January 30, 2007

LNB BANCORP, INC. REPORTS 2006 FOURTH QUARTER AND YEAR END RESULTS 

• Record loans, assets, deposits levels reached in 2006
• Positive developments in expansion strategy
• Focus continues on effective asset quality management

LORAIN, Ohio–January 30, 2007–LNB Bancorp, Inc. (NASDAQ: LNBB), today reported financial results for its fourth quarter and full year ended December 31, 2006.

Net income for the fourth quarter of 2006 totaled $918,000 compared to $1,833,000 for the fourth quarter of 2005. Diluted net income per share for the fourth quarter of 2006 was $0.14 versus $0.28 for the same period in 2005. For the full year ended December 31, 2006, the Company reported net income of $5,424,000, compared with $6,413,000 in 2005. Diluted earnings per share in 2006 were $.84 as compared to $.97 in 2005.

“We had many strong positives to the past year with record assets, loans and deposits and important strategic investments in Lorain County and surrounding markets,” said Daniel E. Klimas, president and chief executive officer of LNB Bancorp. “It is disappointing that margin pressures and asset quality issues negatively impacted our overall performance.”

“Returning to a strong asset quality basis is of the utmost importance as we look at 2007 and we will aggressively pursue resolution to this important issue,” said Klimas. “The local economic weakness that we reported in the third quarter report, continued into the fourth quarter. This weakness is most pronounced in our residential and commercial real estate development portfolio, and resulted in a sizable increase in our nonperforming loans and in potential problem loans, despite the fact that our net charge-offs in 2006 were the lowest since 2002. While we are confident in our ability to manage through this environment, it was prudent to add substantially to our allowance for loan losses in the third and fourth quarters.

Looking at 2006, Klimas said, “We are particularly encouraged by the successful rollout of our expansion strategy which included strengthening our Lorain County presence as well as expanding into attractive markets in nearby counties. In 2006, we opened a new branch in North Ridgeville and early this month we opened another in southern Elyria. Both offices are located in high growth areas of the county.  We also opened a business development office in Cuyahoga County which serves small and medium-sized businesses throughout the region.”

On January 16, 2007, LNB Bancorp announced that it had signed a definitive agreement with Morgan Bancorp, Inc. of Hudson, Ohio in which LNB Bancorp would acquire Morgan and its wholly-owned subsidiary, Morgan Bank, N.A. Completion of the merger is anticipated in the third quarter of 2007, pending certain regulatory and Morgan shareholder approvals. Morgan Bank, which has assets of about $129 million, operates from one branch location in Hudson, a strategically-located, affluent community.

“Both LNB and Morgan share the same commitment to a strong community bank culture and   complementary product strengths. We believe we can export many of the product and business capabilities we each have to help the merged company grow and prosper in the future. Further, this merger will greatly enhance those expansion initiatives, while providing top line growth and better leveraging of our expense base,” said Klimas. The transaction is expected to be accretive to earnings in the first full year of operation.

Fourth Quarter Review
Net interest income was $6,888,000 in the fourth quarter of 2006, compared with $7,671,000 in the same period a year before. This decrease was primarily due to margin pressures. The net interest margin in the fourth quarter of 2006 was 3.63 percent, compared with 4.06 percent in the fourth quarter of 2005.

Noninterest income was $2,800,000 for the three months ended December 31, 2006, a 27 percent increase compared with $2,203,000 in the same period in 2005. Investment and trust services and deposit service charges were improved totaling $542,000 and $1,199,000, respectively, in the quarter as compared to $313,000 and $1,107,000 in the fourth quarter of 2005. Improved income on investment in life insurance also contributed to this result. In the fourth quarter of 2006 the Company also recognized a gain on the sale of its Westlake loan production office, which totaled $231,000. The Westlake operation has been relocated to a leased facility in nearby Avon, Ohio.

The Company continues to show steady progress in managing expenses. For the fourth quarter of 2006, noninterest expense was $7,306,000 compared to $7,360,000 in the same period of 2005. Third party services, marketing and telecommunications all were substantially lower. These improvements were somewhat offset by increased salaries, equipment and occupancy related to the expansion into Cuyahoga County and the new Lorain County offices. Also impacting the fourth quarter was increased costs to manage the higher level of other real estate.

Net charge-offs for the fourth-quarter of 2006 were $369,000 compared to $1,418,000 in the same period of 2005. Included in the fourth quarter 2005 results were charge-offs of $1,173,000 associated with the sale of four loan relationships. The provision for loan losses was $1,365,000 in the fourth quarter of 2006 as compared to $600,000 in the third quarter of 2006 and compared with $150,000 for the same period of 2005. The increase in the provision for loan losses in the third and fourth quarters of 2006 reflect the trends in the problem loan and potential problem loan portfolios to a greater extent than the current trends in actual charge-offs.

Full year 2006 Review
Net interest income decreased 4.7 percent in 2006 as compared with the same period a year ago. The net interest margin for 2006 was 3.74 percent—down 32 basis points from 4.06 percent in 2005. The flat yield curve, combined with a shift in deposit mix from non-interest bearing and savings accounts to money market accounts and time deposits contributed greatly to this decline. The competition for loans and deposits in the market also adversely impacted interest income and the net interest margin. Partially offsetting these factors was 3.3 percent growth in average earning assets.

Noninterest income was $9,751,000 for the 12 months ended December 31, 2006, compared with $10,377,000 for 2005. Included in the 2005 results was $959,000 in mortgage revenue from LNB Mortgage, LLC. which was closed at year-end 2005. In 2006 investment and trust services and deposit service charges were up 7.2 percent and 7.4 percent, respectively, over the 2005. Also contributing were ATM and merchant fees and income from investment in life insurance which were up 4.6 percent and 23.2 percent, respectively, over the prior year.   

Noninterest expense was $28,985,000 in 2006 as compared to $30,267,000 in 2005, a decrease of $1,282,000, or 4.4 percent. Most expenses declined in 2006 as compared to 2005. The exceptions were modest increases in net occupancy, Ohio franchise tax, other real estate expense and marketing and public relations.

Nonperforming loans increased to $12.8 million at December 31, 2006, compared with $6.5 million at December 31, 2005, and from $7.0 million at September 30, 2006. The nonperforming loans have either been charged down to conservative collateral levels or have specific loan loss allocations established. In addition to this activity the level of potential problem loans increased to $22.1 million from $14.4 million at December 31, 2005 and is now at approximately the same level as December 31, 2004. Net charge-offs for full-year 2006 were $1,602,000, compared to $2,012,000 in 2005. In 2006, net charge-offs were .27 percent of average loans, compared with 0.34 percent in 2005.

As a result of the nonperforming loan and potential problem loan trends, the provision for loan losses totaled $2,280,000 in 2006 versus $1,248,000 in 2005. The Company's allowance for loan losses at December 31, 2006, was $7,300,000 as compared with $6,622,000 on December 31, 2005. The ratio of the allowance for loan losses to nonperforming loans was 57 percent on December 31, 2006, a decrease from 102 percent at the end of last year.

Total loans at year-end were $628.3 million as compared to $588.4 million at year-end 2005. This was a 6.8 percent increase and reflects growth in commercial, mortgage and consumer lending. 

Total average assets increased to $819.6 million in 2006 compared with $793.3 million in 2005. Total average loans were $601.1 million in 2006 versus $584.8 million in 2005. Average total deposits for 2006 were $679.8 million versus $635.8 million in 2005. Average shareholders' equity for 2006 was $68.7 million versus $70.4 million in 2005.

“We will focus on a commitment to effectively manage asset quality in this difficult economic environment and take prudent steps to proactively reserve for these issues. At the same time we will continue to pursue our strategy of growing our businesses and markets and positioning the company for solid performance in the future,” Klimas said.

About LNB Bancorp, Inc.
LNB Bancorp, Inc. is an $851.1 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 22 retail-banking locations and 26 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.