Exhibit 99
LNB Bancorp Reports Second Quarter Earnings;
Board Approves Share Repurchase Program
LORAIN, Ohio--(BUSINESS WIRE)--July 28, 2005--LNB Bancorp, Inc.
(NASDAQ:LNBB)
-- Earnings impacted by significant actions designed to improve
long-term performance
-- Positive revenue, net interest margin trends continue
-- Buyback program approved for up to 5 percent of outstanding
shares
LNB Bancorp, Inc. (NASDAQ:LNBB) reported second quarter and
six-month 2005 earnings today that reflect the impact of a series of
significant actions designed to benefit the company over the long
term.
The company also announced that its Board of Directors has
authorized a share repurchase program of up to 5 percent of LNBB
outstanding common stock.
LNB Bancorp earned 13 cents per diluted share in the second
quarter of 2005, compared to 30 cents per diluted share earned in the
second quarter of 2004. Net income for the second quarter was
$852,000, compared to second quarter net income 2004 of $1,980,000.
For the first six months of 2005, LNB Bancorp earned 36 cents per
diluted share, versus 64 cents per diluted share earned in the same
period of 2004. Net income for the first six months of 2005 was
$2,423,000, compared to net income of $4,236,000 for the same period
of 2004.
Management Perspective
"Second quarter and six-month performance reflect the costs
associated with our progress towards improving long-term performance,"
said Daniel E. Klimas, president and chief executive officer of LNB
Bancorp, Inc. "These charges, however, should not minimize the strong
fundamentals at the core of the company's second quarter performance.
We have a strong balance sheet and continued positive trends in net
interest margin, noninterest income and revenues."
Substantial second quarter expense increases reflect severance
costs associated with a major personnel alignment program, technology
costs related to the purchase of telecommunications equipment, and the
impairment of goodwill related to the company's mortgage subsidiary,
LNB Mortgage, LLC. "The recognition of these expenses allows us to
operate with a clear view going forward," said Klimas.
"Our focus for the remainder of 2005 will be directed to building
upon those positive revenue trends, positioning the company for
long-term growth and effectively managing expenses. We're confident
that our strategies will allow us to fulfill our vision as a high
growth, efficiently managed independent community bank," he said.
Board Chairman James R. Herrick said, "On behalf of the Board of
Directors, I want to state our unanimous support for the significant
announcements made today. The recognition of these expenses represents
a significant step toward setting the Corporation on the right course.
Dan has formed a strong leadership team and solid business strategy to
ensure success."
Regarding the share repurchase program, Herrick said, "The board
believes the stock price of LNB Bancorp is a good value and a buyback
program offers a sound investment for the company's financial capital.
"We all share a common vision of a strong, independent bank and
these strategic actions will go a long way toward helping us achieve
that vision and enhancing shareholder value," said Herrick.
Second Quarter Performance
LNB Bancorp's net interest income for the second quarter of 2005
was $7,557,000, compared to $6,851,000 in the year-earlier quarter.
The increase reflects higher net interest margin and higher average
net earning assets.
Net interest margin trends continue to be favorable for the
company. Net interest margin for the second quarter of 2005 was 4.17
percent, compared to 3.95 percent for the second quarter of 2004. "The
positive effects of a rising rate environment combined with a
flattening of the yield curve have more than offset the competitive
pricing pressures we have been experiencing," said Klimas.
Portfolio loans at June 30, 2005 were $578.3 million, up 2.2
percent annualized from December 31, 2004 and up 6.3 percent over a
year earlier. Aside from some sluggishness in the real estate mortgage
area, loan activity increased in nearly all lending categories in the
most recent quarter.
Deposits at June 30, 2005 were $638.8 million, compared to $605.5
million at year-end 2004 and $591.6 million a year ago. The increase
in deposits in the second quarter as compared to year-end 2004 and the
same quarter last year, reflect positive trends in noninterest
checking accounts and retail time deposits, supplemented by growth in
local municipal deposits and broker deposits.
Asset Quality
Asset quality indicators were mixed as the resolution of problem
credits continues. The net charge-off trend continues to be positive,
with second quarter 2005 net charge-offs of $151,000 (.11 percent of
average loans annualized), compared to $255,000 (.19 percent average
loans annualized) for second quarter 2004. Nonperforming loan trends
deteriorated slightly, as nonperforming loans at June 30, 2005 were
$7,233,000, representing 1.24 percent of total loans, compared to 1.14
percent of total loans at June 30, 2004. The provision for loan losses
was $399,000 for the second quarter of 2005 as compared to $425,000
for the second quarter of 2004.
At June 30, 2005, the allowance for loan losses was $7.8 million.
The allowance for loan losses to total loans was 1.35 percent and
provided 108 percent coverage of nonperforming loans at June 30, 2005,
compared to $8.0 million, or 1.47 percent and 128 percent,
respectively, at June 30, 2004, and $7.4 million, or 1.28 percent and
138 percent, respectively at December 31, 2004.
Noninterest Income
Noninterest income was $2,639,000 for the second quarter 2005 as
compared to $2,612,000 for the same period in 2004. The second quarter
2005 results include revenue from the company's mortgage subsidiary
purchased in September 2004. This revenue totaled $370,000 and
$355,000 in the first and second quarters of 2005, respectively. This
new source of revenue has offset the fees that had been earned through
merchant services, a line of business that was substantially
redesigned in late 2004 resulting in lower risk but also lower
merchant fees and related expenses. The second quarter realized
improved performance in deposit service charges and trust and
investment management services as compared to the same period in 2004.
Deposit service charges improved throughout the second quarter and
were $1,052,000 for the period as compared to $1,031,000 in the same
period last year, and $908,000 in the first quarter of 2005. Trust and
investment management services were $555,000 for the second quarter
2005 as compared to $517,000 for the first quarter of 2005 and
$486,000 for the same period in 2004.
Noninterest Expense
As previously mentioned, quarterly comparisons of noninterest
expense have been affected particularly by several strategic actions
and a reassessment of business lines.
Noninterest expense was $8,472,000 in the second quarter 2005, up
$2,209,000 million (35.3 percent) over the second quarter of last
year. These results reflect several large expenses. During the second
quarter of 2005, $1,218,000 of noninterest expense was recorded in the
salary and benefit and other noninterest expense categories that were
specifically attributable to changes in management, job eliminations
and strategic repositioning. Salary and benefit expenses were
$4,260,000 in the second quarter of 2005, up $1,353,000 over the same
period in 2004. Included in this amount was $642,000 of severance
expense. Included in other noninterest expense is a $311,000 goodwill
impairment charge for LNB Mortgage, LLC -- the Corporation's mortgage
subsidiary. This impairment charge represents 100 percent of the
goodwill. This company has incurred losses and an accumulation of
costs since its purchase. New management is in the process of
realigning the operations of this company to better fit the business
needs of the Corporation. "We remain firmly committed to offering
mortgage products to our customers, and this action will help us
deliver those products more effectively and efficiently," said Klimas.
Included in other noninterest expense is $139,000 paid to
terminate legacy telecommunications contracts. Also during the second
quarter 2005, third-party services were $521,000 as compared to
$300,000 in the same period of 2004, reflecting higher external audit
fees and internal audit fees which were outsourced in the second
quarter of 2005. This decision to outsource internal audit will reduce
salaries and benefits associated with this activity in future
quarters.
For the second quarter of 2005, return on average assets was .44
percent, compared to 1.06 percent for the second quarter of 2004.
Return on average equity for the second quarter of 2005 was 4.83
percent, compared to 11.59 percent for the second quarter of 2004.
Share Repurchase Program
The share repurchase program of up to 5 percent, or about 332,000,
of the company's outstanding common shares, was initiated to take
advantage of the market price of the common shares. These repurchased
shares can be used for a number of corporate purposes, including the
company's stock option and employee benefit plans. Under the share
repurchase program, share repurchases are expected to be made
primarily on the open market from time to time until the 5 percent
target is achieved or earlier termination of the repurchase program by
the Board. Repurchases under the program will be made at the
discretion of management based upon market, business, legal and other
factors.
About LNB Bancorp, Inc.
LNB Bancorp, Inc., is a $791.1 million financial holding company
with two wholly owned subsidiaries: The Lorain National Bank and
Charleston Insurance Agency, Inc. and a 49-percent owned subsidiary,
Charleston Title Agency, LLC. LNB Mortgage LLC and North Coast
Community Development Corporation are wholly owned subsidiaries of The
Lorain National Bank. Brokerage services are provided by the bank
through an agreement with Online Brokerage Services. 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 based on
current expectations. Certain forward-looking statements, which
involve inherent risks and uncertainties, are described in LNB
Bancorp's filings with the Securities and Exchange Commission. A
number of important factors could cause actual results to differ
materially from those in the forward-looking statements. Those factors
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.
Consolidated Balance Sheets (unaudited)
(Dollars in thousands except
share and per share amounts) June 30, 2005 December 31, 2004
- ----------------------------------------------------------------------
Assets
Cash and cash equivalents:
Cash and due from banks $ 30,096 $ 23,123
Short-term investments - 3,695
Total cash and cash
equivalents 30,096 26,818
Investment Securities:
Available for sale, at
fair value 144,718 145,588
Federal Home Loan Bank
and Federal Reserve
stock 4,139 4,033
- ----------------------------------------------------------------------
Total securities 148,857 149,621
- ----------------------------------------------------------------------
Loans:
Loans held for sale 3,867 3,067
Portfolio loans 578,331 572,157
Allowance for loan losses (7,793) (7,386)
- ----------------------------------------------------------------------
Net loans 574,405 567,838
- ----------------------------------------------------------------------
Bank premises and equipment,
net 11,179 11,493
Other real estate owned 357 420
Intangible assets 3,402 3,801
Other assets 22,782 21,658
- ----------------------------------------------------------------------
Total Assets $ 791,078 $ 781,649
- ----------------------------------------------------------------------
Liabilities
Deposits:
Noninterest-bearing $ 93,816 $ 96,280
Interest bearing 545,001 509,263
- ----------------------------------------------------------------------
Total deposits 638,817 605,543
- ----------------------------------------------------------------------
Short-term borrowings 13,241 31,619
Federal Home Loan Bank
advances 62,461 69,296
Accrued interest, taxes and
other liabilities 6,243 4,617
- ----------------------------------------------------------------------
Total Liabilities 720,762 711,075
- ----------------------------------------------------------------------
Shareholders' Equity
Common stock, par value $1
per share, authorized
15,000,000 shares, issued
6,771,867 at June 30, 2005
and 6,766,867 at
December 31, 2004 6,772 6,767
Additional paid-in capital 26,334 26,243
Retained earnings 41,322 41,291
Accumulated other
comprehensive loss (1,682) (1,297)
Treasury stock at cost,
125,686 shares at June 30,
2005 and 125,686 shares at
December 31, 2004 (2,430) (2,430)
- ----------------------------------------------------------------------
Total Shareholders'
Equity 70,316 70,574
- ----------------------------------------------------------------------
Total Liabilities
and Shareholders'
Equity $ 791,078 $ 781,649
- ----------------------------------------------------------------------
Consolidated Statements of Income (unaudited)
For the Three Months For the Six Months
Ended June 30, Ended June 30,
- ----------------------------------------------------------------------
(Dollars in thousands
except share and per
share amounts) 2005 2004 2005 2004
- ----------------------------------------------------------------------
Interest Income
Interest and fees on
loans $ 9,302 $ 7,882 $ 18,135 $ 15,651
Interest and
dividends on
investment
securities:
Taxable 1,106 1,007 2,173 2,031
Tax Exempt 112 128 226 273
Interest on cash
equivalents 35 19 73 33
- ----------------------------------------------------------------------
Total interest
income 10,555 9,036 20,607 17,988
Interest Expense
Deposits 2,410 1,607 4,540 3,221
Short-term
borrowings 105 50 194 91
Federal Home Loan
Bank advances 483 528 984 979
- ----------------------------------------------------------------------
Total interest
expense 2,998 2,185 5,718 4,291
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Net Interest Income 7,557 6,851 14,889 13,697
Provision for Loan
Losses 399 425 798 950
- ----------------------------------------------------------------------
Net interest
income after
provision for
loan losses 7,158 6,426 14,091 12,747
Noninterest Income
Deposit service
charges 1,052 1,031 1,960 2,015
Trust and investment
management services 555 486 1,072 1,072
Income from
investment in life
insurance 116 161 309 320
Mortgage banking
revenue 355 - 725 -
Securities gains,
net (6) - 174 223
Gain on sale of
loans - 46 132 83
Gain on sale of
other assets, net (1) - (1) -
Other noninterest
income 568 888 1,195 1,778
- ----------------------------------------------------------------------
Total
noninterest
income 2,639 2,612 5,566 5,491
Noninterest Expense
Salaries and
employee benefits 4,260 2,907 8,238 5,945
Net occupancy 449 409 966 783
Furniture and
equipment 802 659 1,535 1,329
Electronic banking
expenses 141 393 264 725
Supplies, postage,
and delivery 273 257 644 509
Outside services 521 300 830 534
Marketing and public
relations 298 314 605 493
Ohio franchise tax 200 180 382 368
Goodwill impairment 311 - 311 -
Other noninterest
expense 1,217 844 2,368 1,552
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Total noninterest
expense 8,472 6,263 16,143 12,238
- ----------------------------------------------------------------------
Income before income
tax expense 1,325 2,775 3,514 6,000
Income tax expense 473 795 1,091 1,764
- ----------------------------------------------------------------------
Net Income $ 852 $ 1,980 $ 2,423 $ 4,236
- ----------------------------------------------------------------------
Net Income Per Common
Share
Basic $ 0.13 $ 0.30 $ 0.36 $ 0.64
Diluted 0.13 0.30 0.36 0.64
Dividends declared - - - -
Average Common Shares
Outstanding
Basic 6,641,789 6,625,312 6,641,789 6,621,491
Diluted 6,641,789 6,625,653 6,641,789 6,622,288
- ----------------------------------------------------------------------
LNB Bancorp, Inc.
Second Quarter 2005 Financial Highlights
(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,
2005 2005 2004 2005 2004
-------------------------------------------------------
END OF PERIOD
BALANCES
Assets $ 791,078 $ 781,092 $ 760,137 $ 791,078 $ 760,137
Deposits 638,817 609,098 591,619 638,817 591,619
Portfolio
Loans 578,331 574,100 543,996 578,331 543,996
Allowance for
Loan Losses 7,793 7,545 7,989 7,793 7,989
Shareholders'
Equity 70,316 68,356 68,170 70,316 68,170
AVERAGE
BALANCES
Assets:
Total Assets $ 783,493 $ 780,963 $ 752,494 $ 782,227 $ 748,936
Earning Assets 728,769 726,431 700,301 727,600 697,055
Securities 143,555 144,501 151,033 144,028 151,275
Loans 575,774 572,464 539,513 574,119 537,339
Liabilities and
Shareholders'
Equity:
Total
Deposits $ 623,315 $ 619,576 $ 582,272 $ 621,445 $ 580,069
Interest
Bearing
Deposits 526,570 521,514 492,162 524,041 491,247
Interest
Bearing
Liabilities 610,318 606,554 588,696 608,436 586,834
Total
Shareholders'
Equity 70,683 70,707 68,740 70,695 68,781
INCOME
STATEMENT
Net Interest
Income $ 7,557 $ 7,332 $ 6,851 $ 14,889 $ 13,697
Net Interest
Income-FTE 7,573 7,376 6,871 14,949 13,774
Provision for
Loan Losses 399 399 425 798 950
Noninterest
Income 2,639 2,927 2,612 5,566 5,491
Noninterest
Expense 8,472 7,671 6,263 16,143 12,238
Net Income 852 1,571 1,980 2,423 4,236
PER SHARE DATA
Basic Net
Income Per
Common Share $ 0.13 $ 0.23 $ 0.30 $ 0.36 $ 0.64
Diluted Net
Income Per
Common Share 0.13 0.23 0.30 0.36 0.64
Cash Dividends
Per Common
Share 0.18 0.18 0.18 0.36 0.36
Basic Avg
Common Shares
Outstanding 6,642,390 6,641,181 6,628,515 6,641,789 6,623,156
Diluted Avg
Common Shares
Outstanding 6,642,390 6,641,181 6,628,856 6,641,789 6,623,953
KEY RATIOS
Return on
Average
Assets 0.44% 0.82% 1.06% 0.62% 1.14%
Return on
Average
Common Equity 4.83% 9.01% 11.59% 6.91% 12.39%
Efficiency
Ratio 83% 74% 66% 79% 64%
Average Equity
to Average
Assets 9.02% 9.05% 9.13% 9.04% 9.18%
Net Interest
Margin 4.17% 4.12% 3.95% 4.14% 3.97%
Annualized Net
Charge Offs
to Average
Loans 0.11% 0.17% 0.19% 0.14% 0.26%
Allowance for
Loan Losses 1.35% 1.31% 1.47% 1.35% 1.47%
ASSET QUALITY
Non-accrual
Loans $ 7,233 $ 6,586 $ 6,228 $ 7,233 $ 6,228
Net Charge
Offs 151 240 255 391 691
Other Real
Estate Owned 357 476 596 357 596
Total
Nonperforming
Assets 7,590 7,062 6,824 7,590 6,824
CONTACT: For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643