<PAGE>1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported)
December 11, 1998
LNB Bancorp, Inc.
(Exact name of the registrant as specified in its charter)
Ohio 0-13203 34-1406303
(State or other jurisdiction of (SEC File No.) (I.R.S. Employer
incorporation or organization) Identification No.)
457 Broadway, Lorain, Ohio 44052 - 1769
(Address of principal executive offices) (Zip Code)
(440) 244 - 6000
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
<PAGE>2
Item 5. Other Events
Projected 1998 Consolidated Net Income revised downward to 5% over 1997
Consolidated Net Income.
This information release contains forward-looking statements which are
covered under the "Safe Harbor" provisions within the Private Securities
Litigation Reform Act of 1995. These forward-looking statements may
involve significant risks and uncertainties. Although LNB Bancorp, Inc.
believes that the expectations reflected in such forward-looking
statements are reasonable, actual results may differ materially from the
expectations in these forward-looking statements. All references to
monetary amounts are in pre-tax dollars except for consolidated net income
and earnings.
The projected consolidated net income of LNB Bancorp, Inc. (the Bancorp)
for the year ending December 31, 1998 has been reduced due to a
nonrecurring loan loss. Consolidated net income of the Bancorp that was
originally projected to be approximately $7.1 million has been revised to
an estimated $6.8 million. The revised projection represents an increase
of 5% over 1997 consolidated net income. 1998 will be the Bancorp's
sixteenth 16 consecutive year of increased annual earnings. The revised
projection does not impact the Bancorp's fourth quarter regular and extra
cash dividends of $.21 and $.04 per share, respectively, that were
declared on November 17, 1998.
The loss relates to a single loan customer of the Bancorp's subsidiary
bank, The Lorain National Bank (the Bank). This locally based borrower is
engaged in the manufacturing of specialized products that are used in the
production of semi-conductors. The borrower's financial condition began
to deteriorate during the fourth quarter of 1997. This deterioration
resulted from a drop in sales that resulted from the economic decline of
countries in the area of the Pacific Rim and the worldwide decline in
industries related to semi-conductors.
The Bank and its Board of Directors carefully monitored this credit
throughout late 1997 and during 1998. The borrower made significant
efforts to bolster sales and searched for potential acquirers. However,
continued economic decline in the Pacific Rim area caused further declines
in the borrower's sales and caused the borrower to be a less attractive
candidate for acquisition.
The source of partial repayment to the Bank will occur through the sale of
the assets of the borrower. From the sale of assets, the Bank would
experience an estimated loss in the range of $2.7 to $3.5 million on
extensions of credit that originally totaled $4.5 million. The low amount
of recovery on the sale of assets is due to the depressed semi-conductor
market. As a result of this estimated loss, the Bank increased its annual
budgeted 1998 loan loss provision of $600 thousand to $1.8 million in the
third quarter and then to $2.5 million during the fourth quarter of 1998.
These changes in the annual budgeted provision for possible loan losses
were determined to be necessary due to the further erosion of Pacific Rim
economies and of the semi-conductor industry that occurred during the
third and fourth quarters of 1998. The Bank charged-off $500 thousand of
loans to the borrower in the third quarter of 1998 and an additional $1.7
million in the fourth quarter through the date of this release. However,
depending on the outcome of the Borrower's sales negotiations, additional
loan balances that have already been reserved for, may be charged-off
before the end of the year or as liquidation of assets takes place during 1999.
<PAGE>3
The increased expense from the provision for possible loan losses was
partially offset by approximately $644 thousand in securities gains that were
recognized during the fourth quarter of 1998.
The Bank does not anticipate that any additional provision for possible
loan losses will be recorded during 1998 with respect of this problem credit
or any other credit in the Bank's loan portfolio. Bank and Bancorp
management have concluded that, based upon the current level of the
provision for possible loan losses and the current level of risk in the
Bank's loan portfolio, the Bank is adequately reserved for possible loan
losses.
This nonrecurring charge-off and its related provision is not expected to
materially impact 1999 consolidated net income, which is initially projected
to be approximately 8% over 1998 consolidated net income.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LNB BANCORP, INC.
(registrant)
Date: December 11, 1998 /s/Gregory D. Friedman
_________________________
Gregory D. Friedman,
Senior Vice President,
Chief Operating Officer and
Chief Financial Officer
Date: December 11, 1998 /s/Mitchell J. Fallis
_________________________
Mitchell J. Fallis,
Vice President and
Chief Accounting Officer
