Exhibit 99.1
LNB Bancorp, Inc. Reports Improved Third
Quarter Results
-- Third quarter earnings increase 18 percent from a year ago
-- Credit quality shows improvement over first half of the year
-- Morgan Bancorp acquisition contributes to enhanced revenue
performance
LORAIN, Ohio--(BUSINESS WIRE)--Oct. 25, 2007--LNB Bancorp, Inc.
(NASDAQ:LNBB) today announced net income for the third quarter of
2007. Net income for the quarter was $1,673,000 or $0.23 per diluted
share, up from net income of $1,419,000 or $0.22 per diluted share,
for the third quarter of 2006.
"The performance this past quarter is a positive indication of the
solid progress we are continuing to make with our long-term strategy,"
said Daniel E. Klimas, president and chief executive officer of LNB
Bancorp, Inc. "Our third quarter performance was a marked improvement
from the first half of this year, despite continuing to operate in a
weak economic environment."
Klimas said the most significant factors behind this upswing were
the contribution of our newly-acquired Morgan Bancorp and improved
credit quality.
"While non-performing loans remain up over a year ago, they are
significantly lower compared to both the first and second quarters of
this year. This improvement in overall credit quality is very
heartening and is a reflection of the additional controls we
implemented over our credit administration process at the end of 2006
and in to 2007," said Klimas.
"We anticipate that we will continue to operate in a difficult
economic environment for the remainder of the year and into 2008, but
we will continue to be diligent in our efforts to grow revenue,
effectively manage our expenses and improve credit quality," said
Klimas.
With the completion of the merger with Morgan Bancorp of Hudson,
Ohio in May 2007, the Company expanded its market area to include
Summit County. "This acquisition has enhanced our income and
opportunities for growth," said Klimas.
"In addition, we continue to see solid progress with the
investments we have made in the past 18 months in both facilities and
personnel as we create a community bank of scale," Klimas said. "We
genuinely appreciate the efforts of our associates and value the
strategic support of our board of directors in these positive
developments."
Third quarter net interest income totaled $7.8 million, up
$508,000 from the same period a year ago and an increase of $630,000
from the second quarter of 2007. Average earning assets grew by 12.1
percent, or $104.4 million, from the third quarter of 2006 to the
third quarter of 2007. Net interest income for the first nine months
of 2007 was $21.9 million, compared to $21.7 million for the same
period a year ago.
The third quarter continued to prove to be a difficult banking
environment with a continued flat yield curve and a challenging
competitive environment. The net interest margin was 3.31 percent for
the quarter, down six basis points from 3.37 percent for the second
quarter of 2007 and 47 basis points from 3.78 percent for the third
quarter of 2006. The net interest margin for the first nine months of
2007 was 3.39 percent versus 3.83 percent for the first nine months of
2006. During the second quarter of 2007, the Company completed two
private offerings of trust preferred securities which reduced the net
interest margin 15 basis points for the quarter and 8 basis points for
the first nine months of 2007.
Noninterest income was $3.0 million for the third quarter of 2007,
an increase of $551,000, or 22.5 percent, compared to the third
quarter of 2006. The increase was largely from net gains recorded on
the sale of indirect loans and mortgage loans to the secondary market.
The Company retains the servicing rights for these loans. The sale of
high quality indirect loans was a primary activity of Morgan Bank
prior to the acquisition and is continued by the Company. 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. Noninterest income for the first nine months of
this year was $8,426,000, a 21.2 percent increase from the $6,951,000
for the same period in 2006.
Non-interest expense was $8.3 million for the quarter as compared
to $7.3 million for the third quarter of 2006. Increases in salaries
and benefits, occupancy and furniture and equipment primarily are
associated with the Morgan acquisition as well as other facilities
opened in over the past 18 months. While making these significant
investments for the future, the Company has had success in limiting
related increases in overhead expense. The $1,047,000 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 Company also expects to
achieve considerable savings in technology costs as LNB and Morgan
systems are merged in the fourth quarter.
The provision for loan losses was $441,000 for the quarter, down
from $600,000 for the third quarter of 2006. Annualized net
charge-offs were 0.32 percent of average loans for the quarter
compared to 0.57 percent for the third quarter of 2006. Non-performing
assets to total assets were 1.37 percent at September 30, 2007
compared to 1.54 percent at June 30, 2007 and 1.05 percent at
September 30, 2006. Of the $14.0 million of non-performing assets at
September 30, 2007, approximately $3.1 million is other real estate or
repossessed assets in which collateral held is considered collectible.
The allowance for loan losses was 1.09 percent of total loans at
September 30, 2007 compared to 1.04 percent at September 30, 2006.
Net income for the first nine months of 2007 totaled $3,844,000,
or $0.56 per diluted share, compared to net income of $4,506,000, or
$0.70 per diluted share, for the nine months ended September 30, 2006.
While we are seeing some success in our long-term growth strategy as
reflected in 5.6 percent revenue growth for the first nine months of
2007 as compared to the same period last year, earnings were impacted
by the struggling local economy and the impact this has had on local
commercial real estate development. This has led to higher loan loss
provisions in 2007, and additional costs to resolve problem loans in
this sector. In the third quarter, progress in these efforts is
reflected in a lower level of nonperforming loans at September 30,
2007 as compared to June 30, 2007. The local economic conditions are
not expected to improve substantially in the fourth quarter, but the
Company continues to work on strategies to further reduce
nonperforming loans.
Total assets increased by $187.7 million from September 30, 2006
to $1.0 billion at September 30, 2007. Over the same twelve month
period, portfolio loans increased by $120.1 million to $727.2 million,
and total deposits increased $145.8 million to $834.3 million. Since
December 31, 2006, portfolio loans increased $98.9 million and total
deposits increased $117.1 million. The Morgan Bancorp acquisition
during the second quarter of this year contributed $93.1 million in
loans and $101.9 million in deposits.
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
September 30, 2007 December 31, 2006
---------------------- --------------------
(unaudited)
(Dollars in thousands except share amounts)
ASSETS
Cash and due from Banks $ 23,887 $ 29,122
Federal funds sold and
short-term investments 500 -
Securities:
Trading securities 32,000 -
Available for sale, at
fair value 166,681 155,810
Federal Home Loan Bank
and Federal Reserve
Stock 5,380 3,248
---------------------- --------------------
Total securities 204,061 159,058
Loans:
Loans held for sale 2,703 -
Portfolio loans 727,194 628,333
Allowance for loan
losses (7,951) (7,300)
---------------------- --------------------
Net loans 721,946 621,033
---------------------- --------------------
Bank premises and
equipment, net 13,647 12,599
Other real estate owned 3,053 1,289
Bank owned life insurance 15,286 14,755
Goodwill and intangible
assets, net 23,492 3,157
Accrued interest
receivable 4,279 3,939
Other assets 9,046 6,146
---------------------- --------------------
Total Assets $ 1,019,197 $ 851,098
====================== ====================
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other
noninterest-bearing $ 87,218 $ 91,216
Savings, money market
and interest-bearing
demand 360,107 278,401
Certificates of deposit 386,998 347,644
---------------------- --------------------
Total deposits 834,323 717,261
---------------------- --------------------
Short-term borrowings 28,039 22,163
Federal Home Loan Bank
advances 45,206 35,086
Junior subordinated
debentures 20,620 -
Accrued interest payable 4,190 3,698
Accrued taxes, expenses
and other liabilities 5,479 4,193
---------------------- --------------------
Total Liabilities 937,857 782,401
====================== ====================
Shareholders' Equity
Common stock, par value
$1 per share,
authorized 15,000,000
shares, issued
7,623,857 shares at
September 30, 2007 and
6,771,867 at December
31, 2006
7,624 6,772
Additional paid-in
capital 37,606 26,382
Retained earnings 42,597 43,728
Accumulated other
comprehensive loss (395) (2,093)
Treasury shares at
cost, 328,194 shares
at September 30, 2007
and December 31, 2006
(6,092) (6,092)
---------------------- --------------------
Total Shareholders' Equity 81,340 68,697
---------------------- --------------------
Total Liabilities and
Shareholders' Equity $ 1,019,197 $ 851,098
====================== ====================
Consolidated Statements of Income (unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
--------------------- ---------------------
2007 2006 2007 2006
---------- ---------- ---------- ----------
(Dollars in thousands except share and per
share amounts)
Interest Income
Loans $ 13,437 $ 11,164 $ 36,610 $ 31,690
Securities:
U.S. Government
agencies and
corporations 2,148 1,488 5,310 4,249
State and political
subdivisions 157 124 443 330
Other debt and
equity securities 78 49 204 150
Federal funds sold and
short-term investments 51 10 338 73
---------- ---------- ---------- ----------
Total interest income 15,871 12,835 42,905 36,492
Interest Expense
Deposits:
Certificates of
deposit, $100 and
over 2,278 1,864 6,576 4,818
Other deposits 4,427 2,913 11,860 8,073
Federal Home Loan Bank
advances 635 492 1,235 1,227
Short-term borrowings 347 246 812 655
Other interest expense 356 - 567 -
---------- ---------- ---------- ----------
Total interest expense 8,043 5,515 21,050 14,773
---------- ---------- ---------- ----------
Net Interest Income 7,828 7,320 21,855 21,719
Provision for Loan Losses 441 600 1,677 915
---------- ---------- ---------- ----------
Net interest income
after provision for
loan losses 7,387 6,720 20,178 20,804
Noninterest Income
Investment and trust
services 547 482 1,593 1,537
Deposit service charges 1,239 1,224 3,457 3,334
Other service charges
and fees 605 504 1,706 1,444
Income from bank owned
life insurance 182 187 531 474
Other income 128 56 273 160
---------- ---------- ---------- ----------
Total fees and other
income 2,701 2,453 7,560 6,949
Securities gains, net 2 - 261 -
Gains on sale of loans 277 - 546 -
Gains (losses) on sale
of other assets, net 24 - 59 2
---------- ---------- ---------- ----------
Total noninterest income 3,004 2,453 8,426 6,951
Noninterest Expense
Salaries and employee
benefits 4,104 3,770 11,862 10,986
Furniture and equipment 952 737 2,566 2,227
Net occupancy 593 484 1,683 1,413
Outside services 488 406 1,317 1,260
Marketing and public
relations 321 311 936 1,069
Supplies, postage and
freight 353 311 986 912
Telecommunications 232 207 623 577
Ohio Franchise tax 188 207 604 636
Other real estate owned 58 28 305 59
Electronic banking
expenses 150 160 593 466
Other charge-offs and
losses 192 131 387 291
Other expense 703 527 1,839 1,783
---------- ---------- ---------- ----------
Total noninterest expense 8,334 7,279 23,701 21,679
---------- ---------- ---------- ----------
Income before income tax
expense 2,057 1,894 4,903 6,076
Income tax expense 384 475 1,059 1,570
---------- ---------- ---------- ----------
Net Income $ 1,673 $ 1,419 $ 3,844 $ 4,506
========== ========== ========== ==========
Net Income Per Common
Share
Basic $ 0.23 $ 0.22 $ 0.56 $ 0.70
Diluted 0.23 0.22 0.56 0.70
Dividends declared 0.18 0.18 0.54 0.54
Average Common Shares
Outstanding
Basic 7,295,663 6,450,086 6,889,953 6,468,032
Diluted 7,295,663 6,450,235 6,889,953 6,468,291
LNB Bancorp, Inc.
Supplemental Financial Information
(Unaudited - Dollars in thousands except Share and Per Share Data)
Three Months Ended
----------------------------------------
September 30, June 30, September 30,
2007 2007 2006
----------------------------------------
END OF PERIOD BALANCES
Assets $ 1,019,197 $1,002,345 $ 831,544
Deposits 834,323 822,901 688,488
Portfolio loans 727,194 729,308 607,036
Allowance for loan losses 7,951 8,115 6,304
Shareholders' equity 81,340 79,524 68,571
AVERAGE BALANCES
Assets:
Total assets $ 1,019,758 $ 927,820 $ 825,815
Earning assets 937,937 855,746 767,769
Securities 200,085 177,496 164,583
Portfolio loans 737,853 678,250 603,186
Liabilities and shareholders'
equity:
Total deposits $ 820,578 $ 778,059 $ 681,781
Interest bearing deposits 734,185 694,830 599,254
Interest bearing
liabilities 841,952 758,286 668,589
Total shareholders' equity 81,964 77,953 68,308
INCOME STATEMENT
Net interest income $ 7,828 $ 7,198 $ 7,320
Net interest income-FTE(1) 7,927 7,292 7,405
Provision for loan losses 441 853 600
Noninterest income 3,004 2,433 2,453
Noninterest expense 8,334 8,009 7,279
Taxes 384 133 475
- ----------------------------------------------------------------------
Net income 1,673 636 1,419
- ----------------------------------------------------------------------
Total revenue 10,832 9,631 9,773
PER SHARE DATA
Basic net income per common
share $ 0.23 $ 0.09 $ 0.22
Diluted net income per
common share 0.23 0.09 0.22
Cash dividends per common
share 0.18 0.18 0.18
Basic average common shares
outstanding 7,295,663 6,921,162 6,450,086
Diluted average common
shares outstanding 7,295,663 6,921,162 6,450,235
KEY RATIOS
Return on average
assets(2) 0.65% 0.27% 0.68%
Return on average common
equity(2) 8.10% 3.27% 8.24%
Efficiency ratio 76.24% 82.35% 73.84%
Noninterest expense to
average assets(2) 3.24% 3.46% 3.50%
Average equity to average
assets 8.04% 8.40% 8.27%
Net interest margin 3.31% 3.37% 3.78%
Net interest margin
(FTE)(1) 3.35% 3.42% 3.83%
ASSET QUALITY
Nonperforming loans $ 10,942 $ 13,259 $ 7,023
Other real estate owned 3,053 2,132 1,702
Total nonperforming assets 13,995 15,391 8,725
Net Charge Offs 594 1,094 864
Total nonperforming loans
to total loans 1.50% 1.82% 1.16%
Total nonperforming assets
to total assets 1.37% 1.54% 1.05%
Net charge-offs to average
loans(2) 0.32% 0.65% 0.57%
Allowance for loan losses 1.09% 1.11% 1.04%
Allowance to nonperforming
loans 72.66% 61.20% 89.76%
Nine Months Ended
---------------------------
September 30, September 30,
2007 2006
---------------------------
END OF PERIOD BALANCES
Assets $ 1,019,197 $ 831,544
Deposits 834,323 688,488
Portfolio loans 727,194 607,036
Allowance for loan losses 7,951 6,304
Shareholders' equity 81,340 68,571
AVERAGE BALANCES
Assets:
Total assets $ 932,543 $ 813,847
Earning assets 862,483 758,102
Securities 179,785 163,877
Portfolio loans 682,697 594,225
Liabilities and shareholders' equity:
Total deposits $ 771,805 $ 673,353
Interest bearing deposits 688,088 588,833
Interest bearing liabilities 763,744 654,823
Total shareholders' equity 76,455 68,447
INCOME STATEMENT
Net interest income $ 21,855 $ 21,719
Net interest income-FTE(1) 22,137 21,899
Provision for loan losses 1,677 915
Noninterest income 8,426 6,951
Noninterest expense 23,701 21,679
Taxes 1,059 1,570
- ----------------------------------------------------------------------
Net income 3,844 4,506
- ----------------------------------------------------------------------
Total revenue 30,281 28,670
PER SHARE DATA
Basic net income per common share $ 0.56 $ 0.70
Diluted net income per common share 0.56 0.70
Cash dividends per common share 0.54 0.54
Basic average common shares outstanding 6,889,953 6,468,032
Diluted average common shares
outstanding 6,889,953 6,468,291
KEY RATIOS
Return on average assets(2) 0.55% 0.74%
Return on average common equity(2) 6.72% 8.80%
Efficiency ratio 77.55% 75.14%
Noninterest expense to average
assets(2) 3.40% 3.56%
Average equity to average assets 8.20% 8.41%
Net interest margin 3.39% 3.83%
Net interest margin (FTE)(1) 3.43% 3.86%
ASSET QUALITY
Nonperforming loans $ 10,942 $ 7,023
Other real estate owned 3,053 1,702
Total nonperforming assets 13,995 8,725
Net Charge Offs 2,124 1,233
Total nonperforming loans to total
loans 1.50% 1.16%
Total nonperforming assets to total
assets 1.37% 1.05%
Net charge-offs to average loans(2) 0.42% 0.28%
Allowance for loan losses 1.09% 1.04%
Allowance to nonperforming loans 72.66% 89.76%
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized
CONTACT: For LNB Bancorp, Inc.
W. John Fuller, 216-978-7643