LNB Bancorp (LNBB) 8-K LNB Bancorp, Inc. Reports Second Quarter 2013 Results

Exhibit 99.1

LNB Bancorp, Inc. Reports Second Quarter 2013 Results

• Net income available to common shareholders of $1.7 million, a 52% increase from second quarter of last year
• Noninterest income of $3.1 million, a 21% improvement
• Nonperforming assets declined by $8.7 million, or 24%

LORAIN, Ohio--(BUSINESS WIRE)--July 25, 2013--LNB Bancorp, Inc. (NASDAQ:LNBB) (“LNB” or the “Company”) today reported financial results for the second quarter 2013. Net income available to common shareholders was $1.7 million, or $0.18 per common share, compared to $1.1 million, or $0.14 per common share, for the year-ago quarter. Net income available to common shareholders for the first six months of 2013 was $2.6 million, or $0.29 per share.

Noninterest income was $3.1 million for the second quarter of 2013 compared to $2.5 million for the prior-year second quarter. This 21% year over year increase was driven primarily by growth in mortgage and indirect auto lending businesses. Noninterest income for the first six months of 2013 was $6.4 million, up $986,000, or 18%, from the same six month period in 2012.

“Although interest rates increased at the end of the quarter, overall we posted a healthy gain on the sale of loans of $587,000 for the quarter, up 186% from $205,000 earned in the second quarter of 2012,” stated Daniel E. Klimas, president and chief executive officer of LNB Bancorp. “Noninterest income growth has helped to offset our margin compression. The growth in mortgage revenue was largely the result of strategic investments made in 2012 to expand our sales and credit teams,” added Klimas.

Noninterest expense was $8.6 million for the second quarter of 2013 compared with $9.0 million in the same period of 2012, a decrease of 4.7%. “Expense management continues to be a key contributor to our success,” stated Klimas.

The Company continues to make progress on improving credit quality as non-performing assets at the end of the second quarter of 2013 declined by $8.7 million from the second quarter of 2012. The ratio of non-performing assets to total assets at June 30, 2013 was 2.28%, down from 3.02% at June 30, 2012. The provision for loan losses was $1.1 million in the second quarter of 2013, down $617,000 from the 2012 second quarter, reflecting the Company’s improvement in credit quality. Net charge-offs were $1.0 million for the second quarter of 2013, or 0.47% of average loans (annualized), compared to $1.5 million, or 0.69% of average loans (annualized), in the second quarter of 2012.

Operating revenue, including net interest income on a fully tax equivalent basis (“FTE”) plus noninterest income from operations, was $12.2 million for the second quarter of 2013, which was down $397,000, or 3.1%, from the second quarter of the prior year. The net interest margin (FTE) for the second quarter of 2013 was 3.20%, a decline of 3 basis points compared to the first quarter 2013, and a decline of 41 basis points from the 2012 second quarter.

Total assets at June 30, 2013 were $1.22 billion, up $10.3 million, or 0.9%, from June 30, 2012. Total deposits at June 30, 2013 were $1.04 billion, up $15.7 million, or 1.5%, from June 30, 2012.

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. 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 June 30, 2013			At December 31, 2012
	(unaudited)
	(Dollars in thousands except share amounts)
ASSETS
Cash and due from Banks	$	36,663		$	24,139
Federal funds sold and interest bearing deposits in banks		12,871			6,520
Cash and cash equivalents		49,534			30,659
Securities Available for sale, at fair value		228,766			203,763
Total securities		228,766			203,763
Restricted stock		5,741			5,741
Loans held for sale		3,423			7,634
Loans:
Portfolio loans		882,896			882,548
Allowance for loan losses		(17,815	)		(17,637	)
Net loans		865,081			864,911
Bank premises and equipment, net		8,456			8,721
Other real estate owned		1,149			1,366
Bank owned life insurance		18,948			18,611
Goodwill, net		21,582			21,582
Intangible assets, net		527			594
Accrued interest receivable		3,896			3,726
Other assets		11,143			10,946
Total Assets	$	1,218,246		$	1,178,254
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing	$	138,728		$	139,894
Savings, money market and interest-bearing demand		396,070			377,287
Certificates of deposit		504,481			482,411
Total deposits		1,039,279			999,592
Short-term borrowings		1,859			1,115
Federal Home Loan Bank advances		46,607			46,508
Junior subordinated debentures		16,238			16,238
Accrued interest payable		825			882
Accrued taxes, expenses and other liabilities		4,544			3,775
Total Liabilities		1,109,352			1,068,110
Shareholders' Equity
Preferred stock, Series A Voting, no par value, authorized 150,000 shares at June 30, 2013 and December 31, 2012.		-			-
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, 9,147 shares authorized and issued at June 30, 2013 and 18,880 shares at December 31, 2012.		9,147			18,880
Discount on Series B preferred stock		(27	)		(65	)
Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 9,631,896 at June 30, 2013 and 8,272,548 at December 31, 2012.		9,632			8,273
Additional paid-in capital		47,661			39,141
Retained earnings		51,164			48,767
Accumulated other comprehensive income		(2,591	)		1,240
Treasury shares at cost, 328,194 shares at June 30, 2013 and at December 31, 2012		(6,092	)		(6,092	)
Total Shareholders' Equity		108,894			110,144
Total Liabilities and Shareholders' Equity	$	1,218,246		$	1,178,254

Consolidated Statements of Income (unaudited)
	Three Months Ended			Three Months Ended			Six Months Ended			Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2013			2012			2013			2012
	(Dollars in thousands except share and per share amounts)
Interest Income
Loans	$	9,264		$	10,194		$	18,318		$	20,243
Securities:
U.S. Government agencies and corporations		867			1,281			1,708			2,541
State and political subdivisions		298			291			586			578
Other debt and equity securities		138			69			222			141
Federal funds sold and short-term investments		9			10			16			19
Total interest income		10,576			11,845			20,850			23,522
Interest Expense
Deposits		1,236			1,527			2,485			3,158
Federal Home Loan Bank advances		157			212			311			427
Short-term borrowings		-			-			1			-
Junior subordinated debenture		174			173			340			349
Total interest expense		1,567			1,912			3,137			3,934
Net Interest Income		9,009			9,933			17,713			19,588
Provision for Loan Losses		1,050			1,667			2,400			3,567
Net interest income after provision for loan losses		7,959			8,266			15,313			16,021
Noninterest Income
Investment and trust services		440			425			815			815
Deposit service charges		869			929			1,685			1,864
Other service charges and fees		808			804			1,639			1,552
Income from bank owned life insurance		170			169			338			334
Other income		232			58			553			400
Total fees and other income		2,519			2,385			5,030			4,965
Securities gains, net		-			-			178			-
Gains on sale of loans		587			205			1,243			552
Loss on sale of other assets, net		(34	)		(47	)		(47	)		(99	)
Total noninterest income		3,072			2,543			6,404			5,418
Noninterest Expense
Salaries and employee benefits		4,224			3,894			9,251			8,005
Furniture and equipment		1,134			1,200			2,083			2,270
Net occupancy		549			554			1,137			1,133
Professional fees		586			564			1,076			1,059
Marketing and public relations		349			395			638			642
Supplies, postage and freight		274			265			581			508
Telecommunications		175			172			337			345
Ohio Franchise tax		302			307			610			623
FDIC assessments		238			394			480			786
Other real estate owned		48			175			125			307
Loan and collection expense		374			308			762			657
Other expense		369			819			823			1,256
Total noninterest expense		8,622			9,047			17,903			17,591
Income before income tax expense		2,409			1,762			3,814			3,848
Income tax expense		586			324			878			905
Net Income	$	1,823		$	1,438		$	2,936		$	2,943
Dividends and accretion on preferred stock		117			318			374			637
Net Income Available to Common Shareholders	$	1,706		$	1,120		$	2,562		$	2,306
Net Income Per Common Share
Basic	$	0.18		$	0.14		$	0.29		$	0.29
Diluted		0.18			0.14			0.29			0.29
Dividends declared		0.01			0.01			0.02			0.02
Average Common Shares Outstanding
Basic		9,303,702			7,944,354			8,755,457			7,934,458
Diluted		9,319,142			7,950,528			8,769,291			7,938,383

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,			December 31,			June 30,			June 30,			June 30,
END OF PERIOD BALANCES	2013			2013			2012			2012			2013			2012
Cash and Cash Equivalents	$	49,534		$	54,954		$	30,659		$	56,619		$	49,534		$	56,619
Securities		228,766			223,173			203,763			228,788			228,766			228,788
Restricted stock		5,741			5,741			5,741			5,741			5,741			5,741
Loans held for sale		3,423			6,250			7,634			1,207			3,423			1,207
Portfolio loans		882,896			889,931			882,548			867,459			882,896			867,459
Allowance for loan losses		17,815			17,806			17,637			17,300			17,815			17,300
Net loans		865,081			872,125			864,911			850,159			865,081			850,159
Other assets		65,701			68,940			65,546			65,431			65,701			65,431
Total assets	$	1,218,246		$	1,231,183		$	1,178,254		$	1,207,945		$	1,218,246		$	1,207,945
Total deposits		1,039,279			1,049,176			999,593			1,023,553			1,039,279			1,023,553
Other borrowings		64,704			64,684			63,861			64,560			64,704			64,560
Other liabilities		5,369			7,118			4,656			4,295			5,369			4,295
Total liabilities		1,109,352			1,120,978			1,068,110			1,092,408			1,109,352			1,092,408
Total shareholders' equity		108,894			110,205			110,144			115,537			108,894			115,537
Total liabilities and shareholders' equity	$	1,218,246		$	1,231,183		$	1,178,254		$	1,207,945		$	1,218,246		$	1,207,945
AVERAGE BALANCES
Assets:
Total assets	$	1,233,694		$	1,195,633		$	1,198,845		$	1,206,297		$	1,214,767		$	1,191,376
Earning assets*	$	1,147,869		$	1,113,292			1,124,703			1,122,918			1,130,676			1,108,268
Securities	$	225,644		$	207,791			224,876			226,476			217,207			224,654
Portfolio loans		882,499			884,893			883,228			866,909			883,689			859,722
Liabilities and shareholders' equity:
Total deposits	$	1,053,952		$	1,016,968		$	1,013,808		$	1,022,428		$	1,035,562		$	1,008,133
Interest bearing deposits	$	914,652		$	879,208			870,551			885,922			897,028			877,514
Interest bearing liabilities	$	979,260		$	943,566			935,239			950,647			961,512			941,840
Total shareholders' equity		110,619			110,416			116,573			115,281			110,518			114,718
INCOME STATEMENT
Total Interest Income	$	10,576		$	10,274		$	10,920		$	11,845		$	20,850		$	23,522
Total Interest Expense		1,567			1,570			1,732			1,912			3,137			3,934
Net interest income		9,009			8,704			9,188			9,933			17,713			19,588
Provision for loan losses		1,050			1,350			1,800			1,667			2,400			3,567
Other income		2,519			2,511			2,598			2,385			5,030			4,965
Net gain on sale of assets		553			821			778			158			1,374			453
Noninterest expense		8,622			9,281			8,634			9,047			17,903			17,591
Income before income taxes		2,409			1,405			2,130			1,762			3,814			3,848
Income tax expense		586			292			491			324			878			905
Net income		1,823			1,113			1,639			1,438			2,936			2,943
Preferred stock dividend and accretion		117			257			310			318			374			637
Net income available to common shareholders	$	1,706		$	856		$	1,329		$	1,120		$	2,562		$	2,306
Common cash dividend declared and paid	$	93		$	79		$	79		$	79		$	172		$	158
Net interest income-FTE (1)	$	9,169		$	8,860		$	9,339		$	10,095		$	18,029		$	19,903
Total Operating Revenue (4)	$	12,241		$	12,192		$	12,715		$	12,638		$	24,433		$	25,321
	Three Months Ended												Six Months Ended
	June 30,			March 31,			December 31,			June 30,			June 30,			June 30,
	2013			2013			2012			2012			2013			2012
PER SHARE DATA
Basic net income per common share	$	0.18		$	0.10		$	0.17		$	0.14		$	0.29		$	0.29
Diluted net income per common share		0.18			0.10			0.17			0.14			0.29			0.29
Cash dividends per common share		0.01			0.01			0.01			0.01			0.02			0.02
Book value per common shares outstanding		10.36			10.87			11.50			11.38			10.36			11.38
Tangible book value per common shares outstanding**		8.06			8.49			8.70			8.58			8.06			8.58
Period-end common share market value		8.59			8.31			5.90			6.58			8.59			6.58
Market as a % of tangible book		106.53	%		97.93	%		67.82	%		76.69	%		106.53	%		76.69	%
Basic average common shares outstanding		9,303,702			8,201,120			7,944,354			7,944,354			8,755,457			7,934,458
Diluted average common shares outstanding		9,319,142			8,212,038			7,949,556			7,950,528			8,769,291			7,938,383
Common shares outstanding		9,631,896			9,303,702			7,944,354			7,944,354			9,631,896			7,944,354
KEY RATIOS
Return on average assets (2)		0.59	%		0.38	%		0.54	%		0.48	%		0.49	%		0.50	%
Return on average common equity (2)		6.61	%		4.09	%		5.59	%		5.02	%		5.36	%		5.16	%
Efficiency ratio		70.44	%		76.12	%		67.90	%		71.59	%		73.27	%		69.47	%
Noninterest expense to average assets (2)		2.80	%		3.15	%		2.87	%		3.02	%		2.97	%		2.97	%
Average equity to average assets		8.97	%		9.23	%		9.72	%		9.56	%		9.10	%		9.63	%
Net interest margin (FTE) (1)		3.20	%		3.23	%		3.30	%		3.61	%		3.22	%		3.61	%
Common stock dividend payout ratio		5.46	%		9.59	%		5.88	%		7.10	%		6.83	%		6.88	%
Common stock market capitalization	$	82,738		$	77,314		$	46,872		$	52,274		$	82,738		$	52,274
Tangible common equity ratio		6.49	%		6.52	%
ASSET QUALITY
Allowance for Loan Losses
Allowance for loan losses, beginning of period	$	17,806		$	17,637		$	17,587		$	17,115			17,637			17,063
Provision for loan losses		1,050			1,350			1,800			1,667			2,400			3,567
Charge-offs		1,667			1,428			2,201			1,621			3,095			3,697
Recoveries		626			247			451			139			873			367
Net charge-offs		1,041			1,181			1,750			1,482			2,222			3,330
Allowance for loan losses, end of period	$	17,815		$	17,806		$	17,637		$	17,300		$	17,815		$	17,300
Nonperforming Assets
Nonperforming loans	$	26,605		$	28,514		$	27,796		$	34,993		$	26,605		$	34,993
Other real estate owned		1,149			1,215			1,366			1,506			1,149			1,506
Total nonperforming assets	$	27,754		$	29,729		$	29,162		$	36,499		$	27,754		$	36,499
Ratios
Total nonperforming loans to total loans		3.01	%		3.20	%		3.15	%		4.03	%		3.01	%		4.03	%
Total nonperforming assets to total assets		2.28	%		2.41	%		2.48	%		3.02	%		2.28	%		3.02	%
Net charge-offs to average loans (2)		0.47	%		0.54	%		0.79	%		0.69	%		0.51	%		0.78	%
Provision for loan losses to average loans (2)		0.48	%		0.62	%		0.81	%		0.77	%		0.55	%		0.83	%
Allowance for loan losses to portfolio loans		2.02	%		2.00	%		2.00	%		1.99	%		2.02	%		1.99	%
Allowance to nonperforming loans		66.96	%		62.45	%		63.45	%		49.44	%		66.96	%		49.44	%
Allowance to nonperforming assets		64.19	%		59.89	%		60.48	%		47.40	%		64.19	%		47.40	%
CAPITAL & LIQUIDITY
Period-end tangible common equity to assets**		6.49	%		6.53	%		5.98	%		5.73	%		6.49	%		5.73	%
Average equity to assets		8.97	%		9.23	%		9.72	%		9.56	%		9.10	%		9.58	%
Average equity to loans		12.53	%		12.48	%		13.20	%		13.30	%		12.51	%		13.34	%
Average loans to deposits		83.73	%		87.01	%		87.12	%		84.79	%		85.33	%		85.28	%
Tier 1 leverage ratio (3)		8.73	%		8.88	%		8.79	%		8.78	%		8.73	%		8.80	%
Tier 1 risk-based capital ratio (3)		11.36	%		11.11	%		11.21	%		11.46	%		11.36	%		11.39	%
Total risk-based capital ratio (3)		12.62	%		12.36	%		12.47	%		13.97	%		12.62	%		14.01	%

(1) FTE -- fully tax equivalent at 34% tax rate

(2) Annualized

(3) 6-30-13 ratio is estimated.

(4) Net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations

* Earning Assets includes Loans Held for Sale

** Non-GAAP measures.

Reconciliation of Pre-Provision Core Earnings*
	Three Months Ended				Six Months Ended
	June 30,				June 30,
	2013		2012		2013		2012
Pre-provision Core Earnings*	$	3,459	$	3,429	$	6,214	$	7,415
Provision for Loan Losses		1,050		1,667		2,400		3,567
Income before income tax expense	$	2,409	$	1,762	$	3,814	$	3,848

* 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