows significant improvement
• Strong fee income growth continues
• Provision increased to prudently address potential credit issues

LORAIN, Ohio--(BUSINESS WIRE)--LNB Bancorp, Inc. (NASDAQ: LNBB) today reported a net loss of $1,135,000 or $.16 per diluted share for the three months ended June 30, 2008, compared with net income of $636,000 or $.09 per diluted share reported for the same period a year ago, and net income of $1,447,000 or $.20 per diluted share reported for the three months ended March 31, 2008. For the first six months of 2008, net income was $312,000, or $.04 per diluted share, compared with $2,171,000 or $.32 per diluted share for the same period a year ago.

“While reported earnings were impacted by a significant loan loss provision, our core earnings performance for the second quarter was highly impressive with solid revenue gains throughout the company,” said Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc. “Net interest income increased by more than 13 percent and noninterest income rose nearly 30 percent in the second quarter this year compared to the second quarter a year ago.”

Excluding a loan loss provision of $4,664,000 and an income tax benefit of $1,076,000, net income was $2,453,000 for the second quarter this year, compared to net income of $2,332,000, excluding a loan loss provision of $474,000 and income taxes of $411,000, for the first quarter of this year and $1,622,000, excluding a loan loss provision of $853,000 and income taxes of $133,000 for the second quarter of 2007. The company’s management believes that this presentation of the company’s pre-loan loss provision, pre-tax net income provides meaningful information for evaluating the core financial performance of the company in light of the current economic environment.

“The significant strategic investments made by the company over the past three years are having a beneficial impact on the core earnings performance of the company,” said Klimas. “We are encouraged that these investments in people, infrastructure and technology are bolstering our company and improving our revenue performance through this challenging period that is impacting our entire industry.”

Asset quality issues continue to pose challenges for the industry. The company recorded a loan loss provision of $4,664,000 during the second quarter of 2008 in light of the continuing unpredictability of the economy, the continued decline in real estate values, and the credit quality issues inherent in the portfolio.

“We believe this provision is a prudent step toward ensuring that potential losses are appropriately covered,” said Klimas. “Our core earnings performance demonstrates the strength of our company. Our balance sheet is strong.” The Bank continues to remain well-capitalized on all levels.

“The current economic environment continues to be challenging. However, we believe the strength of our capital position, along with our vigilance in addressing the potential risk in our loan portfolio, will enable us to manage through these uncertain economic conditions,” said Klimas.

“It is difficult to predict when these economic pressures will ease, but the increases in revenue of this past quarter clearly demonstrate our earning capability and potential for growth in the future,” he said. “We continue our unwavering resolve to remain a strong, competitive community bank of scale in Northeast Ohio.”

Key Performance Measures

Net interest income for the second quarter of 2008 was $8,139,000, a 13.1 percent increase compared with net interest income of $7,198,000 for the second quarter a year ago and 8.23 percent higher than the $7,520,000 in the first quarter of 2008. Net interest income was $15,659,000 for the first six months of 2008, compared to $14,027,000 in the first six months of 2007.

The bank’s net interest margin climbed to 3.31 percent in the second quarter this year from 3.05 percent in the first quarter 2008. This marks the first quarter-to-quarter increase in the bank’s net interest margin in more than two years. Net interest margin, however, remained slightly below the 3.37 percent of a year ago.

Noninterest income was $3,154,000 for the second quarter of 2008. The second quarter of 2008 included $217,000 from the redemption of bank owned life insurance. Excluding this nonrecurring item, noninterest income in second quarter of 2008 of $2,937,000 was up from $2,433,000 for the same period in 2007 and from $2,874,000 for the first quarter of 2008. 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 second quarter of 2008 to $1,872,000 with an increase of $141,000, or 8.15 percent over the same period last year. Trust and investment management services were $587,000 for the second quarter of 2008, compared to $524,000 for the same period in 2007. Noninterest income was $6,488,000 for the six months ended June 30, 2008, compared to $5,422,000 for the first six months of 2007.

Noninterest expense was $8,840,000 in the second quarter 2008, compared to $8,009,000 for the same period in 2007. As with the loan loss provision, due to the uncertain economic conditions and declining real estate values, the Company reduced the value of other real estate owned by $330,000 during the second quarter. During the second quarter of 2007, the Corporation acquired Morgan Bank of Hudson, Ohio. This acquisition brought additional expenses including personnel, transaction processing equipment and software, and other operating expenses. Despite the initial increase in personnel as a result of the acquisition, careful planning and streamlining of efficiencies has resulted in the reduction of salaries and employee benefit expense from $3,935,000 for the second quarter of 2007 to $3,861,000 for the second quarter of 2008. During the first quarter of this year, a special shareholders meeting was requested by a shareholder of the Corporation which added additional expense, net of tax, of approximately $572,000 of which approximately $81,000 was in the second quarter of this year.

In terms of asset quality, the allowance for loan losses at June 30, 2008 was $11,874,000 or 1.54 percent of outstanding loans, due in part to the increased loan loss provision described above. Net charge-offs for the second quarter of 2008 were $790,000, down from $1,094,000 in the second quarter a year ago, but up from $294,000 during the first quarter of 2008. The allowance to nonperforming loans increased from 61.20 percent in the second quarter of 2007 to 76.96 percent in the second quarter of 2008.

Total assets at the end of the second quarter 2008 were $1.1 billion compared with $1.0 billion at the end of the second quarter of 2007. Total portfolio loans at June 30, 2008 were $769.8 million, up from $729.3 million at June 30, 2007. Total deposits at the end of the second quarter this year were $864.2 million, up from $822.9 million at the end of last year’s second quarter.

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
	June 30, 2008			December 31, 2007
	(unaudited)
	(Dollars in thousands except share amounts)
ASSETS
Cash and due from Banks	$	28,755		$	23,523
Securities:
Trading securities, at fair value		37,195			33,402
Available for sale, at fair value		173,610			179,424
Federal Home Loan Bank and Federal Reserve Stock		4,789			4,579
Total securities		215,594			217,405
Loans held for sale		4,358			4,724
Loans:
Portfolio loans		769,785			753,598
Allowance for loan losses		(11,874	)		(7,820	)
Net loans		757,911			745,778
Bank premises and equipment, net		12,787			13,328
Other real estate owned		2,351			2,478
Bank owned life insurance		15,346			15,487
Goodwill, net		21,570			21,570
Intangible assets, net		2,062			1,280
Accrued interest receivable		4,033			4,074
Other assets		8,207			6,998
Total Assets	$	1,072,974		$	1,056,645
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing	$	90,657		$	88,812
Savings, money market and interest-bearing demand		317,640			331,306
Certificates of deposit		452,905			436,823
Total deposits		861,202			856,941
Short-term borrowings		43,681			42,105
Federal Home Loan Bank advances		58,857			44,207
Junior subordinated debentures		20,600			20,620
Accrued interest payable		3,888			4,620
Accrued taxes, expenses and other liabilities		5,999			5,499
Total Liabilities		994,227			973,992
Shareholders' Equity
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 7,623,857 shares at June 30, 2008 and December 31, 2007		7,624			7,624
Preferred Shares, Series A Voting, no par value, authorized 750,000 shares, none issued at June 30, 2008 and December 31, 2007.		-			-
Additional paid-in capital		37,734			37,712
Retained earnings		39,912			42,951
Accumulated other comprehensive loss		(431	)		458
Treasury shares at cost, 328,194 shares at June 30, 2008 and December 31, 2007		(6,092	)		(6,092	)
Total Shareholders' Equity		78,747			82,653
Total Liabilities and Shareholders' Equity	$	1,072,974		$	1,056,645

Consolidated Statements of Income (unaudited)
	Three Months Ended June 30,						Six Months Ended June 30,
	2008			2007			2008			2007
	(Dollars in thousands except share and per share amounts)
Interest Income
Loans	$	11,962		$	12,085		$	24,538		$	23,173
Securities:
U.S. Government agencies and corporations		1,964			1,575			3,934			3,139
State and political subdivisions		186			151			348			286
Trading securities		236			23			529			23
Other debt and equity securities		67			71			132			126
Federal funds sold and short-term investments		28			257			76			287
Total interest income		14,443			14,162			29,557			27,034
Interest Expense
Deposits		5,397			6,250			11,906			11,731
Federal Home Loan Bank advances		553			274			1,123			600
Short-term borrowings		86			232			261			465
Trust preferred securities		268			208			608			211
Total interest expense		6,304			6,964			13,898			13,007
Net Interest Income		8,139			7,198			15,659			14,027
Provision for Loan Losses		4,664			853			5,138			1,236
Net interest income after provision for loan losses		3,475			6,345			10,521			12,791
Noninterest Income
Investment and trust services		587			524			1,119			1,046
Deposit service charges		1,190			1,136			2,301			2,218
Other service charges and fees		682			595			1,326			1,101
Income from bank owned life insurance		398			182			581			349
Other income		70			78			669			145
Total fees and other income		2,927			2,515			5,996			4,859
Securities gains (losses), net		69			(214	)		283			259
Gains on sale of loans		157			118			344			269
Gains (losses) on sale of other assets, net		1			14			(135	)		35
Total noninterest income		3,154			2,433			6,488			5,422
Noninterest Expense
Salaries and employee benefits		3,861			3,935			7,639			7,758
Furniture and equipment		1,035			907			2,031			1,614
Net occupancy		603			535			1,260			1,090
Outside services		591			474			1,474			829
Marketing and public relations		274			353			582			615
Supplies, postage and freight		335			323			684			633
Telecommunications		202			203			446			391
Ohio Franchise tax		225			201			445			416
Intangible asset amortization		34			48			68			76
Other real estate owned		509			131			607			245
Electronic banking expenses		300			193			510			382
Loan and collection expense		232			101			460			195
Other expense		639			605			1,156			1,223
Total noninterest expense		8,840			8,009			17,362			15,467
Income (loss) before income tax expense		(2,211	)		769			(353	)		2,746
Income tax expense (benefit)		(1,076	)		133			(665	)		675
Net Income (Loss)	$	(1,135	)	$	636		$	312		$	2,071
Net Income (Loss) Per Common Share
Basic	$	(0.16	)	$	0.09		$	0.04		$	0.32
Diluted		(0.16	)		0.09			0.04			0.32
Dividends declared		0.18			0.18			0.36			0.36
Average Common Shares Outstanding
Basic		7,295,663			6,921,152			7,295,663			6,683,736
Diluted		7,295,663			6,921,162			7,295,663			6,683,736

LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
	Three Months Ended									Six Months Ended
	June 30,			March 31,			June 30,			June 30,			June 30,
	2008			2008			2007			2008			2007
END OF PERIOD BALANCES
Assets	$	1,072,974		$	1,067,002		$	1,002,965		$	1,072,974		$	1,002,965
Deposits		861,202			865,065			822,901			861,202			822,901
Portfolio loans		769,785			752,443			729,308			769,785			729,308
Allowance for loan losses		11,874			8,000			8,115			11,874			8,115
Shareholders' equity		78,747			83,363			79,524			78,747			79,524
AVERAGE BALANCES
Assets:
Total assets	$	1,065,623		$	1,063,204		$	927,820		$	1,064,967		$	888,212
Earning assets		987,829			988,376			855,746			989,045			824,130
Securities		223,139			226,040			177,496			218,246			169,468
Portfolio loans		764,690			762,336			678,250			763,577			654,662
Liabilities and shareholders' equity:
Total deposits	$	864,217		$	861,855		$	778,059		$	863,643		$	747,013
Interest bearing deposits		777,357			776,941			694,830			777,790			664,657
Interest bearing liabilities		885,878			884,069			758,286			885,453			723,992
Total shareholders' equity		82,898			83,925			77,953			83,532			73,655
INCOME STATEMENT
Net interest income	$	8,139		$	7,520		$	7,198		$	15,659		$	14,027
Net interest income-FTE (1)		8,244			7,615			7,292			15,860			14,210
Provision for loan losses		4,664			474			853			5,138			1,236
Noninterest income		3,154			3,334			2,433			6,488			5,422
Noninterest expense		8,840			8,522			8,009			17,362			15,367
Taxes		(1,076	)		411			133			(667	)		675
Net income (loss)		(1,135	)		1,447			636			314			2,171
Total revenue		11,293			10,854			9,631			22,147			19,449
PER SHARE DATA
Basic net income (loss) per common share	$	(0.16	)	$	0.20		$	0.09		$	0.04		$	0.32
Diluted net income (loss) per common share		(0.16	)		0.20			0.09			0.04			0.32
Cash dividends per common share		0.18			0.18			0.18			0.36			0.36
Basic average common shares outstanding		7,295,663			7,295,663			6,921,152			7,295,663			6,683,736
Diluted average common shares outstanding		7,295,663			7,295,663			6,921,162			7,295,663			6,683,736
KEY RATIOS
Return on average assets (2)		-0.43	%		0.55	%		0.27	%		0.06	%		0.49	%
Return on average common equity (2)		-5.51	%		6.93	%		3.27	%		0.76	%		5.94	%
Efficiency ratio		77.56	%		77.83	%		82.35	%		77.69	%		78.28	%
Noninterest expense to average assets (2)		3.34	%		3.22	%		3.46	%		3.28	%		3.49	%
Average equity to average assets		7.78	%		7.89	%		8.40	%		7.84	%		8.29	%
Net interest margin		3.31	%		3.06	%		3.37	%		3.18	%		3.43	%
Net interest margin (FTE) (1)		3.36	%		3.10	%		3.42	%		3.22	%		3.48	%
ASSET QUALITY
Nonperforming loans	$	15,428		$	15,044		$	13,259		$	15,428		$	13,259
Other real estate owned		2,351			2,680			2,132			2,351			2,132
Total nonperforming assets		17,779			17,724			15,391			17,779			15,391
Net Charge Offs		790			294			1,094			1,084			1,530
Total nonperforming loans to total loans		2.00	%		2.00	%		1.82	%		2.00	%		1.82	%
Total nonperforming assets to total assets		1.66	%		1.66	%		1.53	%		1.66	%		1.53	%
Net charge-offs to average loans (2)		0.42	%		0.16	%		0.65	%		0.29	%		0.47	%
Allowance for loan losses		1.54	%		1.06	%		1.11	%		1.54	%		1.11	%
Allowance to nonperforming loans		76.96	%		53.18	%		61.20	%		76.96	%		61.20	%
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized

CONTACT:
For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643