Exhibit 99.1
LNB Bancorp, Inc. Reports 2005 Fourth-Quarter and Year-End Results
LORAIN, Ohio--(BUSINESS WIRE)--Jan. 26, 2006--LNB Bancorp, Inc.
(NASDAQ:LNBB):
-- Fourth-Quarter Net Income increases 57 percent from year-ago
period
-- Loan growth continues; net interest margin holds up despite
pressures
-- Additional steps taken to enhance asset quality
LNB Bancorp, Inc. (NASDAQ:LNBB), today reported financial results
for its fourth quarter and full year ended December 31, 2005.
Net income for the fourth quarter of 2005 increased 57 percent,
reaching $1,833,000, compared with $1,165,000 in fourth quarter of
2004. Diluted net income per share for the 2005 fourth quarter
increased 56 percent to $0.28 versus $0.18 in the comparable period a
year ago.
For the full year of 2005, the Company reported net income of
$6,413,000, or $.97 per diluted share, compared with $7,475,000, or
$1.13 per diluted share a year ago.
Fourth Quarter Overview
"We are pleased to close the year on such a positive earnings note
as we continue to take important steps to place us on a solid
foundation for the future," said Daniel E. Klimas, president and chief
executive officer of LNB Bancorp, Inc.
Net interest income was $7,672,000 in the fourth quarter of 2005,
an increase of 5.3 percent as compared with the same period a year
before. This was primarily driven by earning asset growth, as the net
interest margin was 4.08 percent, compared to 4.09 percent during the
same period in 2004.
Noninterest income was $2,204,000 for the three months ended
December 31, 2005, compared with $1,948,000 in the same period in
2004, a 13.1 percent increase. Included in fourth quarter 2004 results
was an impairment charge of $1.2 million related to the write-down of
agency preferred stock owned by the Company. Deposit service charges
were $1,107,000, up 6.3 percent in the quarter as compared to
$1,041,000 in the fourth quarter of 2004. This improvement was offset
by lower mortgage and trust fees in the fourth quarter. The decline in
mortgage banking fees reflects the realignment of the mortgage
operation from a fee-based operation to one with a balance sheet
growth focus.
For the fourth quarter of 2005, noninterest expense was $7,360,000
compared with $7,292,000 for the same period of 2004. Salaries and
benefits were $3,404,000, a decrease of $423,000 or 11.0 percent from
the same period in 2004, reflecting lower staffing levels. However,
higher expenses in several other categories offset this improvement.
In particular, outside services were $701,000, an increase of $359,000
or 105 percent in the fourth quarter as compared to $342,000 in the
same period last year. This reflects higher internal and external
audit costs, higher legal expenses related to corporate governance,
the costs associated with a loan sale and IT consulting fees.
In the fourth quarter the Company took a major step in improving
asset quality. In addition to improvements to the credit process, the
Company sold four loan relationships totaling about $5.7 million of
principal balances that were substandard credits. "Improving asset
quality was one of our primary objectives in 2005," said Klimas.
Nonperforming loans decreased to $6,494,000 at December 31, 2005,
as compared to $7,452,000 at September 30, 2005, but were up as
compared with $4,921,000 at December 31, 2004. The current
nonperforming loans have been charged down to estimated collateral
levels and are well secured. Klimas said an additional relevant
measure of asset quality is the level of potential problem loans,
which were $14.4 million at December 31, 2005, compared to $21.6
million at December 31, 2004.
Net charge-offs for the fourth-quarter were $1,418,000. Included
in the fourth quarter 2005 results were charge-offs of $1,173,000
associated with the sale of four loan relationships. The charge-offs
on the four loan relationships were in line with the specific reserves
established on these loans at December 31, 2004. The provision for
loan losses was $150,000 in the fourth quarter of 2005 as compared to
$399,000 in the same period last year.
Full Year 2005 Overview
The full-year results for 2005 reflect certain costs associated
with repositioning the company for growth. "Early in the year, we
adopted a strategic plan that called for realigning our staffing
levels and recruiting key managers. Many of the costs associated with
those important activities were recognized in the second quarter of
the year," said Klimas.
Despite those costs, the Company posted revenue gains and
completed the year with a strong balance sheet. For the full year, net
interest income increased 6.8 percent to $30,030,000 from $28,122,000
in 2004. The net interest margin for 2005 was 4.09 percent--up 8 basis
points from 4.01 percent in 2004, despite pressures on loan pricing
and funding costs throughout the year.
Noninterest income was $10,377,000 for the year ended December 31,
2005, as compared with $10,442,000 for 2004. Again, 2004 performance
was impacted by an impairment charge of $1.2 million related to the
write-down of agency preferred stock owned by the Company. There was
improvement in deposit service charges and fees, especially in the
last two quarters of 2005. ATM fees and mortgage banking revenue also
improved in 2005. Offsetting these improvements was a reduction in
other service charges of $899,000. This includes merchant card fees, a
business that the Company exited in the fourth quarter of 2004. We
also experienced some weakness in trust income due to competition and
market conditions.
Noninterest expense in 2005 was $30,267,000, an increase of
$3,977,000 or 15.1 percent, as compared to $26,290,000, in 2004. As
previously disclosed, the Company incurred higher personnel and other
noninterest expenses in the second quarter associated with the
recruitment of a new management, a realignment of overall staffing, a
goodwill impairment charge related to its subsidiary LNB Mortgage,
LLC, and writing off various telecommunications contracts. In the
second quarter of 2005, these expenses totaled $1.2 million. In
addition to these specific activities, noninterest expense was
impacted throughout the year by expenditures to improve our compliance
with corporate governance standards, compliance with Sarbanes Oxley
404, and to make improvements in internal auditing and technology.
For the year ended December 31, 2005, the provision for loan
losses totaled $1,248,000 versus $1,748,000 in 2004. The decrease in
the provision for loan losses was due to improved asset quality, most
notably the sale of four substandard loans for which specific reserves
had been established at December 31, 2004. The Company's allowance for
loan losses at December 31, 2005, was $6,622,000 compared with
$7,386,000 on December 31, 2004. The ratio of the allowance for loan
losses to total loans was 1.13 percent at December 31, 2005, as
compared to 1.28 percent at December 31, 2004. The allowance for loan
losses to nonperforming loans was 102 percent on December 31, 2005, a
decrease from 150 percent at the end of 2004.
Net charge-offs for the year were $2,012,000 as compared to
$2,092,000 for 2004. Included in the fourth quarter 2005 results were
charge-offs of $1,173,000 associated with the sale of four loan
relationships. In 2005, net charge-offs were .34 percent of average
loans compared with 0.38 percent in 2004.
Income taxes for the year were $2,479,000 as compared to
$3,051,000 in 2004. This is an effective tax rate in 2005 of 27.9
percent as compared to 29.0 percent in 2004. This reflects the lower
level of pretax income and new markets tax credits generated by the
Company's subsidiary, North Coast Community Development Corporation.
Total assets ended the year at $801.1 million, up nearly $20
million from year-end 2004. Total portfolio loans increased by 2.8
percent as compared to year-end 2004, ending the year at $588.4
million. The Company experienced 4.1 percent growth in commercial
loans, 51.0 percent increase in purchased installment loans and 7.4
percent growth in home equity lines. Real estate loans offset a
portion of this increase declining 16.8 percent. Total deposits at
year-end 2005 were $640.2 million, an increase of nearly $35 million.
"Amid these changes in 2005, we also marked a year in which we
celebrated the 100th anniversary of the company," said Klimas. "This
commemoration gave us an opportunity to recommit ourselves to our
vision of being a high growth, efficiently managed independent
community bank. We are excited about our prospects for the future as
we begin our second century of service to our customers and our
community.
"We believe the foundation has been laid for improved earnings
performance in 2006 and beyond," said Klimas.
About LNB Bancorp, Inc.
LNB Bancorp, Inc. is an $801.1 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. 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
December 31,
---------------------
(Dollars in thousands except share amounts) 2005 2004
- ----------------------------------------------------------------------
Assets (unaudited)
Cash and due from banks $23,923 $23,123
Federal funds sold and short-term investments - 3,695
Securities:
Available for sale, at fair value 151,629 145,588
Federal Home Loan Bank and Federal Reserve
stock 3,645 4,033
- ----------------------------------------------------------------------
Total securities 155,274 149,621
- ----------------------------------------------------------------------
Loans:
Loans held for sale 2,586 3,067
Portfolio loans 588,425 572,157
Allowance for loan losses (6,622) (7,386)
- ----------------------------------------------------------------------
Net loans 584,389 567,838
- ----------------------------------------------------------------------
Bank premises and equipment, net 10,833 11,493
Other real estate owned 432 420
Bank owned life insurance 13,935 13,335
Intangible assets 3,321 3,801
Accrued interest receivable 3,053 2,594
Other assets 5,961 5,729
- ----------------------------------------------------------------------
Total Assets $801,121 $781,649
- ----------------------------------------------------------------------
Liabilities
Deposits
Demand and other noninterest-bearing $87,597 $96,280
Savings, money market, and interest-bearing 265,831 280,169
Certificates of deposit 286,788 229,094
- ----------------------------------------------------------------------
Total deposits 640,216 605,543
Securities sold under repurchase agreements
and other short-term borrowings 32,616 31,619
Federal Home Loan Bank advances 53,896 69,296
Accrued interest payable 2,126 1,172
Accrued taxes, expenses and other liabilities 3,861 3,445
- ----------------------------------------------------------------------
Total Liabilities 732,715 711,075
- ----------------------------------------------------------------------
Shareholders' Equity
Common stock, par value $1 per share,
authorized 15,000,000 shares, issued
6,771,867 shares at December 31, 2005 and
6,766,867 shares at December 31, 2004 6,772 6,766
Additional paid-in capital 26,334 26,243
Retained earnings 42,945 41,292
Accumulated other comprehensive loss (2,996) (1,297)
Treasury stock at cost, 250,694 shares in 2005
and 125,694 shares in 2004 (4,649) (2,430)
- ----------------------------------------------------------------------
Total Shareholders' Equity 68,406 70,574
- ----------------------------------------------------------------------
Total Liabilities and Shareholders' Equity $801,121 $781,649
- ----------------------------------------------------------------------
Consolidated Statements of Income
- ----------------------------------------------------------------------
For the Year Ended
- ----------------------------------------------------------------------
(Dollars in thousands except share
and per share amounts) 2005 2004 2003
- ----------------------------------------------------------------------
Interest Income (unaudited)
Loans $38,145 $32,560 $32,759
Securities:
U.S. Government agencies and
corporations 4,487 3,784 4,155
States and political
subdivisions 439 459 610
Other debt and equity securities 224 301 296
U.S. Treasury securities - - -
Federal funds sold and short-term
investments 137 120 40
- ----------------------------------------------------------------------
Total interest income 43,432 37,224 37,860
Interest Expense
Deposits:
Certificates of deposit, $100
and over 3,937 1,448 1,447
Other deposits 6,976 5,366 5,814
Federal Home Loan Bank advances 1,862 2,066 1,737
Federal funds borrowed and
other short-term borrowings 627 222 198
- ----------------------------------------------------------------------
Total interest expense 13,402 9,102 9,196
- ----------------------------------------------------------------------
Net Interest Income 30,030 28,122 28,664
Provision for Loan Losses 1,248 1,748 2,695
- ----------------------------------------------------------------------
Net interest income after provision
for loan losses 28,782 26,374 25,969
Noninterest income
Investment and trust services 1,940 2,091 1,762
Deposit service charges 4,219 4,187 4,260
Other service charges and fees 1,895 2,794 3,104
Mortgage banking revenue 959 364 -
Income from bank owned life
insurance 600 632 772
Other income 479 592 207
- ----------------------------------------------------------------------
Total fees and other income 10,092 10,660 10,105
Securities gains (losses), net 173 (777) 449
Gain on sale of loans 132 181 236
Gain on sale of credit card
portfolio - - 832
Gain (loss) on sale of other
assets, net (20) 378 2
- ----------------------------------------------------------------------
Total noninterest income 10,377 10,442 11,624
Noninterest Expense
Salaries and employee benefits 15,057 12,995 13,814
Net occupancy 1,830 1,633 1,585
Furniture and Equipment 3,001 2,784 2,517
Electronic banking expenses 542 1,257 1,395
Supplies, postage and freight 1,245 1,208 1,137
Outside services 1,925 1,182 1,441
Marketing and public relations 1,249 1,047 762
Ohio Franchise tax 772 729 673
Other expense 4,646 3,455 3,143
- ----------------------------------------------------------------------
Total noninterest expense 30,267 26,290 26,467
- ----------------------------------------------------------------------
Income before income tax expense 8,892 10,526 11,126
Income tax expense 2,479 3,051 3,411
- ----------------------------------------------------------------------
Net Income $6,413 $7,475 $7,715
- ----------------------------------------------------------------------
Net Income Per Common Share
Basic $0.97 $1.13 $1.17
Diluted 0.97 1.13 1.17
Dividends declared 0.72 0.72 0.70
Average Common Shares Outstanding
Basic 6,612,803 6,631,392 6,615,654
Diluted 6,612,852 6,632,324 6,615,654
- ----------------------------------------------------------------------
LNB Bancorp, Inc.
Financial Highlights
(Unaudited - Dollars in thousands except Share and Per Share Data)
Three Months Ended Twelve Months Ended
--------------------------------------------------
Dec. 31, Sept. 30, Dec. 31, Dec. 31, Dec. 31,
2005 2005 2004 2005 2004
--------------------------------------------------
END OF PERIOD BALANCES
Assets $801,121 $812,437 $781,649 $801,121 $781,649
Deposits 640,216 655,740 605,543 640,216 605,543
Portfolio Loans 588,425 594,493 572,157 588,425 572,157
Allowance for Loan
Losses 6,622 7,890 7,386 6,622 7,386
Shareholders'
Equity 68,406 69,478 70,574 68,406 70,574
AVERAGE BALANCES
Assets:
Total Assets $801,045 $804,797 $775,226 $793,287 $759,537
Earning Assets 750,215 751,254 712,725 739,520 707,031
Securities 156,503 157,117 150,227 152,114 150,227
Loans 591,141 589,684 569,644 584,762 551,515
Liabilities and
Shareholders'
Equity:
Total Deposits $643,592 $652,513 $605,627 $635,785 $589,347
Interest Bearing
Deposits 557,506 561,038 504,897 543,055 497,042
Interest Bearing
Liabilities 639,109 636,721 598,609 624,230 592,815
Total
Shareholders'
Equity 69,545 70,804 71,032 70,427 69,507
INCOME STATEMENT
Net Interest
Income $7,672 $7,470 $7,284 $30,030 $28,122
Net Interest
Income-FTE (1) 7,720 7,519 7,322 30,231 28,337
Provision for Loan
Losses 150 300 399 1,248 1,748
Noninterest Income 2,204 2,608 1,948 10,377 10,442
Noninterest
Expense 7,360 6,764 7,292 30,267 26,290
Net Income 1,833 2,157 1,165 6,413 7,475
PER SHARE DATA
Basic Net Income
Per Common Share $0.28 $0.33 $0.18 $0.97 $1.13
Diluted Net Income
Per Common Share 0.28 0.33 0.18 0.97 1.13
Cash Dividends Per
Common Share 0.18 0.18 0.18 0.72 0.72
Basic Avg Common
Shares
Outstanding 6,544,706 6,625,086 6,641,095 6,612,803 6,631,392
Diluted Avg Common
Shares
Outstanding 6,544,819 6,625,168 6,641,709 6,612,852 6,632,324
KEY RATIOS
Return on Average
Assets (2) 0.91% 1.06% 0.60% 0.81% 0.98%
Return on Average
Common Equity
(2) 10.46% 12.09% 6.52% 9.11% 10.75%
Efficiency Ratio 74% 67% 79% 75% 68%
Average Equity to
Average Assets 8.68% 8.80% 9.16% 8.88% 9.15%
Net Interest
Margin (FTE) (1) 4.08% 3.97% 4.09% 4.09% 4.01%
Net Charge Offs to
Average Loans (2) 0.95% 0.14% 0.72% 0.34% 0.38%
Allowance for Loan
Losses 1.13% 1.33% 1.29% 1.13% 1.28%
ASSET QUALITY
Nonperforming
Loans $6,494 $7,452 $4,921 $6,494 $4,921
Other Real Estate
Owned 432 399 420 432 420
Total
Nonperforming
Assets 6,926 7,851 5,341 6,926 5,341
Net Charge Offs 1,418 203 1,037 2,012 2,092
(1) FTE -- fully tax equivalent at 35% tax rate
(2) Annualized for the three month periods
CONTACT: For LNB Bancorp, Inc.
John Fuller, 216-978-7643