LNB Bancorp, Inc. (NASDAQ: LNBB) ("LNB" or the "Company") today reported financial results for the second quarter 2015. Net income available to common shareholders was $2.3 million or $0.23 per common share, compared to $2.0 million, or $0.21 per common share, for the year ago quarter. For the first six months of 2015, net income available to common shareholders was $4.1 million, or $0.43 per common share, compared to $3.6 million, or $0.37 per common share for the first six months of last year.

"LNB had a successful quarter on all fronts," stated Daniel E. Klimas, president and chief executive officer of LNB Bancorp. "We grew loan balances, reduced non-performing loans and managed our expenses well."

Net interest income was $8.9 million for the second quarter of 2015, compared to $9.2 million in the second quarter of the prior year, a decrease of 3.9%. The net interest margin, on a fully taxable equivalent basis, for the second quarter of 2015 was 3.10%, a decline of 17 basis points from the second quarter of 2014. The continued low growth environment and sustained low rates coupled with a change in the mix of the balance sheet contributed to the margin compression.

Noninterest income was $3.1 million in the second quarter of 2015, compared to $3.3 million in the second quarter of the previous year. The gain on sale of loans was $704,000 this quarter.

Loan balances grew by $26.5 million or 2.9% compared to the second quarter of 2014, led by the commercial and indirect auto loan portfolios.

Noninterest expense was $8.9 million, compared to $8.8 million in the second quarter of 2014.

In connection with the pending merger with Northwest Bancshares, the Corporation recognized $138,000 in pre-tax merger-related expense during the second quarter and $268,000 during the first six months of 2015.

The Company continued to make progress on improving credit quality in the second quarter of 2015, as non-performing assets declined $4.4 million from the same quarter in 2014. The ratio of non-performing assets to total assets at June 30, 2015 was 1.33%, down from 1.69% at June 30, 2014.

No provision for loan losses was taken in the second quarter of 2015, as compared to a provision of $893,000 taken in the second quarter of 2014, reflecting the Company's improvement in credit quality and net loss history. Net charge-offs were $868,000 for the second quarter of 2015, or 0.37% of average loans (annualized), compared to $960,000, or 0.42% of average loans (annualized), in the second quarter of 2014.

Total assets at June 30, 2015 were $1.24 billion, unchanged from June 30, 2014. Total deposits at June 30, 2015 were $1.05 billion, unchanged from June 30, 2014. The Company continued to maintain capital levels in excess of the regulatory requirements to be categorized as "well capitalized".

About LNB Bancorp, Inc.

LNB Bancorp, Inc. is a $1.2 billion bank 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 and its Morgan Bank division serve customers through 21 retail-banking locations and 30 ATMs in Lorain, Erie, Cuyahoga and Summit counties. North Coast Community Development Corporation is a wholly owned subsidiary 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.

Forward-Looking Statements

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 comments, 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 but are not limited to: a worsening of economic conditions or slowing of any economic recovery, which could negatively impact, among other things, business activity and consumer spending and could lead to a lack of liquidity in the credit markets; changes in the interest rate environment which could reduce anticipated or actual margins; increases in interest rates or further weakening of economic conditions that could constrain borrowers' ability to repay outstanding loans or diminish the value of the collateral securing those loans; market conditions or other events that could negatively affect the level or cost of funding, affecting the Company's ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth, and new business transactions at a reasonable cost, in a timely manner and without adverse consequences; changes in political conditions or the legislative or regulatory environment, including new or heightened legal standards and regulatory requirements, practices or expectations, which may impede profitability or affect the Company's financial condition (such as, for example, the Dodd-Frank Act and rules and regulations that have been or may be promulgated under the Act); persisting volatility and limited credit availability in the financial markets, particularly if market conditions limit the Company's ability to raise funding to the extent required by banking regulators or otherwise; significant increases in competitive pressure in the banking and financial services industries, particularly in the geographic or business areas in which the Company conducts its operations; limitations on the Company's ability to return capital to shareholders, including the ability to pay dividends, and the dilution of the Company's common shares that may result from, among other things, any capital-raising or acquisition activities of the Company; adverse effects on the Company's ability to engage in routine funding transactions as a result of the actions and commercial soundness of other financial institutions; general economic conditions becoming less favorable than expected, continued disruption in the housing markets and/or asset price deterioration, which have had and may continue to have a negative effect on the valuation of certain asset categories represented on the Company's balance sheet; increases in deposit insurance premiums or assessments imposed on the Company by the FDIC; a failure of the Company's operating systems or infrastructure, or those of its third-party vendors, that could disrupt its business; risks that are not effectively identified or mitigated by the Company's risk management framework; and difficulty attracting and/or retaining key executives and/or relationship managers at compensation levels necessary to maintain a competitive market position; as well as the risks and uncertainties described from time to time in the Company's reports as filed with the SEC. In addition, expected cost savings, synergies and other financial benefits from the anticipated merger with Northwest Bancshares might not be realized within the expected time frame and costs or difficulties relating to integration matters and completion of the merger might be greater than expected. The Company may have difficulty retaining key employees during the pendency of the merger.

The Company undertakes no obligation to update or clarify forwardlooking statements, whether as a result of new information, future events or otherwise.
CONSOLIDATED BALANCE SHEETS
   
At June 30, 2015 At December 31, 2014
(unaudited)
(Dollars in thousands except share amounts)
ASSETS
Cash and due from banks $ 30,810 $ 17,927
Federal funds sold and interest bearing deposits in banks   2,291     6,215  
Cash and cash equivalents 33,101 24,142
Securities available for sale, at fair value 208,243 217,572
Restricted stock 5,741 5,741
Loans held for sale 4,050 10,483
Loans:
Portfolio loans 933,838 930,025
Allowance for loan losses   (15,929 )   (17,416 )
Net loans   917,909     912,609  
Bank premises and equipment, net 9,235 9,173
Other real estate owned 793 772
Bank owned life insurance 19,835 19,757
Goodwill, net 21,582 21,582
Intangible assets, net 254 321
Accrued interest receivable 3,512 3,635
Other assets   14,100     10,840  
Total Assets $ 1,238,355   $ 1,236,627  
 
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
Demand and other noninterest-bearing $ 148,939 $ 158,476
Savings, money market and interest-bearing demand 459,951 436,271
Certificates of deposit   442,331     440,178  
Total deposits   1,051,221     1,034,925  
Short-term borrowings 635 10,611
Federal Home Loan Bank advances 47,027 54,321
Junior subordinated debentures 16,238 16,238
Accrued interest payable 613 596
Accrued taxes, expenses and other liabilities   4,681     4,597  
Total Liabilities   1,120,415     1,121,288  
Shareholders' Equity
Fixed rate cumulative preferred stock, Series B, no par value, $1,000 liquidation value, no shares were issued at June 30, 2015 and no shares were issued at December 31, 2014. - -

Common stock, par value $1 per share, authorized 15,000,000 shares, issued shares 10,008,169 at June 30, 2015 and 10,002,139 at December 31, 2014.
10,008 10,002
Additional paid-in capital 51,627 51,441
Retained earnings 64,096 60,568
Accumulated other comprehensive loss (1,430 ) (495 )
Treasury shares at cost, 347,349 shares at June 30, 2015 and 336,745 at December 31, 2014   (6,361 )   (6,177 )
Total Shareholders' Equity   117,940     115,339  
Total Liabilities and Shareholders' Equity $ 1,238,355   $ 1,236,627  
 

Consolidated Statements of Income (unaudited)
       
Three Months Ended

June 30,
Three Months Ended

June 30,
Six Months Ended

June 30,
Six Months Ended

June 30,

2015

2014

2015

2014
(Dollars in thousands except share and per share amounts)
Interest Income
Loans $ 9,008 $ 9,188 $ 17,932 $ 18,116
Securities: -
U.S. Government agencies and corporations 890 1,040 1,829 2,068
State and political subdivisions 294 310 510 613
Other debt and equity securities 67 67 134 184
Federal funds sold and short-term investments   2     7     5   24  
Total interest income 10,261 10,612 20,410 21,005
 
Interest Expense
Deposits 1,067 1,023 2,089 2,105
Federal Home Loan Bank advances 138 157 279 312
Short-term borrowings 6 27 6 53
Junior subordinated debenture   170     169     339   338  
Total interest expense   1,381     1,376     2,713   2,808  
Net Interest Income 8,880 9,236 17,697 18,197
Provision for Loan Losses   -     893     -   1,793  
Net interest income after provision for loan losses 8,880 8,343 17,697 16,404
 
Noninterest Income
Investment and trust services 450 456 872 856
Deposit service charges 777 849 1,545 1,619
Other service charges and fees 716 738 1,382 1,491
Income from bank owned life insurance 473 173 644 342
Other income (loss)   (2 )   106     96   257  
Total fees and other income 2,414 2,322 4,539 4,565
Securities Gains (Loss), net - (5 ) 192 (5 )
Gains on sale of loans 704 890 1,364 1,593

Loss on sale of other assets, net
  7     44     7   10  
Total noninterest income 3,125 3,251 6,102 6,163
 
Noninterest Expense
Salaries and employee benefits 4,589 4,510 9,236 9,105
Furniture and equipment 1,325 1,177 2,611 2,325
Net occupancy 593 603 1,202 1,216
Professional fees 411 426 855 920
Marketing and public relations 433 390 818 790
Supplies, postage and freight 154 218 415 432
Telecommunications 167 162 324 313
Ohio Financial tax 210 223 420 447
Intangible asset amortization 34 34 67 67
FDIC assessments 232 261 455 533
Other real estate owned 28 37 35 61
Loan and collection expense 297 372 612 670
Other expense   422     385     1,034   778  
Total noninterest expense   8,895     8,798     18,084   17,657  
Income before income tax expense 3,110 2,796 5,715 4,910
Income tax expense   849     773     1,607   1,281  
Net Income $ 2,261   $ 2,023   $ 4,108 $ 3,629  
Dividends and accretion on preferred stock   -     -     -   35  
Net Income Available to Common Shareholders $ 2,261   $ 2,023   $ 4,108 $ 3,594  
 
Net Income Per Common Share
Basic $ 0.23 $ 0.21 $ 0.43 $ 0.37
Diluted 0.23 0.21 0.42 0.37
Dividends declared 0.03 0.01 0.06 0.02
Average Common Shares Outstanding
Basic 9,650,490 9,626,420 9,645,215 9,620,806
Diluted 9,751,825 9,643,892 9,741,560 9,637,814
 

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, December 31, June 30, June 30, June 30,
END OF PERIOD BALANCES   2015   2015   2014   2014 2015   2014
Cash and Cash Equivalents $ 33,101 $ 64,920 $ 24,142 $ 47,795 $ 33,101 $ 47,795
Securities 208,243 203,848 217,572 219,422 208,243 219,422
Restricted stock 5,741 5,741 5,741 5,741 5,741 5,741
Loans held for sale 4,050 4,652 3,646 2,856 4,050 2,856
Portfolio loans 933,838 924,403 930,025 907,365 933,838 907,365
Allowance for loan losses   15,929   16,797   17,416   17,430   15,929   17,430
Net loans 917,909 907,606 912,609 889,935 917,909 889,935
Other assets   69,311   69,682   72,917   71,093   69,311   71,093
Total assets $ 1,238,355 $ 1,256,449 $ 1,236,627 $ 1,236,842 $ 1,238,355 $ 1,236,842
Total deposits 1,051,221 1,069,011 1,034,925 1,048,938 1,051,221 1,048,938
Other borrowings 63,900 63,849 81,170 66,413 63,900 66,413
Other liabilities   5,294   6,059   5,193   11,003   5,294   11,003
Total liabilities 1,120,415 1,138,919 1,121,288 1,126,354 1,120,415 1,126,354
Total shareholders' equity   117,940   117,530   115,339   110,488   117,940   110,488
Total liabilities and shareholders' equity $ 1,238,355 $ 1,256,449 $ 1,236,627 $ 1,236,842 $ 1,238,355 $ 1,236,842
 
AVERAGE BALANCES
Assets:
Total assets $ 1,256,363 $ 1,240,485 $ 1,233,457 $ 1,236,203 $ 1,248,468 $ 1,235,296
Earning assets* 1,168,604 1,157,066 1,160,953 1,154,063 1,162,867 1,152,291
Securities 208,491 206,665 219,861 223,198 207,582 220,491
Portfolio loans 937,440 925,565 924,216 907,851 929,342 907,350
Liabilities and shareholders' equity:
Total deposits $ 1,069,116 $ 1,052,598 $ 1,047,688 $ 1,056,144 $ 1,060,903 $ 1,056,062
Interest bearing deposits 903,926 881,380 876,897 905,838 892,716 908,076
Interest bearing liabilities 968,142 948,111 943,339 972,784 958,182 975,414
Total shareholders' equity 117,631 116,017 114,135 108,624 116,829 107,657
 
INCOME STATEMENT
Total Interest Income $ 10,261 $ 10,149 $ 10,648 $ 10,612 $ 20,410 $ 21,005
Total Interest Expense   1,381   1,332   1,370   1,376   2,713   2,808
Net interest income 8,880 8,817 9,278 9,236 17,697 18,197
Provision for loan losses - - 600 893 - 1,793
Other income 2,414 2,125 2,435 2,322 4,539 4,565
Net gain on sale of assets 711 852 956 929 1,563 1,598
Noninterest expense   8,895   9,189   9,907   8,798   18,084   17,657
Income before income taxes 3,110 2,605 2,162 2,796 5,715 4,910
Income tax expense   849   758   660   773   1,607   1,281
Net income 2,261 1,847 1,502 2,023 4,108 3,629
Preferred stock dividend and accretion   -   -   -   -   -   35
Net income available to common shareholders $ 2,261 $ 1,847 $ 1,502 $ 2,023 $ 4,108 $ 3,594
Common cash dividend declared and paid $ 290 $ 290 $ 290 $ 97 $ 580 $ 194
 
Net interest income-FTE (1) $ 9,029 $ 8,923 $ 9,436 $ 9,396 $ 17,953 $ 18,513
Total Operating Revenue (4) $ 12,154 $ 11,900 $ 12,827 $ 12,647 $ 24,055 $ 24,676
 

  Three Months Ended   Six Months Ended
June 30,   March 31,   December 31,   June 30, June 30,   June 30,
    2015   2015   2014   2014 2015   2014
PER SHARE DATA
Basic net income per common share $ 0.23 $ 0.19 $ 0.16 $ 0.21 $ 0.43 $ 0.37
Diluted net income per common share 0.23 0.19 0.15 0.21 0.43 0.37
Cash dividends per common share 0.03 0.03 0.03 0.01 0.06 0.02
Book value per common shares outstanding 12.21 12.17 11.93 11.43 12.21 11.43
Tangible book value per common shares outstanding** 9.95 9.91 9.67 9.49 9.95 9.49
Period-end common share market value 18.50 17.84 18.03 12.18 18.50 12.18
Market as a % of tangible book 185.97 % 180.11 % 186.51 % 128.36 % 185.97 % 128.36 %
Basic average common shares outstanding 9,650,490 9,639,880 9,626,842 9,626,420 9,645,215 9,620,806
Diluted average common shares outstanding 9,751,825 9,738,594 9,692,425 9,643,892 9,741,560 9,637,814
Common shares outstanding 9,660,820 9,657,660 9,665,394 9,664,972 9,660,820 9,664,972
 
KEY RATIOS
Return on average assets (2) 0.72 % 0.60 % 0.48 % 0.66 % 0.66 % 0.59 %
Return on average common equity (2) 7.71 % 6.46 % 5.22 % 7.47 % 7.09 % 6.80 %
Efficiency ratio 73.19 % 77.22 % 77.24 % 69.57 % 75.18 % 71.56 %
Noninterest expense to average assets (2) 2.84 % 3.00 % 3.19 % 2.85 % 2.92 % 2.88 %
Average equity to average assets 9.36 % 9.35 % 9.25 % 8.79 % 9.36 % 8.72 %
Net interest margin (FTE) (1) 3.10 % 3.13 % 3.22 % 3.27 % 3.11 % 3.24 %
Common stock dividend payout ratio 12.94 % 15.82 % 19.36 % 4.79 % 14.09 % 5.38 %
Common stock market capitalization $ 178,725 $ 172,293 $ 174,267 $ 117,719 $ 178,725 $ 117,719
 
 
ASSET QUALITY
Allowance for Loan Losses
Allowance for loan losses, beginning of period $ 16,797 $ 17,416 $ 17,432 $ 17,497 $ 17,416 $ 17,505
Provision for loan losses - - 600 893 - 1,793
Charge-offs 965 693 937 1,033 1,658 2,032
Recoveries   97     74     321     73     171     164  
Net charge-offs   868     619     616     960     1,487     1,868  
Allowance for loan losses, end of period $ 15,929   $ 16,797   $ 17,416   $ 17,430   $ 15,929   $ 17,430  
 
Nonperforming Assets
Nonperforming loans $ 15,681 $ 16,988 $ 16,578 $ 19,907 $ 15,681 $ 19,907
Other real estate owned   793     772     772     1,016     793     1,016  
Total nonperforming assets $ 16,474   $ 17,760   $ 17,350   $ 20,923   $ 16,474   $ 20,923  
 
Ratios
Total nonperforming loans to total loans 1.68 % 1.84 % 1.78 % 2.19 % 1.68 % 2.19 %
Total nonperforming assets to total assets 1.33 % 1.41 % 1.40 % 1.69 % 1.33 % 1.69 %
Net charge-offs to average loans (2) 0.37 % 0.27 % 0.26 % 0.42 % 0.32 % 0.42 %
Provision for loan losses to average loans (2) 0.00 % 0.00 % 0.26 % 0.39 % 0.00 % 0.40 %
Allowance for loan losses to portfolio loans 1.71 % 1.82 % 1.87 % 1.92 % 1.71 % 1.92 %
Allowance to nonperforming loans 101.58 % 98.88 % 105.05 % 87.56 % 101.58 % 87.56 %
Allowance to nonperforming assets 96.69 % 94.58 % 100.38 % 83.31 % 96.69 % 83.31 %
 
CAPITAL & LIQUIDITY
Period-end tangible common equity to assets** 7.90 % 7.75 % 7.69 % 7.29 % 7.90 % 7.29 %
Average equity to assets 9.36 % 9.35 % 9.25 % 8.79 % 9.36 % 8.72 %
Average equity to loans 12.55 % 12.53 % 12.35 % 11.96 % 12.57 % 11.86 %
Average loans to deposits 87.68 % 87.93 % 88.21 % 85.96 % 87.60 % 85.92 %
Tier 1 leverage ratio (3) 9.21 % 9.19 % 9.10 % 8.77 % 9.21 % 8.77 %
Tier 1 risk-based capital ratio (3) 11.18 % 10.86 % 11.26 % 11.17 % 11.18 % 11.17 %
Total risk-based capital ratio (3) 12.43 % 12.11 % 12.51 % 12.43 % 12.43 % 12.43 %
 
(1) FTE -- fully tax equivalent at 34% tax rate
(2) Annualized

(3) The June 30, 2015 and March 31, 2015 Tier I leverage ratio was prepared under Basel III capital requirements, which were effective January 1, 2015. Prior year ratios were prepared under Basel I requirements.
(4) Net interest income on a fully tax-equivalent basis ("FTE") plus noninterest income from operations
* Earning Assets includes Loans Held for Sale

** Non-GAAP measures.
 

** Non-GAAP Financial Measures - Statements included in this press release include non-GAAP financial measures. The Corporations use of these non-GAAP financial measures, includes the period-end tangible common equity to assets ratio, in their analysis of the company's performance. Period-end tangible common equity excludes preferred stock as well as goodwill and other intangible assets, net, from total stockholders' equity. Management believes that non-GAAP financial measures provide additional useful information that allows readers to evaluate the ongoing performance of the Corporation. Non-GAAP financial measures should not be considered as an alternative to any measure of performance or financial condition as promulgated under GAAP, and investors should consider Corporation's performance and financial condition as reported under GAAP and all other relevant information when assessing the performance or financial condition of the Company. Non-GAAP financial measures have limitations as analytical tools, and investors should not consider them in isolation or as a substitute for analysis of the results or financial condition as reported under GAAP.

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