Exhibit 99.1
LNB Bancorp, Inc. Reports First Quarter Results
LORAIN, Ohio--(BUSINESS WIRE)--April 26, 2006--LNB Bancorp, Inc.
(NASDAQ:LNBB):
-- Net Income 22-cents per diluted share for 1st quarter 2006
-- Results impacted by margin pressures
-- Strong deposit growth, stable credit quality, good expense management
LNB Bancorp, Inc. (NASDAQ:LNBB) today reported net income for the three
months ended March 31, 2006 of $1,448,000, or $.22 per diluted share, compared
to $1,571,000, or $.24 per diluted share for the quarter ended March 31, 2005.
Included in net income for the three month period ended March 31, 2005 was
$317,000 of gains on the sale of assets.
Daniel E. Klimas, president and chief executive officer, said, "We saw
strong deposit growth, good expense management and stable credit quality
measures in the first quarter, but we did not reach the revenue levels we had
anticipated."
Klimas said the flattening yield curve put pressure on the net interest
margin which, combined with flat loan growth, resulted in a decline in net
interest income. While revenue growth in the first quarter did not meet
management's expectations, the majority of the company's annual growth
traditionally comes in the second through fourth quarters. "Moving into the
second quarter, our loan pipeline is increasing," said Klimas.
"The financial services industry is extremely competitive in northern Ohio,
perhaps the most competitive of any region of the country," said Klimas, who
pointed to the fact that there are at least a dozen banking competitors in
Lorain County alone. "However, LNB Bancorp has a clear growth strategy that
focuses on its strengths as an independent community bank.
"Amid this competitive environment, the keys for 2006 will be stabilizing
the net interest margin and growing the loan portfolio, while maintaining stable
credit quality," he said. "Our balance sheet remains strong, we are focused on
successfully executing the strategy we embarked on in 2005 and remain optimistic
about our long-term prospects." Klimas emphasized a number of significant
investments that are expected to have positive long-term impact. In 2005,
strategic investments were made in the residential mortgage, private banking and
small business functions. Earlier this year, Lorain National Bank announced
plans to construct two new branches in high growth areas of Lorain County and
establish a business development office in Cuyahoga County with a special focus
on small business. Those offices are expected to be operational in the summer
and fall of this year, respectively.
Key Performance Measures
Net interest income for the first quarter was $7,203,000, compared to
$7,332,000 for the first quarter a year ago and $7,671,000 for the fourth
quarter of 2005. This was a $129,000, or 1.8 percent, decline from the first
quarter of 2005 and a $468,000, or 6.1 percent, decline from the fourth quarter
of 2005. The net interest margin for the first quarter this year was 3.89
percent, compared to 4.06 percent recorded for the fourth quarter of 2005, and
4.09 percent for the first quarter of 2005. The first quarter net interest
margin decline was the result of the flat yield curve, competitive rates for
deposits and loans and a rapid shift from low-cost core funding to higher-priced
money market accounts and time deposits. While there was a rapid decline in the
net interest margin in January, some stabilization was apparent by the end of
the first quarter.
Noninterest income was $2,121,000 in the first quarter of 2006, compared
with $2,927,000 for the first quarter of 2005 and $2,204,000 for the fourth
quarter of 2005. The decline in noninterest income in the first quarter of 2006
as compared to the same period in 2005 was $806,000, or 27.5 percent. Included
in the first quarter of 2005 was $370,000 of revenue from LNB Mortgage LLC. With
the closing of this subsidiary, these fees are no longer generated. Also
included in the first quarter of 2005 were gains on the sale of assets of
$317,000. Deposit service charges and ATM fees increased 6.6 percent and 7.2
percent, respectively, in the first quarter of 2006 as compared to the same
period in 2005. The decline in noninterest income in the first quarter 2006 as
compared to the fourth quarter of 2005 was primarily due to a one-time loan
placement fee recorded in the fourth quarter of 2005.
Noninterest expense was $7,209,000 in the first quarter of 2006, a
$462,000, or 6.0 percent, decline from $7,671,000 during the same period in
2005, and a $151,000, or 2.0 percent, decline from the fourth quarter in 2005.
The $462,000 decline between the first quarter of 2006 and the same period in
2005 was primarily due to lower salary and benefit expense and lower
communications expense. Salary and benefit expense was lower due to the closing
of LNB Mortgage LLC. The noninterest expense improvement in the first quarter of
the year from the fourth quarter of 2005 was attributable to decreases in third
party services, travel and entertainment, supplies, postage and delivery and
communications expense.
"While we are making good progress on expense management, continued
investments are required to execute our long-term strategy," said Klimas.
Credit quality continues to be stable. At March 31, 2006, nonperforming
loans were $6,481,000, compared to $6,494,000 and $6,586,000 at December 31,
2005 and March 31, 2005 respectively. At the end of the first quarter of 2006,
the ratios of total nonperforming loans to total portfolio loans and total
nonperforming assets to total assets were 1.10 percent and 0.88 percent,
respectively, as compared to the 1.10 percent and 0.86 percent, respectively, at
yearend 2005. The company's senior credit administration team is aggressively
pursuing the resolution of these nonperforming loans. Net charge-offs for the
first quarter were $204,000 as compared to $1,418,000 and $240,000 in the fourth
quarter of 2005 and in the first quarter of 2005, respectively. Net charge-offs
(annualized) for the first quarter were 0.14 percent of average portfolio loans,
an improvement over 0.95 percent in the fourth quarter of 2005, and 0.17 percent
in the first quarter of 2005. The provision for loan losses was $150,000 in the
first quarter of 2006 as compared to $150,000 in the fourth quarter of 2005 and
$399,000 in the first quarter of 2005. The allowance for loan losses ended the
first quarter of 2006 at $6,568,000 compared to $6,622,000 at year-end 2005 and
$7,545,000 at the end of the first quarter of 2005. Total assets at the end of
the first quarter of 2006 were $810.1 million, an increase of $29.0 million, or
3.7 percent over the same period a year ago and $9.0 million, or 1.1 percent,
compared to December 31, 2005. Total deposits at the end of the first quarter
this year were $674.1 million, up from $609.1 million in the same period a year
ago and $640.2 million at the end of 2005. Total portfolio loans at March 31,
2006 were $588.2 million, up 2.5 percent from March 31, 2005, but flat compared
to December 31, 2005.
About LNB Bancorp, Inc.
LNB Bancorp, Inc. is an $810.1 million 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. Lorain National Bank serves customers
through 20 retail-banking locations and 24 ATMs in Lorain, eastern Erie and
western Cuyahoga 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
March 31, 2006 December 31, 2005
-------------- -----------------
(unaudited)
(Dollars in thousands except
share amounts)
ASSETS
Cash and due from Banks $25,081 $23,923
Federal funds sold and short-term
investments - -
Securities:
Available for sale, at fair value 157,883 151,629
Federal Home Loan Bank and Federal
Reserve Stock 3,242 3,645
-------------- ----------------
Total securities 161,125 155,274
-------------- ----------------
Loans:
Loans held for sale 2,599 2,586
Portfolio loans 588,226 588,425
Allowance for loan losses (6,568) (6,622)
-------------- ----------------
Net loans 584,257 584,389
-------------- ----------------
Bank premises and equipment, net 11,413 10,833
Other real estate owned 608 432
Bank owned life insurance 14,161 13,935
Goodwill and intangible assets, net 3,279 3,321
Accrued interest receivable 3,275 3,053
Other assets 6,894 5,961
-------------- ----------------
Total Assets $810,093 $801,121
============== ================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing $87,997 $87,597
Savings, money market and interest-
bearing demand 275,304 265,831
Certificates of deposit 310,755 286,788
-------------- ----------------
Total deposits 674,056 640,216
-------------- ----------------
Short-term borrowings 21,901 32,616
Federal Home Loan Bank advances 41,093 53,896
Accrued interest payable 2,153 2,126
Accrued taxes, expenses and other
liabilities 3,513 3,861
-------------- ----------------
Total Liabilities 742,716 732,715
============== ================
Shareholders' Equity
Common stock, par value $1 per
share, authorized 15,000,000
shares, issued 6,771,867 at March
31, 2006 and December 31, 2005 6,772 6,772
Additional paid-in capital 26,334 26,334
Retained earnings 43,235 42,945
Accumulated other comprehensive loss (3,491) (2,996)
Treasury shares at cost, 293,194 at
March 31, 2006 and 250,694 at
December 31, 2005 (5,473) (4,649)
-------------- ----------------
Total Shareholders' Equity 67,377 68,406
-------------- ----------------
Total Liabilities and Shareholders'
Equity $810,093 $801,121
============== ================
Consolidated Statements of Income (unaudited)
Three Months Ended March 31,
----------------------------
2006 2005
------------- --------------
(Dollars in thousands except
share and per share
amounts)
Interest Income
Loans $10,078 $8,833
Securities:
U.S. Government agencies and
corporations 1,339 1,019
State and political subdivisions 103 114
Other debt and equity securities 52 50
Federal funds sold and short-term
investments 36 36
------------- --------------
Total interest income 11,608 10,052
Interest Expense
Deposits:
Certificates of deposit, $100 and
over 1,370 683
Other deposits 2,434 1,447
Federal Home Loan Bank advances 400 501
Short-term borrowings 201 89
------------- --------------
Total interest expense 4,405 2,720
------------- --------------
Net Interest Income 7,203 7,332
Provision for Loan Losses 150 399
------------- --------------
Net interest income after provision
for loan losses 7,053 6,933
Noninterest Income
Investment and trust services 509 517
Deposit service charges 968 908
Other service charges and fees 451 461
Mortgage banking revenue - 370
Income from bank owned life insurance 145 193
Other income 46 161
------------- --------------
Total fees and other income 2,119 2,610
Securities gains, net - 180
Gains on sale of loans - 132
Gains on sale of other assets, net 2 5
------------- --------------
Total noninterest income 2,121 2,927
Noninterest Expense
Salaries and employee benefits 3,578 3,978
Furniture and equipment 737 733
Net occupancy 478 517
Outside services 419 309
Marketing and public relations 391 307
Supplies, postage and freight 298 371
Telecommunications 199 312
Ohio Franchise tax 232 182
Electronic banking expenses 145 123
Other expense 732 839
------------- --------------
Total noninterest expense 7,209 7,671
------------- --------------
Income before income tax expense 1,965 2,189
Income tax expense 517 618
------------- --------------
Net Income $1,448 $1,571
============= ==============
Net Income Per Common Share
Basic $0.22 $0.24
Diluted 0.22 0.24
Dividends declared 0.18 0.18
Average Common Shares Outstanding
Basic 6,504,981 6,641,173
Diluted 6,504,981 6,641,173
LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
-----------------------------------
March 31, December 31, March 31,
2006 2005 2005
-----------------------------------
END OF PERIOD BALANCES
Assets $810,093 $801,121 $781,092
Deposits 674,056 640,216 609,098
Portfolio loans 588,226 588,425 574,100
Allowance for loan losses 6,568 6,622 7,545
Shareholders' equity 67,377 68,406 68,356
AVERAGE BALANCES
Assets:
Total assets $804,553 $801,045 $780,963
Earning assets 751,537 750,215 726,431
Securities 158,027 156,503 144,501
Portfolio loans 589,888 591,141 572,464
Liabilities and shareholders'
equity:
Total deposits $661,204 $643,592 $619,576
Interest bearing deposits 573,542 557,506 521,514
Interest bearing liabilities 642,058 639,109 606,554
Total shareholders' equity 69,339 69,545 70,707
INCOME STATEMENT
Net interest income $7,203 $7,671 $7,332
Net interest income-FTE(1) 7,251 7,719 7,386
Provision for loan losses 150 150 399
Noninterest income 2,121 2,203 2,927
Noninterest expense 7,209 7,360 7,671
Taxes 517 531 618
- ----------------------------------------------------------------------
Net income 1,448 1,833 1,571
- ----------------------------------------------------------------------
Total revenue 9,324 9,874 10,259
PER SHARE DATA
Basic net income Per common share $0.22 $0.28 $0.24
Diluted net income per common
share 0.22 0.28 0.24
Cash dividends per common share 0.18 0.18 0.18
Basic average common shares
outstanding 6,504,981 6,544,706 6,641,181
Diluted average common shares
outstanding 6,504,981 6,544,819 6,641,181
KEY RATIOS
Return on average assets(2) 0.73% 0.91% 0.82%
Return on average common
equity(2) 8.47% 10.46% 9.01%
Efficiency ratio 76.92% 74.18% 74.38%
Noninterest expense to average
assets(2) 3.63% 3.65% 3.98%
Average equity to average assets 8.62% 8.68% 9.05%
Net interest margin 3.89% 4.06% 4.09%
Net interest margin (FTE)(1) 3.91% 4.08% 4.12%
Quarterly asset growth(2) 4.54% -5.53% -0.29%
Quarterly portfolio loan
growth(2) -0.13% -3.67% 1.30%
Quarterly deposit growth(2) 12.14% -5.95% 9.89%
ASSET QUALITY
Nonperforming loans $6,481 $6,494 $6,586
Other real estate owned 608 432 476
Total nonperforming assets 7,089 6,926 7,062
Net Charge Offs 204 1,418 240
Total nonperforming loans to
total loans 1.10% 1.10% 1.15%
Total nonperforming assets to
total assets 0.88% 0.86% 0.90%
Net charge-offs to average
loans(2) 0.14% 0.95% 0.17%
Allowance for loan losses 1.12% 1.13% 1.31%
Allowance to nonperforming loans 101.34% 101.97% 114.56%
(1) FTE -- fully tax equivalent at 34% tax rate (2) Annualized for the three
month periods *T
CONTACT: For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643