Exhibit 99.1
LNB Bancorp, Inc. Reports Second Quarter Results
LORAIN, Ohio--(BUSINESS WIRE)--July 27, 2006--LNB Bancorp, Inc.
(NASDAQ:LNBB):
-- Earnings of 25 cents per diluted share in second quarter of 2006
versus 13 cents a year ago
-- Performance reflects solid investments to grow revenue
-- Margin shows signs of stabilizing; asset quality stable
LNB Bancorp, Inc. (NASDAQ:LNBB) today reported net income of $1,639,000, or
$.25 per diluted share, for the second quarter of 2006, compared to $852,000, or
$.13 per diluted share, for the same quarter a year ago.
For the first six months of 2006, LNB Bancorp earned $3,087,000, or $.48
per diluted share, versus $2,423,000, or $.36 per diluted share, in the same
period of 2005. The difference in earnings from period to period is due in part
to the impact of substantial expenses incurred in the second quarter of 2005 in
connection with severance costs, technology upgrades and a goodwill impairment
charge.
Management Perspective
"Our second quarter 2006 performance reflects the benefit of important
changes and investments made over the past year," said Daniel E. Klimas,
president and chief executive officer of LNB Bancorp, Inc. "We posted solid
earnings amid margin pressure and stiff competition in our markets.
"While loan growth was still a bit sluggish, there were two important
developments during the quarter that give us reason for optimism," said Klimas.
"One was the opening of a business development office in Independence, Ohio to
serve small to mid-size businesses in Cuyahoga County and the other was the
successful recruitment and hiring of a team of professionals to provide
investment products and services to our customers." As part of that second move,
LNB signed an agreement with Investment Centers of America to provide brokerage
services to its customers.
"Additionally, we are also looking forward to the opening of two new
branches later this year in high growth markets in Lorain County," said Klimas,
who said management's focus for the remainder of 2006 will be directed to
capitalizing on those investments, growing the balance sheet and effectively
managing expenses.
Second Quarter Performance
Net Interest Income
LNB Bancorp's net interest income for the second quarter of 2006 was
$7,196,000, compared to $7,557,000 for the same period last year. This decline
was due to higher funding costs and slow asset growth during the second quarter
of 2006. On a linked quarter basis, second quarter net interest income was down
a modest $7,000 from the first quarter of 2006. Net interest income for the
first half of 2006 was $14,399,000, compared to $14,889,000 for the same period
a year ago.
Net Interest Margin
The net interest margin for the second quarter of 2006 was 3.82 percent,
compared to 4.16 percent for the second quarter of 2005. The net interest margin
stabilized somewhat in the second quarter. The second quarter 2006 margin only
declined 7 basis points from the first quarter of 2006, while the decline from
the fourth quarter of 2005 to first quarter of 2006 was 17 basis points. The net
interest margin for the first six months of 2006 was 3.86 percent versus 4.13
percent for the first half of 2005.
"The positive impact of a rising rate environment on our commercial and
home equity loan portfolios was offset by lower noninterest bearing demand
deposits and a shift of interest-bearing deposits from low-cost savings and
interest-bearing demand deposits to higher-cost money market and retail time
deposits. The flat yield curve and continuing competitive pricing pressures also
contributed to the decline in net interest margin," said Klimas.
Portfolio Loans
Portfolio loans at June 30, 2006 were $598.5 million, up 3.4 percent
annualized from December 31, 2005 and up 3.5 percent over a year earlier. With
the exception of 1-4 family mortgages, the Corporation experienced
year-over-year growth in all loan categories.
Deposits
Deposits at June 30, 2006 were $678.0 million, compared to $640.2 million
at year-end 2005 and $638.8 million a year ago. The increase in deposits in the
first six months of 2006 as compared to year-end 2005 and the same period last
year, reflect positive trends in money market accounts and retail time deposits,
supplemented by growth in public time deposits and brokered time deposits.
For the first half of 2006, new demand deposit accounts were up more than
25 percent from the first half of 2005. "This is very positive in terms of
growing our relationships with customers in our markets," said Klimas.
Asset Quality
Asset quality indicators continue to be stable. The net charge-off trend
continues to be positive, with second quarter 2006 net charge-offs of $165,000,
or .11 percent of average loans annualized, compared to $151,000, or .11 percent
average loans annualized for second quarter 2005. On a year-to-date basis, 2006
net-charge-offs were $369,000, or .13 percent of average loans annualized,
compared to $391,000, or .14 percent of average loans annualized in the first
six months of 2005. Nonperforming loan trends continue to improve. Nonperforming
loans at June 30, 2006 were $6,279,000, representing 1.05 percent of total
loans, compared to $7,233,000, or 1.25 percent of total loans at June 30, 2005.
Potential problem loans, which are classified loans excluding nonperforming
loans, were $13.9 million at June 30, 2006, compared to $14.4 million at
December 31, 2005. The provision for loan losses for the second quarter and
first six months of 2006 was $165,000 and $315,000, respectively, compared to
$399,000 and $798,000 for the same periods in 2005.
At June 30, 2006, the allowance for loan losses was $6.6 million. The
allowance for loan losses to total loans was 1.10 percent and provided 105
percent coverage of nonperforming loans at June 30, 2006, compared to $7.8
million, or 1.35 percent and 108 percent, respectively, at June 30, 2005, and
$6.6 million, or 1.13 percent and 102 percent, respectively at December 31,
2005.
Noninterest Income
Noninterest income was $2,377,000 for the second quarter 2006, compared to
$2,639,000 for the same period in 2005. The difference is due in part to the
fact that the second quarter of 2005 included revenue from the Corporation's
mortgage subsidiary which was closed at year-end 2005. Revenue from the mortgage
subsidiary totaled $355,000 in the second quarter of 2005. The two biggest
components of noninterest income are deposit service charges and trust and
investment management services. Deposit service charges continued to improve
throughout the second quarter and were $1,142,000 for the period as compared to
$1,052,000 in the same period last year, and $968,000 in the first quarter of
2006. Trust and investment management services were $546,000 for the second
quarter 2006 as compared to $555,000 for the same period in 2005, and $509,000
for the first quarter of 2006.
Noninterest Expense
Noninterest expense was $7,191,000 in the second quarter 2006, compared to
$8,472,000 for the second quarter of last year, a decline of 15.1 percent.
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
was specifically attributable to changes in management, job eliminations and
strategic repositioning. On a linked quarter basis, noninterest expense in the
second quarter of 2006 was down .2 percent from the first quarter of 2006.
Salary and benefit expenses were $3,638,000 in the second quarter of 2006, down
$622,000 as compared to the same period in 2005. Included in the second quarter
of 2005 was $642,000 of severance expense. While most expense categories were
about the same or slightly below a year ago, marketing and direct mail postage
expenses were up, reflecting the company's aggressive campaign to open and
expand account relationships across its markets.
Return on Assets and Equity
For the second quarter of 2006, return on average assets was .81 percent,
compared to .44 percent for the second quarter of 2005. Return on average equity
for the second quarter of 2006 was 9.71 percent, compared to 4.83 percent for
the second quarter of 2005. On a year-to-date basis, return on average assets
was .77 percent in 2006 as compared to .62 percent in 2005. Return on average
equity for the first six months of 2006 was 9.09 percent, compared to 6.91
percent in 2005.
About LNB Bancorp, Inc.
LNB Bancorp, Inc. is an $823.6 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
June 30, December 31,
2006 2005
--------------------------
(unaudited)
(Dollars in thousands
except share amounts)
ASSETS
Cash and due from Banks $ 22,857 $ 23,923
Federal funds sold and short-term
investments - -
Securities:
Available for sale, at fair value 160,951 151,629
Federal Home Loan Bank and Federal Reserve
Stock 3,162 3,645
----------- -----------
Total securities 164,113 155,274
----------- -----------
Loans:
Loans held for sale 2,425 2,586
Portfolio loans 598,511 588,425
Allowance for loan losses (6,568) (6,622)
----------- -----------
Net loans 594,368 584,389
----------- -----------
Bank premises and equipment, net 12,054 10,833
Other real estate owned 1,572 432
Bank owned life insurance 14,302 13,935
Goodwill and intangible assets, net 3,237 3,321
Accrued interest receivable 3,542 3,053
Other assets 7,578 5,961
----------- -----------
Total Assets $ 823,623 $ 801,121
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing $ 85,890 $ 87,597
Savings, money market and interest-bearing
demand 281,696 265,831
Certificates of deposit 310,430 286,788
----------- -----------
Total deposits 678,016 640,216
----------- -----------
Short-term borrowings 22,542 32,616
Federal Home Loan Bank advances 50,091 53,896
Accrued interest payable 2,729 2,126
Accrued taxes, expenses and other
liabilities 3,387 3,861
----------- -----------
Total Liabilities 756,765 732,715
=========== ===========
Shareholders' Equity
Common stock, par value $1 per share,
authorized 15,000,000 shares, issued
6,771,867 shares at June 30, 2006 and
December 31, 2005 6,772 6,772
Additional paid-in capital 26,358 26,334
Retained earnings 43,708 42,945
Accumulated other comprehensive loss (4,067) (2,996)
Treasury shares at cost, 318,194 shares at
June 30, 2006 and 250,694 shares at
December 31, 2005 (5,913) (4,649)
----------- -----------
Total Shareholders' Equity 66,858 68,406
----------- -----------
Total Liabilities and Shareholders' Equity $ 823,623 $ 801,121
=========== ===========
Consolidated Statements of Income (unaudited)
Three Months Ended Six Months Ended June
June 30, 30,
--------------------------------------------
2006 2005 2006 2005
---------- ---------- ---------- ----------
(Dollars in thousands except share and per
share amounts)
Interest Income
Loans $ 10,448 $ 9,302 $ 20,526 $ 18,135
Securities:
U.S. Government
agencies and
corporations 1,422 1,052 2,761 2,071
State and political
subdivisions 103 112 206 226
Other debt and equity
securities 49 52 101 102
Federal funds sold and
short-term investments 27 37 63 73
---------- ---------- ---------- ----------
Total interest income 12,049 10,555 23,657 20,607
Interest Expense
Deposits:
Certificates of
deposit, $100 and
over 1,584 820 2,954 1,503
Other deposits 2,727 1,590 5,160 3,037
Federal Home Loan Bank
advances 335 483 735 984
Short-term borrowings 207 105 409 194
---------- ---------- ---------- ----------
Total interest expense 4,853 2,998 9,258 5,718
---------- ---------- ---------- ----------
Net Interest Income 7,196 7,557 14,399 14,889
Provision for Loan Losses 165 399 315 798
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 7,031 7,158 14,084 14,091
Noninterest Income
Investment and trust
services 546 555 1,055 1,072
Deposit service charges 1,142 1,052 2,110 1,960
Other service charges
and fees 489 480 940 941
Mortgage banking revenue - 355 - 725
Income from bank owned
life insurance 142 116 287 309
Other income 58 93 104 254
---------- ---------- ---------- ----------
Total fees and other
income 2,377 2,651 4,496 5,261
Securities gains, net - (6) - 174
Gains on sale of loans - - - 132
Gains on sale of other
assets, net - (6) 2 (1)
---------- ---------- ---------- ----------
Total noninterest income 2,377 2,639 4,498 5,566
Noninterest Expense
Salaries and employee
benefits 3,638 4,260 7,216 8,238
Furniture and equipment 753 802 1,490 1,535
Net occupancy 451 449 929 966
Outside services 435 521 854 830
Marketing and public
relations 367 298 758 605
Supplies, postage and
freight 303 273 601 644
Telecommunications 171 417 370 729
Ohio Franchise tax 197 200 429 382
Electronic banking
expenses 161 141 306 264
Other expense 715 1,111 1,447 1,950
---------- ---------- ---------- ----------
Total noninterest expense 7,191 8,472 14,400 16,143
---------- ---------- ---------- ----------
Income before income tax
expense 2,217 1,325 4,182 3,514
Income tax expense 578 473 1,095 1,091
---------- ---------- ---------- ----------
Net Income $ 1,639 $ 852 $ 3,087 $ 2,423
========== ========== ========== ==========
Net Income Per Common
Share
Basic $ 0.25 $ 0.13 $ 0.48 $ 0.36
Diluted 0.25 0.13 0.48 0.36
Dividends declared 0.18 0.18 0.36 0.36
Average Common Shares
Outstanding
Basic 6,475,651 6,642,390 6,477,154 6,641,789
Diluted 6,475,602 6,642,393 6,477,292 6,641,790
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, June 30, June 30, June 30,
2006 2006 2005 2006 2005
------------------------------------------------------
END OF PERIOD
BALANCES
Assets $ 823,623 $ 810,093 $ 791,078 $ 823,623 $ 791,078
Deposits 678,016 674,056 638,817 678,016 638,817
Portfolio
loans 598,511 588,226 578,331 598,511 578,331
Allowance for
loan losses 6,568 6,568 7,793 6,568 7,793
Shareholders'
equity 66,858 67,389 70,316 66,858 70,316
AVERAGE BALANCES
Assets:
Total assets $ 810,942 $ 804,553 $ 783,493 $ 807,763 $ 782,227
Earning assets 754,822 751,537 728,767 753,186 727,600
Securities 163,089 158,027 143,555 160,572 144,028
Portfolio
loans 589,454 589,888 575,772 589,667 574,119
Liabilities and
shareholders'
equity:
Total
deposits $ 676,845 $ 661,204 $ 623,315 $ 669,066 $ 621,445
Interest
bearing
deposits 593,418 573,542 526,570 583,533 524,041
Interest
bearing
liabilities 653,529 642,058 610,318 647,823 608,436
Total
shareholders'
equity 67,706 69,339 70,683 68,518 70,695
INCOME STATEMENT
Net interest
income $ 7,196 $ 7,203 $ 7,557 $ 14,399 $ 14,889
Net interest
income-FTE(1) 7,243 7,251 7,573 14,494 14,949
Provision for
loan losses 165 150 399 315 798
Noninterest
income 2,377 2,121 2,639 4,498 5,566
Noninterest
expense 7,191 7,209 8,472 14,400 16,143
Taxes 578 517 473 1,095 1,091
- -------------- ---------- ---------- ---------- ---------- ----------
Net income 1,639 1,448 852 3,087 2,423
- -------------- ---------- ---------- ---------- ---------- ----------
Total revenue 9,573 9,324 10,196 18,897 20,455
PER SHARE DATA
Basic net
income per
common
share $ 0.25 $ 0.22 $ 0.13 $ 0.48 $ 0.36
Diluted net
income per
common share 0.25 0.22 0.13 0.48 0.36
Cash dividends
per common
share 0.18 0.18 0.18 0.36 0.36
Basic average
common shares
outstanding 6,475,651 6,504,981 6,642,390 6,477,154 6,641,789
Diluted
average
common shares
outstanding 6,475,602 6,504,981 6,642,393 6,477,292 6,641,790
KEY RATIOS
Return on
average
assets(2) 0.81% 0.73% 0.44% 0.77% 0.62%
Return on
average
common
equity(2) 9.71% 8.47% 4.83% 9.09% 6.91%
Efficiency
ratio 74.75% 76.92% 82.96% 75.82% 78.69%
Noninterest
expense to
average
assets(2) 3.56% 3.63% 4.34% 3.59% 4.16%
Average equity
to average
assets 8.35% 8.62% 9.02% 8.48% 9.04%
Net interest
margin(2) 3.82% 3.89% 4.16% 3.86% 4.13%
Net interest
margin
(FTE)(1)(2) 3.85% 3.91% 4.17% 3.88% 4.14%
ASSET QUALITY
Nonperforming
loans $ 6,279 $ 6,481 $ 7,233 $ 6,279 $ 7,233
Other real
estate owned 1,572 608 357 1,572 357
Total
nonperforming
assets 7,851 7,089 7,590 7,851 7,590
Net Charge
Offs 165 204 151 369 391
Total
nonperforming
loans to
total loans 1.05% 1.10% 1.25% 1.05% 1.25%
Total
nonperforming
assets to
total assets 0.95% 0.88% 0.96% 0.95% 0.96%
Net charge-
offs to
average
loans(2) 0.11% 0.14% 0.11% 0.13% 0.14%
Allowance for
loan losses 1.10% 1.12% 1.35% 1.10% 1.35%
Allowance to
nonperforming
loans 104.60% 101.34% 107.74% 104.60% 107.74%
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized for the three and six month periods presented
CONTACT: For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643