LNB Bancorp (LNBB) 8-K LNB Bancorp, Inc. Reports Earnings for the Third Quarter 2012

Exhibit 99.1

LNB Bancorp, Inc. Reports Earnings for the Third Quarter 2012

• Net income of $1.5 million
• Loan balances grew by $48 million over prior year, or 5.7%
• Nonperforming assets continue to decline, down $2.3 million from the previous quarter
• Lorain National Bank opened a mortgage loan production office in Solon, Ohio, extending the bank’s reach into additional high-growth markets.

LORAIN, Ohio--(BUSINESS WIRE)--October 25, 2012--LNB Bancorp, Inc. (NASDAQ: LNBB) (“LNB” or the “Company”) today reported financial results for the quarter ended September 30, 2012. Net income was $1.53 million compared to $1.67 million for the third quarter of 2011, a decline of $147,000 or 8.79%. Net income available to common shareholders was $1.21 million, or $0.15 per common share, compared to $1.35 million, or $0.17 per common share, for the 2011 third quarter. For the first nine months of 2012, net income was $4.46 million, up $954,000 or 27%, from the first nine months of the prior year. Net income available to common shareholders for the first nine months of 2012 was $3.51 million, or $0.44 per common share; this compares to $2.56 million for the 2011 nine-month period, or $0.32 per common share, an increase of $0.12 per share, or 37.5%.

“We are particularly pleased with the continued progress that we are making in credit quality,” noted Daniel E. Klimas, president and chief executive officer of LNB Bancorp, Inc. “Non-performing assets have declined $2.3 million in the quarter and nearly $5 million year over year. The ratio of non-performing assets to total assets is 2.84% in the quarter, down from 3.35% a year ago.

“Loans have grown by $42.6 million since year-end 2011. This month, the U.S. Small Business Administration recognized Lorain National Bank for ranking 4^th in the Cleveland metro area in small business SBA loan production over the last twelve months.

“We have participated in the resurgence in the automobile industry through our indirect lending activities, originating auto loans through dealers in Ohio, Indiana, Georgia, North Carolina, Kentucky and Tennessee. The auto loan portfolio has increased $21 million during the first nine months of 2012.”

Third Quarter Review

Net income for the 2012 third quarter declined by $147,000 from the year-ago quarter but increased $88,000 from the preceding quarter. Improvement in asset quality has more than offset the impact of declining interest rates, resulting in a 27% improvement in net income for the first nine months of 2012 compared to the year-earlier nine months.

Operating revenue, including net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations, was $12.5 million for the third quarter of 2012, a decline of $100,000 compared to the third quarter of 2011. Stronger loan sales this quarter offset declining net interest income; and while loan sales were stronger, the Company still achieved $47 million of growth in average earning assets year over year. Net interest income on a tax-equivalent basis (FTE) in the quarter was $9.6 million, down $600,000, or 6.0%, from the 2011 third quarter. The net interest margin (FTE) for the full nine months of 2012 was 3.53%, a decline of fifteen basis points from the 2011 nine-month period.

Excluding gains of $46,000 and $7,000 from securities sales in the third quarter of 2012 and 2011 respectively, noninterest income from recurring operations was $3.0 million for the third quarter of 2012 compared to $2.5 million for the year-ago third quarter, an increase of 17.8%. Strong mortgage and auto loan originations and sales accounted for the majority of fee income growth, up $183,000, or double the level of gains in the 2011 third quarter.

For the third quarter of 2012, noninterest expense was $8.5 million compared to $8.3 million for the year-ago quarter. On a pretax, tax­ equivalent basis, pre-provision core earnings* for the third quarter were $3.94 million, down 7.8%, from the third quarter of 2011.

Total assets were $1.2 billion as of September 30, 2012, up 3.1% since September 30, 2011. Portfolio loans increased 5.7% during the same 12-month period, to $885.7 million. Of the $48.2 million in total loan growth over the past twelve months, $42.6 million was booked since year-end 2011. Commercial lending was the primary contributor to recent loan growth, up $28.3 million since the beginning of the year.

Asset quality continues to improve. Nonperforming assets declined by $5 million, or 12.7%, over the past twelve months, to $34.2 million. LNB added $1.9 million to the loan loss reserve during the quarter. At quarter-end, the loan loss reserve was 1.99% of total portfolio loans compared to 2.13% for the year-ago third quarter and 1.99% for the second quarter of 2012.

All regulatory ratios continue to exceed the threshold for “well-capitalized.” Tangible common equity ratio improved by 13 basis points to 5.79% as a result of $3.5 million growth in common equity since September 30, 2011.

* Pre-provision core earnings is a non-GAAP financial measure that the Company’s management believes is useful in analyzing the Company’s underlying performance trends, particularly in periods of economic stress. Pre-provision core earnings is defined as income before income tax expense, adjusted to exclude the impact of provision for loan losses. Pre-provision core earnings is reconciled to the related GAAP financial measure in the “Reconciliation” table included after the consolidated financial statements and supplemental financial information included in this press release.

About LNB Bancorp, Inc.

LNB Bancorp, Inc. is a $1.2 billion bank 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 its Morgan Bank division serve customers through 20 retail-banking locations and 28 ATMs in Lorain, Erie, Cuyahoga and Summit counties, as well as a loan production office in Solon, Ohio. North Coast Community Development Corporation is a wholly owned subsidiary of The Lorain National Bank. 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.

Forward-Looking Statements

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 but are not limited to:

• a worsening of economic conditions or slowing of any economic recovery, which could negatively impact, among other things, business activity and consumer spending and could lead to a lack of liquidity in the credit markets;
• changes in the interest rate environment which could reduce anticipated or actual margins;
• increases in interest rates or further weakening of economic conditions that could constrain borrowers’ ability to repay outstanding loans or diminish the value of the collateral securing those loans;
• market conditions or other events that could negatively affect the level or cost of funding, affecting the Company’s ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth, and new business transactions at a reasonable cost, in a timely manner and without adverse consequences;
• changes in political conditions or the legislative or regulatory environment, including new or heightened legal standards and regulatory requirements, practices or expectations, which may impede profitability or affect the Company’s financial condition (such as, for example, the Dodd-Frank Act and rules and regulations that have been or may be promulgated under the Act);
• persisting volatility and limited credit availability in the financial markets, particularly if market conditions limit the Company’s ability to raise funding to the extent required by banking regulators or otherwise;
• significant increases in competitive pressure in the banking and financial services industries, particularly in the geographic or business areas in which the Company conducts its operations;
• limitations on the Company’s ability to return capital to shareholders, including the ability to pay dividends, and the dilution of the Company’s common shares that may result from, among other things, funding any repurchase or redemption of the Company’s outstanding preferred stock;
• adverse effects on the Company’s ability to engage in routine funding transactions as a result of the actions and commercial soundness of other financial institutions;
• general economic conditions becoming less favorable than expected, continued disruption in the housing markets and/or asset price deterioration, which have had and may continue to have a negative effect on the valuation of certain asset categories represented on the Company’s balance sheet;
• increases in deposit insurance premiums or assessments imposed on the Company by the FDIC;
• a failure of the Company’s operating systems or infrastructure, or those of its third-party vendors, that could disrupt its business;
• risks that are not effectively identified or mitigated by the Company’s risk management framework; and
• difficulty attracting and/or retaining key executives and/or relationship managers at compensation levels necessary to maintain a competitive market position; as well as the risks and uncertainties described from time to time in the Company’s reports as filed with the SEC.

The Company undertakes no obligation to update or clarify forward-looking statements, whether as a result of new information, future events or otherwise.

CONSOLIDATED BALANCE SHEETS
	At September 30, 2012			At December 31, 2011
	(unaudited)
	(Dollars in thousands except share amounts)
ASSETS
Cash and due from Banks	$	20,445		$	34,323
Federal funds sold and interest bearing deposits in banks		8,082			6,324
Cash and cash equivalents		28,527			40,647
Securities Available for sale, at fair value		235,334			226,012
Total securities		235,334			226,012
Restricted stock		5,741			5,741
Loans held for sale		3,380			3,448
Loans:
Portfolio loans		885,715			843,088
Allowance for loan losses		(17,587	)		(17,063	)
Net loans		868,128			826,025
Bank premises and equipment, net		8,954			8,968
Other real estate owned		1,653			1,687
Bank owned life insurance		18,370			17,868
Goodwill, net		21,582			21,582
Intangible assets, net		629			731
Accrued interest receivable		3,758			3,550
Other assets		10,573			12,163
Total Assets	$	1,206,629		$	1,168,422
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing	$	143,085		$	126,713
Savings, money market and interest-bearing demand		382,613			359,977
Certificates of deposit		496,011			504,390
Total deposits		1,021,709			991,080
Short-term borrowings		988			227
Federal Home Loan Bank advances		47,494			42,497
Junior subordinated debentures		16,238			16,238
Accrued interest payable		928			1,118
Accrued taxes, expenses and other liabilities		3,195			3,988
Total Liabilities		1,090,552			1,055,148
Shareholders' Equity
Preferred stock, Series A Voting, no par value, authorized 150,000 shares at September 30, 2012 and December 31, 2011.		-			-
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 25,223 shares authorized and issued at September 30, 2012 and December 31, 2011.		25,223			25,223
Discount on Series B preferred stock		(90	)		(101	)
Warrant to purchase common stock		-			146
Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 8,272,548 at September 30, 2012 and 8,210,443 at December 31, 2011.		8,273			8,210
Additional paid-in capital		39,060			39,607
Retained earnings		47,353			44,080
Accumulated other comprehensive income		2,350			2,201
Treasury shares at cost, 328,194 shares at September 30, 2012 and at December 31, 2011		(6,092	)		(6,092	)
Total Shareholders' Equity		116,077			113,274
Total Liabilities and Shareholders' Equity	$	1,206,629		$	1,168,422

Consolidated Statements of Income (unaudited)
	Three Months Ended September 30,					Nine Months Ended September 30,
	2012		2011			2012			2011
	(Dollars in thousands except share and per share amounts)					(Dollars in thousands except share and per share amounts)
Interest Income
Loans	$	9,779	$	10,692		$	30,022		$	31,731
Securities:
U.S. Government agencies and corporations		1,145		1,505			3,686			4,594
State and political subdivisions		289		257			867			770
Other debt and equity securities		69		67			210			210
Federal funds sold and short-term investments		8		15			27			38
Total interest income		11,290		12,536			34,812			37,343
Interest Expense
Deposits		1,450		2,044			4,608			6,531
Federal Home Loan Bank advances		214		263			641			790
Short-term borrowings		-		-			-			2
Junior subordinated debenture		179		170			528			511
Total interest expense		1,843		2,477			5,777			7,834
Net Interest Income		9,447		10,059			29,035			29,509
Provision for Loan Losses		1,875		2,100			5,442			7,545
Net interest income after provision for loan losses		7,572		7,959			23,593			21,964
Noninterest Income
Investment and trust services		375		378			1,190			1,251
Deposit service charges		994		1,099			2,858			3,015
Other service charges and fees		842		769			2,394			2,494
Income from bank owned life insurance		167		175			501			524
Other income		214		66			614			186
Total fees and other income		2,592		2,487			7,557			7,470
Securities gains, net		46		7			46			507
Gains on sale of loans		364		181			916			598
Gain (Loss) on sale of other assets, net		31		(133	)		(68	)		(158	)
Total noninterest income		3,033		2,542			8,451			8,417
Noninterest Expense
Salaries and employee benefits		4,131		3,986			12,136			12,149
Furniture and equipment		1,273		821			2,982			2,299
Net occupancy		531		569			1,664			1,769
Professional fees		414		450			1,473			1,381
Marketing and public relations		312		215			954			761
Supplies, postage and freight		317		265			825			826
Telecommunications		191		163			536			547
Ohio Franchise tax		304		303			927			899
FDIC assessments		346		396			1,132			1,369
Other real estate owned		107		144			414			941
Electronic banking expenses		121		236			682			668
Loan and collection expense		352		334			1,009			1,086
Other expense		144		447			1,400			1,345
Total noninterest expense		8,542		8,329			26,133			26,040
Income before income tax expense		2,063		2,172			5,911			4,341
Income tax expense		538		500			1,443			827
Net Income	$	1,525	$	1,672		$	4,468		$	3,514
Dividends and accretion on preferred stock		319		319			956			956
Net Income Available to Common Shareholders	$	1,206	$	1,353		$	3,512		$	2,558
Net Income Per Common Share
Basic	$	0.15	$	0.17		$	0.44		$	0.32
Diluted		0.15		0.17			0.44			0.32
Dividends declared		0.01		0.01			0.03			0.03
Average Common Shares Outstanding
Basic		7,944,354		7,882,439			7,937,781			7,879,575
Diluted		7,949,118		7,882,439			7,941,990			7,879,575

LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
	Three Months Ended										Nine Months Ended
	September 30,		June 30,		March 31,		December 31,		September 30,		September 30,		September 30,
END OF PERIOD BALANCES	2012		2012		2012		2011		2011		2012		2011
Cash and Cash Equivalents	$	28,527	$	56,619	$	44,112	$	40,647	$	40,648	$	28,527	$	40,648
Securities		235,334		228,788		231,851		226,012		232,358		235,334		232,358
Restricted stock		5,741		5,741		5,741		5,741		5,741		5,741		5,741
Loans held for sale		3,380		1,207		4,462		3,448		4,069		3,380		4,069
Portfolio loans		885,715		867,459		862,220		843,088		837,492		885,715		837,492
Allowance for loan losses		17,587		17,300		17,115		17,063		17,845		17,587		17,845
Net loans		868,128		850,159		845,105		826,025		819,647		868,128		819,647
Other assets		65,519		65,431		67,823		66,549		67,820		65,519		67,820
Total assets	$	1,206,629	$	1,207,945	$	1,199,094	$	1,168,422	$	1,170,283	$	1,206,629	$	1,170,283
Total deposits		1,021,709		1,023,553		1,016,166		991,080		989,279		1,021,709		989,279
Other borrowings		64,720		64,560		64,628		58,962		64,107		64,720		64,107
Other liabilities		4,123		4,296		4,240		5,106		4,199		4,123		4,199
Total liabilities		1,090,552		1,092,409		1,085,034		1,055,148		1,057,585		1,090,552		1,057,585
Total shareholders' equity		116,077		115,537		114,061		113,274		112,698		116,077		112,698
Total liabilities and shareholders' equity	$	1,206,629	$	1,207,945	$	1,199,094	$	1,168,422	$	1,170,283	$	1,206,629	$	1,170,283
AVERAGE BALANCES
Assets:
Total assets	$	1,202,425	$	1,206,297	$	1,176,454	$	1,168,340	$	1,167,114	$	1,195,086	$	1,167,432
Earning assets*		1,128,665		1,122,918		1,093,618		1,082,438		1,081,696		1,115,117		1,086,414
Securities		233,153		226,476		222,832		224,778		232,252		227,508		237,394
Portfolio loans		876,817		866,909		856,364		833,811		835,090		865,462		820,644
Liabilities and shareholders' equity:
Total deposits	$	1,016,029	$	1,022,428	$	993,839	$	991,105	$	990,189	$	1,010,784	$	991,664
Interest bearing deposits		872,309		885,922		869,107		866,037		865,043		875,767		870,984
Interest bearing liabilities		939,268		950,647		933,033		925,530		925,041		940,977		930,786
Total shareholders' equity		115,666		115,281		114,156		112,925		112,678		115,036		111,433
INCOME STATEMENT
Total Interest Income	$	11,290	$	11,845	$	11,677	$	12,006	$	12,536	$	34,812	$	37,343
Total Interest Expense		1,843		1,912		2,022		2,274		2,477		5,777		7,834
Net interest income		9,447		9,933		9,655		9,732		10,059		29,035		29,509
Provision for loan losses		1,875		1,667		1,900		2,808		2,100		5,442		7,545
Other income		2,592		2,384		2,581		2,517		2,487		7,557		7,470
Net gain on sale of assets		441		159		294		481		55		894		947
Noninterest expense		8,542		9,047		8,544		8,104		8,329		26,133		26,040
Income before income taxes		2,063		1,762		2,086		1,818		2,172		5,911		4,341
Income tax expense		538		324		581		329		500		1,443		827
Net income		1,525		1,438		1,505		1,489		1,672		4,468		3,514
Preferred stock dividend and accretion		319		318		319		320		319		956		956
Net income available to common shareholders	$	1,206	$	1,120	$	1,186	$	1,169	$	1,353	$	3,512	$	2,558
Common cash dividend declared and paid	$	79	$	79	$	79	$	79	$	79	$	238	$	237
Net interest income-FTE (1)	$	9,592	$	10,093	$	9,806	$	9,877	$	10,203	$	29,494	$	29,909
Pre-provision core earnings		3,938		3,429		3,986		4,626		4,272		11,353		11,886

	Three Months Ended															Nine Months Ended
	September 30,			June 30,			March 31,			December 31,			September 30,			September 30,			September 30,
	2012			2012			2012			2011			2011			2012			2011
PER SHARE DATA
Basic net income per common share	$	0.15		$	0.14		$	0.15		$	0.15		$	0.17		$	0.44		$	0.32
Diluted net income per common share		0.15			0.14			0.15			0.15			0.17			0.44			0.32
Cash dividends per common share		0.01			0.01			0.01			0.01			0.01			0.03			0.03
Book value per common shares outstanding		11.45			11.38			11.19			11.18			11.11			11.45			11.11
Tangible book value per common shares outstanding**		8.65			8.58			8.39			8.35			8.28			8.65			8.28
Period-end common share market value		6.09			6.58			6.94			4.70			3.75			6.09			3.75
Market as a % of book		53.20	%		57.82	%		61.99	%		42.04	%		33.75	%		53.20	%		33.75	%
Basic average common shares outstanding		7,944,354			7,944,354			7,924,562			7,882,249			7,882,439			7,937,781			7,879,575
Diluted average common shares outstanding		7,949,118			7,950,539			7,925,368			7,882,249			7,882,439			7,941,990			7,879,575
Common shares outstanding		7,944,354			7,944,354			7,944,354			7,882,249			7,882,249			7,944,354			7,882,249
KEY RATIOS
Return on average assets (2)		0.50	%		0.48	%		0.51	%		0.51	%		0.57	%		0.50	%		0.40	%
Return on average common equity (2)		5.25	%		5.02	%		5.30	%		5.23	%		5.89	%		5.19	%		4.22	%
Efficiency ratio		67.66	%		71.60	%		67.38	%		62.94	%		65.35	%		68.87	%		67.94	%
Noninterest expense to average assets (2)		2.83	%		3.02	%		2.92	%		2.75	%		2.83	%		2.92	%		2.98	%
Average equity to average assets		9.62	%		9.56	%		9.70	%		9.67	%		9.65	%		9.63	%		9.55	%
Net interest margin (FTE) (1)		3.38	%		3.61	%		3.61	%		3.62	%		3.74	%		3.53	%		3.68	%
Common stock dividend payout ratio		6.59	%		7.10	%		6.68	%		6.74	%		5.83	%		6.78	%		9.24	%
Common stock market capitalization	$	48,381		$	52,274		$	55,134		$	37,047		$	29,558		$	48,381		$	29,558
ASSET QUALITY
Allowance for Loan Losses
Allowance for loan losses, beginning of period	$	17,300		$	17,115		$	17,063		$	17,845		$	17,351		$	17,063		$	16,136
Provision for loan losses		1,875			1,667			1,900			2,808			2,100			5,442			7,545
Charge-offs		1,681			1,621			2,076			3,747			1,751			5,378			6,362
Recoveries		93			139			228			157			145			460			526
Net charge-offs		1,588			1,482			1,848			3,590			1,606			4,918			5,836
Allowance for loan losses, end of period	$	17,587		$	17,300		$	17,115		$	17,063		$	17,845		$	17,587		$	17,845
CAPITAL & LIQUIDITY
Period-end tangible common equity to assets**		5.79	%		5.73	%		5.65	%		5.73	%		5.66	%		5.79	%		5.66	%
Average equity to assets		9.62	%		9.56	%		9.70	%		9.67	%		9.65	%		9.63	%		9.55	%
Average equity to loans		13.19	%		13.30	%		13.33	%		13.54	%		13.49	%		13.29	%		13.58	%
Average loans to deposits		86.30	%		84.79	%		86.17	%		84.13	%		84.34	%		85.62	%		82.75	%
Tier 1 leverage ratio (3)		9.17	%		8.78	%		8.87	%		8.80	%		8.87	%		9.17	%		8.49	%
Tier 1 risk-based capital ratio (3)		11.71	%		11.46	%		11.37	%		11.39	%		11.37	%		11.71	%		11.14	%
Total risk-based capital ratio (3)		12.97	%		13.97	%		13.94	%		14.01	%		13.94	%		12.97	%		13.84	%
Nonperforming Assets
Nonperforming loans	$	32,584		$	34,993		$	36,870		$	34,471		$	37,115		$	32,584		$	37,115
Other real estate owned		1,653			1,506			1,845			1,687			2,116			1,653			2,116
Total nonperforming assets	$	34,237		$	36,499		$	38,715		$	36,158		$	39,231		$	34,237		$	39,231
Ratios
Total nonperforming loans to total loans		3.68	%		4.03	%		4.28	%		4.09	%		4.43	%		3.68	%		4.43	%
Total nonperforming assets to total assets		2.84	%		3.02	%		3.23	%		3.09	%		3.35	%		2.84	%		3.35	%
Net charge-offs to average loans (2)		0.72	%		0.69	%		0.87	%		1.71	%		0.76	%		0.76	%		0.95	%
Provision for loan losses to average loans (2)		0.85	%		0.77	%		0.89	%		1.34	%		1.00	%		0.84	%		1.23	%
Allowance for loan losses to portfolio loans		1.99	%		1.99	%		1.98	%		2.02	%		2.13	%		1.99	%		2.13	%
Allowance to nonperforming loans		53.97	%		49.44	%		46.42	%		49.50	%		48.08	%		53.97	%		48.08	%
Allowance to nonperforming assets		51.37	%		47.40	%		44.21	%		47.19	%		45.49	%		51.37	%		45.49	%
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized
(3) 9-30-12 ratio is estimated.
* Earning Assets includes Loans Held for Sale
* * Non-GAAP measures.

Reconciliation of Pre-Provision Core Earnings*
	Three Months Ended September 30,		Nine Months Ended September 30,
	2012	2011	2012	2011
Pre-provision Core Earnings*	$ 3,938	$ 4,272	$ 11,353	$ 11,886
Provision for Loan Losses	1,875	2,100	5,442	7,545
Income before income tax expense	$ 2,063	$ 2,172	$ 5,911	$ 4,341

* Pre-provision core earnings is a non-GAAP financial measure that the Company’s management believes is useful in analyzing the Company’s underlying performance trends, particularly in periods of economic stress. Pre-provision core earnings is defined as income before income tax expense, adjusted to exclude the impact of provision for loan losses.

CONTACT:
LNB Bancorp, Inc.
Peter R. Catanese, Senior Vice President, 440-244-7126