Exhibit 99.1
LNB Bancorp, Inc. Reports Second Quarter Results
-- Earnings impacted by economic challenges
-- Total assets surpass $1 billion for first time in company history
-- Morgan Bancorp, Inc. acquisition completed
LORAIN, Ohio--(BUSINESS WIRE)--July 26, 2007--LNB Bancorp, Inc.
(NASDAQ:LNBB) today announced net income for the second quarter of 2007. Net
income for the quarter was $636,000 or $0.09 per diluted share, compared to net
income of $1,639,000 or $0.25 per diluted share, for the second quarter of 2006.
Net income for the first six months of 2007 totaled $2,171,000, or $0.32 per
diluted share, compared to net income of $3,087,000, or $0.48 per diluted share,
for the six months ended June 30, 2006.
"The weak economic environment in our markets continues to have an impact
on our performance," said Daniel E. Klimas, president and chief executive
officer of LNB Bancorp, Inc. "Specifically, the sluggish residential development
sector has had a profound effect on many banks throughout the region."
Klimas indicated that residential building permits in Lorain County
declined more than 40 percent in the first five months of this year compared to
the first five months a year ago, according to U. S. Census Bureau data.
Unemployment in Lorain County for June this year was 6.6 percent, compared to
5.9 percent in June last year.
"We recognize that it will take time for the local economy to rebound and
for our customers to begin to see the benefits from any improvement in the
economy," said Klimas. "Meanwhile, we are working hard to strategically position
ourselves for this economic improvement.
"Despite this challenging operating environment, we are showing solid loan
growth, gaining market share, and continuing to invest in people and technology
to become an even stronger community bank of scale," said Klimas, who pointed to
the fact that LNB Bancorp surpassed $1 billion in total assets for the first
time in its history.
While non-performing loans are up $7.0 million since June of last year,
they are down $3.4 million since the end of the first quarter. At June 30, 2007,
non-performing loans were approximately $13.3 million and represented about 1.82
percent of total loans. "In the last quarter of 2006, the Company instituted
additional controls over our credit administration process and have been focused
on reviewing our entire commercial portfolio," said Klimas. "We are working
diligently to further resolve the level of non-performing loans and have seen
improvement in our credit quality."
Management also looks at the level of potential problem loans which the
company feels requires a higher level of scrutiny. The level of these loans,
which were $19.3 million at June 30, 2007 as compared to $22.1 million at
December 31, 2006, is also showing improvement.
A major highlight of the second quarter this year was the successful
completion of the merger with Morgan Bank, N.A. of Hudson, Ohio. On May 10,
2007, LNB Bancorp, Inc. announced the completion of the acquisition of Morgan
Bancorp, Inc., of Hudson, Ohio and its wholly-owned subsidiary, Morgan Bank,
N.A., in a stock and cash merger transaction valued at approximately $27.9
million. With this acquisition, the Company has now expanded its market area to
include Summit County. "We are very pleased with the progress of our branch
network and other retail delivery systems. We have made some significant
investments over the past 18 months in terms of locations and personnel as we
create a community bank of scale," said Klimas. "While those investments,
including the Morgan acquisition, certainly carry a short-term cost, we are
confident that these strategic moves will have a positive long-term impact on
our company." The Morgan Bank acquisition contributed approximately $93.2
million in portfolio loans, primarily indirect auto loans, and $101.8 million in
deposits.
Second quarter net interest income totaled $7.2 million, a modest increase
compared to the second quarter of 2006 and a $369,000 increase from the first
quarter of this year. Average earning assets grew by 15 percent, or $111.8
million, from the second quarter of 2006 to the second quarter of 2007, with
approximately $96.3 million contributed by the acquired Morgan Bank portfolio.
Net interest income for the first half of 2007 was $14.0 million, compared to
$14.4 million for the same period a year ago.
The net interest margin was 3.33 percent for the quarter, down seventeen
basis points from 3.50 percent for the first quarter of 2007 and 49 basis points
from 3.82 percent for the second quarter of 2006. The cost of funds remained
flat on a linked quarter basis. In addition to the impact of the increased level
in non-performing loans, the decline in net interest margin from the second
quarter of 2006 was also impacted as the cost of funds rose more than the yield
on assets during that period. The net interest margin for the first six months
of 2007 was 3.41 percent versus 3.86 percent for the first half of 2006.
Non-interest income was $2.4 million for the second quarter of 2007, an
increase of $56,000, or 2.4 percent, compared to the second quarter of 2006. The
increase was largely from net gains recorded on the sale of indirect loans
originated by Morgan and mortgage loans to the secondary market. The company
retains the servicing rights for these loans. Other types of non-interest income
grew as well, including service charges on deposit accounts, and ATM charges
reflecting continued momentum in fee-based services.
Non-interest expense was $8.0 million for the quarter as compared to $7.2
million for the second quarter of 2006. The increases in salaries and benefits,
occupancy and furniture and equipment primarily relate to operating costs
associated with the acquisition of Morgan Bank and other new facilities opened
during 2006 and into the first quarter of 2007. In addition to the Morgan Bank
acquisition, the company continued to strengthen and expand its presence in
Lorain County and adjacent Cuyahoga County. While making these significant
investments for the future, the company has had success in limiting related
increases in overhead expense. The $818,000 increase in non-interest expense
also includes operating costs associated with the new offices, as well as
increases in legal and other carrying costs associated with non-performing
assets.
The provision for loan losses was $853,000 for the quarter compared to
$165,000 for the second quarter of 2006. Annualized net charge-offs were 0.64
percent of average loans for the quarter compared to 0.11 percent for the second
quarter of 2006. Non-performing assets to total assets were 1.54 percent at June
30, 2007 compared to 2.08 percent at March 31, 2007 and 0.95 percent at June 30,
2006. Of the $15.4 million of non-performing assets at June 30, 2007,
approximately $2.1 million is other real estate or repossessed assets in which
collateral held is considered collectible. The allowance for loan losses was
1.11 percent of total loans at June 30, 2007 compared to 1.10 percent at June
30, 2006.
Total assets increased by $178.7 million, or 21.7 percent, from June 30,
2006 to $1.0 billion at June 30, 2007. Over the same twelve month period,
portfolio loans increased by $130.8 million to $729.3 million, and total
deposits increased $144.9 million to $822.9 million. Since December 31, 2006,
portfolio loans increased $101.0 million and total deposits increased $105.6
million. These increases are principally a result of the Morgan Bank
acquisition.
About LNB Bancorp, Inc.
LNB Bancorp, Inc. is a $1.0 billion 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. The Lorain National Bank serves
customers through 22 retail-banking locations and 29 ATMs in Lorain, eastern
Erie, western Cuyahoga and Summit 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, 2007 December 31, 2006
------------- -----------------
(unaudited)
(Dollars in thousands except
share amounts)
ASSETS
Cash and due from Banks $23,986 $29,122
Federal funds sold and short-term
investments - -
Securities:
Trading securities 31,581 -
Available for sale, at fair value 147,751 155,810
Federal Home Loan Bank and Federal
Reserve Stock 4,759 3,248
------------- -----------------
Total securities 184,091 159,058
------------- -----------------
Loans:
Loans held for sale 6,346 -
Portfolio loans 729,308 628,333
Allowance for loan losses (8,115) (7,300)
------------- -----------------
Net loans 727,539 621,033
------------- -----------------
Bank premises and equipment, net 13,826 12,599
Other real estate owned 2,132 1,289
Bank owned life insurance 15,104 14,755
Goodwill and intangible assets, net 23,473 3,157
Accrued interest receivable 4,126 3,939
Other assets 8,068 6,146
------------- -----------------
Total Assets $1,002,345 $851,098
============= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing $89,193 $91,216
Savings, money market and interest-
bearing demand 366,564 278,401
Certificates of deposit 367,144 347,644
------------- -----------------
Total deposits 822,901 717,261
------------- -----------------
Short-term borrowings 21,285 22,163
Federal Home Loan Bank advances 49,206 35,086
Accrued interest payable 4,246 3,698
Accrued taxes, expenses and other
liabilities 25,183 4,193
------------- -----------------
Total Liabilities 922,821 782,401
============= =================
Shareholders' Equity
Common stock, par value $1 per share,
authorized 15,000,000 shares, issued
7,623,857 shares at June 30, 2007
and 6,771,867 at December 31, 2006 7,624 6,772
Additional paid-in capital 37,677 26,382
Retained earnings 42,237 43,728
Accumulated other comprehensive loss (1,922) (2,093)
Treasury shares at cost, 318,194
shares at June 30, 2007 and 250,694
shares at December 31, 2006 (6,092) (6,092)
------------- -----------------
Total Shareholders' Equity 79,524 68,697
------------- -----------------
Total Liabilities and Shareholders'
Equity $1,002,345 $851,098
============= =================
Consolidated Statements of Income (unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------- -------------------
2007 2006 2007 2006
---------- --------- --------- ---------
(Dollars in thousands except share and
per share amounts)
Interest Income
Loans $12,085 $10,448 $23,173 $20,526
Securities:
U.S. Government agencies and
corporations 1,598 1,422 3,162 2,761
State and political
subdivisions 151 103 286 206
Other debt and equity
securities 71 49 126 101
Federal funds sold and short-
term investments 257 27 287 63
---------- --------- --------- ---------
Total interest income 14,162 12,049 27,034 23,657
Interest Expense
Deposits:
Certificates of deposit,
$100 and over 2,131 1,584 4,298 2,954
Other deposits 4,119 2,727 7,433 5,160
Federal Home Loan Bank
advances 274 335 600 735
Short-term borrowings 232 207 465 409
Other interest expense 208 - 211 -
---------- --------- --------- ---------
Total interest expense 6,964 4,853 13,007 9,258
---------- --------- --------- ---------
Net Interest Income 7,198 7,196 14,027 14,399
Provision for Loan Losses 853 165 1,236 315
---------- --------- --------- ---------
Net interest income after
provision for loan losses 6,345 7,031 12,791 14,084
Noninterest Income
Investment and trust services 524 546 1,046 1,055
Deposit service charges 1,136 1,142 2,218 2,110
Other service charges and
fees 595 489 1,101 940
Income from bank owned life
insurance 182 142 349 287
Other income 78 58 145 104
---------- --------- --------- ---------
Total fees and other income 2,515 2,377 4,859 4,496
Securities gains, net (214) - 259 -
Gains on sale of loans 118 - 269 -
Gains (losses) on sale of
other assets, net 14 - 35 2
---------- --------- --------- ---------
Total noninterest income 2,433 2,377 5,422 4,498
Noninterest Expense
Salaries and employee
benefits 3,935 3,638 7,758 7,216
Furniture and equipment 907 753 1,614 1,490
Net occupancy 535 451 1,090 929
Outside services 474 435 829 854
Marketing and public
relations 353 367 615 758
Supplies, postage and freight 323 303 633 601
Telecommunications 203 171 391 370
Ohio Franchise tax 201 197 416 429
Other real estate owned 133 17 247 31
Electronic banking expenses 193 161 382 306
Other charge-offs and losses 101 73 195 160
Other expense 651 625 1,197 1,256
---------- --------- --------- ---------
Total noninterest expense 8,009 7,191 15,367 14,400
---------- --------- --------- ---------
Income before income tax
expense 769 2,217 2,846 4,182
Income tax expense 133 578 675 1,095
---------- --------- --------- ---------
Net Income $636 $1,639 $2,171 $3,087
========== ========= ========= =========
Net Income Per Common Share
Basic $0.09 $0.25 $0.32 $0.48
Diluted 0.09 0.25 0.32 0.48
Dividends declared 0.36 0.18 0.18 0.36
Average Common Shares
Outstanding
Basic 6,921,162 6,475,651 6,683,736 6,477,154
Diluted 6,921,162 6,475,651 6,683,736 6,477,292
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,
2007 2007 2006 2007 2006
----------------------------------------------------
END OF PERIOD
BALANCES
Assets $1,002,345 $852,841 $823,623 $1,002,345 $823,623
Deposits 822,901 722,592 678,016 822,901 678,016
Portfolio loans 729,308 621,940 598,511 729,308 598,511
Allowance for
loan losses 8,115 7,258 6,568 8,115 6,568
Shareholders'
equity 79,524 69,133 66,858 79,524 66,858
AVERAGE BALANCES
Assets:
Total assets $939,536 $848,208 $810,942 $894,103 $807,763
Earning assets 866,666 792,163 754,822 829,620 753,186
Securities 157,947 158,932 163,089 158,437 160,572
Portfolio loans 689,190 630,814 589,454 656,567 589,667
Liabilities and
shareholders'
equity:
Total deposits $789,182 $715,624 $676,845 $752,606 $669,066
Interest bearing
deposits 705,217 634,150 593,418 669,880 583,533
Interest bearing
liabilities 746,373 689,319 653,529 718,003 647,823
Total
shareholders'
equity 78,587 69,309 67,706 73,974 68,518
INCOME STATEMENT
Net interest
income $7,198 $6,829 $7,196 $14,027 $14,399
Net interest
income-FTE (1) 7,295 6,918 7,243 14,210 14,494
Provision for
loan losses 853 383 165 1,236 315
Noninterest
income 2,433 2,989 2,377 5,422 4,498
Noninterest
expense 8,009 7,358 7,191 15,367 14,400
Taxes 133 542 578 675 1,095
- ----------------------------------------------------------------------
Net income 636 1,535 1,639 2,171 3,087
- ----------------------------------------------------------------------
Total revenue 9,631 9,818 9,573 19,449 18,897
PER SHARE DATA
Basic net income
per common
share $0.09 $0.24 $0.25 $0.32 $0.48
Diluted net
income per
common share 0.09 0.24 0.25 0.32 0.48
Cash dividends
per common
share 0.18 0.18 0.18 0.36 0.36
Basic average
common shares
outstanding 6,921,162 6,443,673 6,475,651 6,683,736 6,477,154
Diluted average
common shares
outstanding 6,921,162 6,443,673 6,475,651 6,683,736 6,477,292
KEY RATIOS
Return on
average assets
(2) 0.27% 0.73% 0.81% 0.49% 0.77%
Return on
average common
equity (2) 3.25% 8.98% 9.71% 5.92% 9.09%
Efficiency ratio 82.33% 74.27% 74.75% 78.28% 75.82%
Noninterest
expense to
average assets
(2) 3.42% 3.52% 3.56% 3.47% 3.59%
Average equity
to average
assets 8.36% 8.17% 8.35% 8.27% 8.48%
Net interest
margin 3.33% 3.50% 3.82% 3.41% 3.86%
Net interest
margin (FTE)
(1) 3.38% 3.54% 3.85% 3.45% 3.88%
ASSET QUALITY
Nonperforming
loans $13,259 $16,675 $6,279 $13,259 $6,279
Other real
estate owned 2,132 1,073 1,572 2,132 $1,572
Total
nonperforming
assets 15,391 17,748 7,851 15,391 $7,851
Net Charge Offs 1,105 425 165 1,530 $369
Total
nonperforming
loans to total
loans 1.82% 2.68% 1.05% 1.82% 1.05%
Total
nonperforming
assets to total
assets 1.54% 2.08% 0.95% 1.54% 0.95%
Net charge-offs
to average
loans (2) 0.64% 0.27% 0.11% 0.47% 0.13%
Allowance for
loan losses 1.11% 1.17% 1.10% 1.11% 1.10%
Allowance to
nonperforming
loans 61.20% 43.53% 104.60% 61.20% 104.60%
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized
CONTACT: For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643