-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, DAf3ZX2bqM+4Z0r/rwISS09i5hTErpPG9nbKlE3PtT7iuut6Bglr00C2Xoc839ho A3LNd/IFclxNPOzqlduz/Q== /in/edgar/work/20000814/0000737210-00-000017/0000737210-00-000017.txt : 20000921 0000737210-00-000017.hdr.sgml : 20000921 ACCESSION NUMBER: 0000737210-00-000017 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: LNB BANCORP INC CENTRAL INDEX KEY: 0000737210 STANDARD INDUSTRIAL CLASSIFICATION: [6022 ] IRS NUMBER: 341406303 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-13203 FILM NUMBER: 697656 BUSINESS ADDRESS: STREET 1: 457 BROADWAY CITY: LORAIN STATE: OH ZIP: 44052-1769 BUSINESS PHONE: 4402446000 10-Q 1 0001.txt 1 Form 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-13203 LNB Bancorp, Inc. (Exact name of the registrant as specified in its charter) Ohio 34-1406303 (State or other jurisdiction of (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) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such requirements for the past 90 days. YES X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Outstanding at July 31, 2000: 4,210,647 shares Class of Common Stock: $1.00 par value 2 LNB Bancorp, Inc. Quarterly Report on Form 10-Q Quarter Ended June 30, 2000 Part I - Financial Information Item 1 - Financial Statements Interim financial information required by Requisition 210.10-01 of Regulation S-X is included in this Form 10-Q as referenced below: Page Number Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 5 Condensed Consolidated Statements of Cash Flows 9 Notes to the Condensed Consolidated Financial Statements 11 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations 17 Item 3 - Quantitative and Qualitative Disclosures about Market Risk 22 Part II - Other Information Item 1 - Legal Proceedings 23 Item 2 - Changes in Securities 23 Item 3 - Defaults upon Senior Securities 23 Item 4 - Submission of Matters to a Vote of Security Holders 23 Item 5 - Other Information 23 Item 6 - Exhibits and Reports on Form 8-K 23 Signatures 23 Exhibit Index 24 3 FORM 10-Q LNB BANCORP, INC. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS JUNE 30, DECEMBER 31, CONDENSED CONSOLIDATED BALANCE SHEETS 2000 1999 ------------- ------------- (Unaudited) ASSETS: Cash and due from banks $ 27,094,000 $ 28,023,000 Federal funds sold and short-term investments 3,036,000 9,320,000 Securities: Available for sale, at fair value 77,412,000 75,728,000 Held to maturity, at cost (fair value $42,009,000 and $41,819,000, respectively) 44,785,000 44,642,000 Federal Home Loan Bank and Federal Reserve Bank stock, at cost 3,046,000 2,949,000 ------------ ------------ Total Securities 125,243,000 123,319,000 ------------ ------------ Loans: Portfolio loans 429,692,000 409,971,000 Loans available for sale 9,730,000 9,545,000 ------------ ------------ Total Loans 439,422,000 419,516,000 Reserve for loan losses (4,868,000) (4,667,000) ------------ ------------ Net loans 434,554,000 414,849,000 ------------ ------------ Bank premises and equipment, net 11,274,000 11,253,000 Intangible assets 4,046,000 4,245,000 Accrued interest receivable 4,138,000 4,057,000 Other assets 4,486,000 4,449,000 Other foreclosed assets 247,000 96,000 ------------ ------------ TOTAL ASSETS $614,118,000 $599,611,000 ============ ============ STATEMENT CONTINUED ON NEXT PAGE 4 STATEMENT CONTINUED FROM PREVIOUS PAGE LIABILITIES AND SHAREHOLDERS' EQUITY: Deposits: Demand and other noninterest-bearing deposits $ 86,805,000 $ 80,654,000 Savings and passbook accounts 202,733,000 191,928,000 Certificates of deposit 200,004,000 184,249,000 ------------ ------------ Total deposits 489,542,000 456,831,000 ------------ ------------ Securities sold under repurchase agreements and other short-term borrowings 42,378,000 52,122,000 Federal Home Loan Bank advances, short-term 5,360,000 15,000,000 Federal Home Loan Bank advances, long-term 18,985,000 19,345,000 Accrued interest payable 1,600,000 1,510,000 Accrued taxes, expenses, and other liabilities 3,242,000 3,750,000 ------------ ------------ Total Liabilities 561,107,000 548,558,000 ------------ ------------ Shareholders' equity: Preferred stock, no par value: Shares authorized 1,000,000, and shares outstanding, none Common stock $1.00 par: Shares authorized 15,000,000 Shares issued 4,310,447 and 4,227,161, respectively and Shares outstanding 4,210,447 and 4,127,161 respectively 4,228,000 4,227,000 Additional capital 22,703,000 22,685,000 Retained earnings 30,155,000 28,057,000 Accumulated other comprehensive (loss) (1,175,000) (1,016,000) Treasury stock at cost, 100,000 shares (2,900,000) (2,900,000) ------------ ------------ Total Shareholders' Equity 53,011,000 51,053,000 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $614,118,000 $599,611,000 ============ ============ See notes to unaudited condensed consolidated financial statements. 5 FORM 10-Q LNB BANCORP, INC. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS SIX MONTHS ENDED CONDENSED CONSOLIDATED STATEMENTS JUNE 30, OF INCOME (UNAUDITED) ------------------------ 2000 1999 INTEREST INCOME ------------------------ Interest and fees on loans: Taxable $18,651,000 $16,429,000 Tax-exempt 10,000 16,000 Interest and dividends on securities: Taxable 3,590,000 3,421,000 Tax-exempt 124,000 108,000 Interest on Federal funds sold and short-term investments 85,000 85,000 ----------- ----------- TOTAL INTEREST INCOME 22,460,000 20,059,000 ----------- ----------- INTEREST EXPENSE: Interest on Certificates of Deposit of $100,000 and over 1,326,000 1,249,000 Interest on other deposits 6,096,000 4,920,000 Interest on securities sold under repurchase agreements and other short-term borrowings 832,000 528,000 Interest on Federal Home Loan Bank advances 679,000 617,000 ----------- ----------- TOTAL INTEREST EXPENSE 8,933,000 7,314,000 ----------- ----------- NET INTEREST INCOME 13,527,000 12,745,000 Provision for loan losses 600,000 700,000 NET INTEREST INCOME AFTER PROVISION ----------- ----------- FOR LOAN LOSSES 12,927,000 12,045,000 ----------- ----------- OTHER INCOME: Investment and Trust Services Division income 1,117,000 1,074,000 Service charges on deposit accounts 1,546,000 1,526,000 Other service charges, exchanges and fees 1,356,000 1,193,000 Other operating income 26,000 218,000 ----------- ----------- TOTAL OTHER INCOME 4,045,000 4,011,000 STATEMENT CONTINUED ON NEXT PAGE 6 STATEMENT CONTINUED FROM PREVIOUS PAGE OTHER EXPENSES: Salaries and employee benefits 5,105,000 4,915,000 Net occupancy expense of premises 758,000 790,000 Furniture and equipment expense 1,289,000 1,201,000 Amortization of intangible assets 208,000 210,000 Supplies and postage 476,000 509,000 FDIC deposit insurance premium 47,000 25,000 Ohio franchise tax 330,000 293,000 Other operating expenses 2,527,000 2,363,000 ------------ ----------- TOTAL OTHER EXPENSES 10,740,000 10,306,000 ------------ ----------- INCOME BEFORE INCOME TAXES 6,232,000 5,750,000 INCOME TAXES 2,132,000 1,954,000 ------------ ----------- NET INCOME $ 4,100,000 $ 3,796,000 ============ =========== PER SHARE DATA: BASIC EARNINGS PER SHARE $ .97 $ .90 ====== ====== DILUTED EARNINGS PER SHARE $ .97 $ .90 ====== ====== DIVIDENDS DECLARED PER SHARE $ .47 $ .43 ====== ====== See notes to unaudited condensed consolidated financial statements. 7 FORM 10-Q LNB BANCORP, INC. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS THREE MONTHS ENDED CONDENSED CONSOLIDATED STATEMENTS JUNE 30, OF INCOME (UNAUDITED) ------------------------ 2000 1999 INTEREST INCOME ----------------------- Interest and fees on loans: Taxable $ 9,629,000 $ 8,457,000 Tax-exempt 5,000 8,000 Interest and dividends on securities: Taxable 1,778,000 1,710,000 Tax-exempt 63,000 54,000 Interest on Federal funds sold and short-term investments 46,000 52,000 ----------- ----------- TOTAL INTEREST INCOME 11,521,000 10,281,000 ----------- ----------- INTEREST EXPENSE: Interest on Certificates of Deposit of $100,000 and over 714,000 638,000 Interest on other deposits 3,136,000 2,483,000 Interest on securities sold under repurchase agreements and other short-term borrowings 396,000 291,000 Interest on Federal Home Loan Bank advances 303,000 327,000 ----------- ----------- TOTAL INTEREST EXPENSE 4,549,000 3,739,000 ----------- ----------- NET INTEREST INCOME 6,972,000 6,542,000 Provision for loan losses 300,000 500,000 NET INTEREST INCOME AFTER PROVISION ----------- ----------- FOR LOAN LOSSES 6,672,000 6,042,000 ----------- ----------- OTHER INCOME: Investment and Trust Services Division income 615,000 604,000 Service charges on deposit accounts 784,000 849,000 Other services charges, exchanges and fees 701,000 601,000 Other operating income 12,000 207,000 ----------- ----------- TOTAL OTHER INCOME 2,112,000 2,261,000 STATEMENT CONTINUED ON NEXT PAGE 8 STATEMENT CONTINUED FROM PREVIOUS PAGE OTHER EXPENSES: Salaries and employee benefits 2,613,000 2,520,000 Net occupancy expense of premises 372,000 398,000 Furniture and equipment expense 716,000 593,000 Supplies and postage 268,000 253,000 FDIC deposit insurance premium 23,000 12,000 Ohio franchise tax 161,000 142,000 Amortization of intangible assets 104,000 105,000 Other operating expenses 1,283,000 1,275,000 ------------ ------------ TOTAL OTHER EXPENSES 5,540,000 5,298,000 ------------ ------------ INCOME BEFORE INCOME TAXES 3,244,000 3,005,000 INCOME TAXES 1,124,000 1,042,000 ------------ ------------ NET INCOME $ 2,120,000 $ 1,963,000 ============ ============ PER SHARE DATA: BASIC EARNINGS PER SHARE $ .50 $ .47 ====== ====== DILUTED EARNINGS PER SHARE $ .50 $ .47 ====== ====== DIVIDENDS DECLARED PER SHARE $ .24 $ .22 ====== ====== See notes to unaudited condensed consolidated financial statements. 9 FORM 10-Q LNB BANCORP, INC. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS SIX MONTHS ENDED CONDENSED CONSOLIDATED STATEMENTS JUNE 30, OF CASH FLOWS (UNAUDITED) ------------------------- 2000 1999 CASH FLOWS FROM OPERATING ACTIVITIES: ------------------------- Interest received $22,365,000 $19,999,000 Other income received 4,083,000 3,943,000 Interest paid (8,843,000) (7,145,000) Cash paid for salaries and employee benefits (5,251,000) (4,707,000) Net occupancy expense of premises paid (598,000) (589,000) Furniture and equipment expenses paid (428,000) (418,000) Cash paid for supplies and postage (476,000) (509,000) Cash paid for other operating expenses (3,010,000) (2,466,000) Federal income taxes paid (2,101,000) (2,010,000) ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES 5,741,000 6,098,000 ----------- ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available for sale 7,000,000 11,497,000 Proceeds from maturities of securities held to maturity 318,000 122,000 Purchases of securities held to maturity (701,000) (6,665,000) Purchases of securities available for sale (8,858,000) (9,471,000) Net (increase) in loans made to customers (20,465,000) (41,426,000) Purchases of bank premises, equipment and software (1,042,000) (821,000) Proceeds from sales of bank premises, and equipment (18,000) -0- Purchases of other foreclosed assets 247,000 -0- Proceeds from liquidation of other foreclosed assets 96,000 1,191,000 ----------- ----------- NET CASH USED IN INVESTING ACTIVITIES (23,917,000) (45,573,000) ----------- ----------- STATEMENT CONTINUED ON NEXT PAGE 10 STATEMENT CONTINUED FROM PREVIOUS PAGE CASH FLOWS FROM FINANCING ACTIVITIES: Net increase (decrease) in demand and other noninterest-bearing deposits 6,151,000 (3,924,000) Net increase in savings and passbook deposits 10,805,000 7,133,000 Net increase in certificates of deposit 15,755,000 15,994,000 Net increase (decrease) in securities sold under repurchase agreements and other short-term borrowings (9,744,000) 15,383,000 Proceeds from Federal Home Loan Bank advances -0- 12,300,000 Payment on Federal Home Loan Bank advances 10,000,000 -0- Proceeds from exercise of stock options 19,000 2,000 Dividends paid (2,023,000) (1,938,000) ----------- ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 10,963,000 44,950,000 ----------- ----------- NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (7,213,000) 5,475,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 37,343,000 32,801,000 ----------- ----------- CASH AND CASH EQUIVALENTS AT END OF PERIOD $30,130,000 $38,276,000 =========== =========== RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: NET INCOME $ 4,100,000 $ 3,796,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,021,000 984,000 Amortization of intangible assets 199,000 211,000 Amortization of deferred loan fees and costs, net 135,000 (139,000) Provision for loan losses 600,000 700,000 (Increase)in accrued interest receivable (81,000) (280,000) (Increase) in other assets (505,000) (260,000) Increase in accrued interest payable 90,000 169,000 Increase (decrease) in accrued taxes, expenses and other liabilities (31,000) 827,000 Others, net 213,000 90,000 ----------- ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,741,000 $ 6,098,000 =========== =========== See notes to unaudited condensed consolidated financial statements. 11 FORM 10-Q LNB Bancorp, Inc. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INTRODUCTION The following areas of discussion pertain to the unaudited condensed consolidated financial statements of LNB Bancorp, Inc. (The Parent Company) and its wholly-owned subsidiary, Lorain National Bank (The Bank) at June 30, 2000, compared to December 31, 1999 and the results of its operations and cash flows for the three and six months ending June 30, 2000 compared to the same period in 1999. The term "the Corporation" refers to LNB Bancorp, Inc. and its wholly-owned subsidiary. It is the intent of this discussion to provide the reader with a more thorough understanding of the unaudited condensed consolidated financial statements and supporting schedules, and should be read in conjunction with those unaudited condensed consolidated financial statements and schedules. LNB Bancorp, Inc. is not aware of any trends, events, or uncertainties that might have a material effect on the soundness of operations; neither is LNB Bancorp, Inc. aware of any proposed recommendations by regulatory authorities which would have a similar effect if implemented. In an effort to take advantage of the recently passed Gramm-Leach-Bliley Act, otherwise known as the financial modernization act, LNB Bancorp, Inc. has applied for, and received, one of the first charters as a financial holding company. The Act enables financial holding companies to engage in business activities previously unavailable to them. The Corporation will also be able to offer new products and services as they are developed and approved by regulators. LNB Bancorp, Inc. is strategically reviewing its new business opportunities under the Gramm-Leach-Bliley Act. LNB Bancorp, Inc. achieved a significant milestone in its history by the listing of its common stock on the NASDAQ Stock Market. The NASDAQ listing will provide greater liquidity for our stock while enhancing our visibility in the investment community. FORWARD-LOOKING STATEMENTS When used in this Form 10Q, the words or phrases "are expected to", "will continue", "is anticipated", "estimate", "projected", or similar expressions are intended to identify "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act. Such statements are subject to certain risks and uncertainties including changes in economic conditions in the Corporation's market area, changes in policies by regulatory agencies, fluctuations in interest rates, demand for loans, and competition, that could cause actual results to differ materially from historical earnings and those presently anticipated or projected. 12 BASIS OF PRESENTATION The unaudited condensed consolidated balance sheet as of June 30, 2000, the unaudited condensed consolidated statements of income and the unaudited condensed consolidated statements of cash flows for the three and six months ended June 30, 2000 and 1999 are prepared in accordance with generally accepted accounting principles for interim financial information. The above mentioned statements reflect all normal and recurring adjustments which are, in the opinion of Management, necessary for a fair presentation of the financial position and the results of operations for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The consolidated balance sheet at December 31, 1999 has been taken from the audited Financial Statements and condensed. It is suggested that these unaudited condensed consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Corporation's December 31, 1999 Annual Report to Shareholders. The results of operations for the period ended June 30, 2000 are not necessarily indicative of the operating results for the full year. RESERVE FOR LOAN LOSSES Because some loans may not be repaid in full, a reserve for loan losses is recorded. This reserve is increased by provisions charged to earnings and is reduced by loan charge-offs, net of recoveries. Estimating the risk of loss on any loan is necessarily subjective. Accordingly, the reserve is maintained by Management at a level considered adequate to cover loan losses that are currently anticipated based on Management's evaluation of several key factors including information about specific borrower situations, their financial position and collateral values, current economic conditions, changes in the mix and levels of the various types of loans, past charge-off experience and other pertinent information. The reserve for loan losses is based on estimates using currently available information, and ultimate losses may vary from current estimates due to changes in circumstances. These estimates are reviewed periodically and, as adjustments become necessary, they are reported in earnings in the periods in which they become known. While Management may periodically allocate portions of the reserve for specific problem situations, the entire reserve is available for any charge-offs that may occur. Charge-offs are made against the reserve for loan losses when Management concludes that it is probable that all or a portion of a loan is uncollectible. After a loan is charged-off, collection efforts continue and future recoveries may occur. A loan is considered impaired, based on current information and events, if it is probable that the Bank will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. The measurement of impaired loans is generally based on the present value of the expected future cash flows discounted at the loans initial effective interest rate, except that all collateral-dependent loans are measured for impairment based on the fair value of the collateral. If the loan valuation is less than the recorded value of the loan, an impairment reserve must be established for the difference. The impairment reserve is established by either an allocation of the reserve for loan losses or by a provision for loan losses, 13 depending upon the adequacy of the reserve for loan losses. RECLASSIFICATIONS Certain 1999 amounts have been reclassified to conform to 2000 presentation. 14 2. EARNINGS PER SHARE DATA Earnings per share is calculated as follows: For the 6 Months ended June 30, 2000 Income Shares Per-Share (Numerator) (Denominator) Amount -------------------------------------- Net Income $4,100,000 Basic EPS Income available to common stockholders $4,100,000 4,210,185 $ .97 ===== Effect of Dilutive Securities Incentive Stock Options -0- 5,974 ---------- --------- Dilutive EPS Income available to common stockholders + assumed conversions $4,100,000 4,216,159 $ .97 ========== ========= ===== For the 6 Months ended June 30, 1999 Income Shares Per-Share (Numerator) (Denominator) Amount -------------------------------------- Net Income $3,796,000 Basic EPS Income available to common stockholders $3,796,000 4,205,142 $ .90 ===== Effect of Dilutive Securities Incentive Stock Options -0- 8,606 ---------- --------- Dilutive EPS Income available to common stockholders + assumed conversions $3,796,000 4,213,748 $ .90 ========== ========= ===== For the 3 Months ended June 30, 2000 Income Shares Per-Share (Numerator) (Denominator) Amount -------------------------------------- Net Income $2,120,000 Basic EPS Income available to common stockholders $2,120,000 4,210,292 $ .50 ===== Effect of Dilutive Securities Incentive Stock Options -0- 4,241 ---------- --------- Dilutive EPS Income available to common stockholders + assumed conversions $2,120,000 4,214,533 $ .50 ========== ========= ===== 15 For the 3 Months ended June 30, 1999 Income Shares Per-Share (Numerator) (Denominator) Amount -------------------------------------- Net Income $1,963,000 Basic EPS Income available to common stockholders $1,963,000 4,205,192 $ .47 ===== Effect of Dilutive Securities Incentive Stock Options -0- 8,231 ---------- --------- Dilutive EPS Income available to common stockholders + assumed conversions $1,963,000 4,213,423 $ .47 ========== ========= ===== 3. COMPREHENSIVE INCOME The Corporation's comprehensive income for the six months ended June 30, 2000 and 1999 are as follows: For the six months ended June 30, 2000 1999 --------------------------------- Net income $4,100,000 $3,796,000 Other comprehensive income: Change in unrealized gain on securities available for sale, net of tax (credit) of $(54,000) and $(525,000) (105,000) (1,018,000) ----------- ----------- Comprehensive Income $3,995,000 $2,778,000 The Corporation's comprehensive income for the three months ended June 30, 2000 and 1999 are as follows: For the three months ended June 30, 2000 1999 ----------------------------------- Net income $2,120,000 $1,963,000 Other comprehensive income: Change in unrealized gain on securities available for sale, net of tax (credit) of $(8,000) and $(322,000) (14,000) (624,000) ----------- ------------ Comprehensive Income $2,106,000 $1,339,000 16 4. DIVIDEND REINVESTMENT AND CASH STOCK PURCHASE PLAN The Board of Directors adopted a dividend reinvestment and cash stock purchase plan on November 18, 1997. Under the plan, the first dividend reinvestment and cash stock purchase date was April 1, 1998. The plan allows shareholders to elect to use their quarterly cash dividends to purchase shares of LNB Bancorp, Inc. common stock. Additionally, cash can be contributed directly to the plan for the purchase of shares of common stock with a quarterly limit of $5,000. The dividend reinvestment plan authorized the sale of 150,000 shares of the Corporation's authorized but previously unissued common shares to shareholders who choose to invest all or a portion of their cash dividends plus additional cash payments. No shares were issued by the Corporation pursuant to the plan in the first half of 2000. In the first half of 2000, stock was purchased in the open market at the then current market price. 17 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS FINANCIAL CONDITION Total assets of the Corporation increased $14,507,000 during the first half of 2000, to $614,118,000. This growth was funded by increases in savings deposits, market access accounts, certificates of deposit and repurchase agreements. Total earning assets increased 2.8% to $567,701,000 at June 30, 2000 from $552,155,000 at December 31, 1999. The ratio of earning assets to total assets increased from 92.1% at December 31, 1999 to 92.4% at June 30, 2000. The loan to deposit ratio has decreased from 91.83% at 1999 year-end to 89.76% at June 30, 2000. Federal funds sold and other interest bearing investments decreased by $6,284,000 during the first six months of 2000. This decrease is the result of the bank eliminating its excess liquidity which was built up for Y2K purposes. Total securities increased $1,924,000 ending the first half at $125,243,000. At June 30, 2000 gross unrealized gains (losses) in the investment portfolio were approximately $44,000 and $(4,732,000), respectively. The decrease in the market value of the securities portfolio is due to market interest rate fluctuations and not due to the deterioration of the credit worthiness of debt issuers. Net loans increased $19,705,000 during the first half to $435,544,000 at June 30, 2000, for a 5% increase. Commercial loan growth was strong accounting for 79% of total loan growth while mortgage and consumer loans accounted for 14% and 6%, respectively, of total loan growth during the six months ended June 30, 2000. This loan increase was supported by a spring/summer home equity loan sale program. This home equity sale program resulted in new loans totaling over $2 million. The reserve for loan losses ended the quarter at $4,868,000 supported by a provision for loan losses of $600,000, recoveries of $134,000 and loan charge-offs of $533,000. The reserve for loan losses as a percentage of ending loans was 1.11% and 1.11% at December 31, 1999 and June 30, 2000, respectively. Corporate management believes that the reserve for loan losses as a percentage of ending loans at June 30, 2000 remains at an appropriate level. The ratio of the reserve for loan losses to nonperforming assets improved to 557.6% as of June 30, 2000. Also, Corporate management believes that the current level of the reserve for loan losses is adequate based upon quantitative analysis of identified risks and analysis of historical trends, and probable losses inherent in the loan portfolio at June 30, 2000. Nonperforming assets at June 30, 2000 totaled $873,000, down from $1,439,000 at March 31, 2000. The second quarter decrease in nonperforming assets of $566,000 resulted from loans being brought current in the amount of $880,000, loans charged-off in the amount of $000,000 liquidations of nonaccrual loans of $208,000 and increases in nonaccrual loans of $276,000. The level of nonperforming assets increased by $100,000 during the first quarter of 2000. This increase is the result of an increase in nonaccrual 18 loans of $196,000 as well as by a decrease in other foreclosed assets owned in the amount of $96,000. The increase in nonaccrual loans is due to decreases in nonaccrual principal balances of $227,000 which have been paid off or brought current, loans charged-off in the amount of $170,000 and liquidations of nonaccrual loans of $92,000 and increases in nonaccrual principal balances of $685,000 which includes one large commercial loan credit of $384,000 and several small commercial and consumer loan credits. The decrease in nonaccrual loans in the first quarter of 2000 was due primarily to one commercial loan customer and 28 personal loan customers. The decrease in Other Foreclosed Assets in the amount of $96,000 resulted from liquidation of one residential property. The level of nonperforming assets remains at relatively low levels and Corporate management believes nonperforming assets are well collateralized. The table below presents the level of nonperforming assets at the end of the last four calendar quarters. Amounts in thousands 06/30/00 03/31/00 12/31/99 09/30/99 -------- -------- -------- -------- Nonperforming Assets: Nonaccrual $ 626 $ 1,439 $ 1,243 $ 994 Restructured 0 0 0 0 Other Foreclosed Assets 247 0 96 0 ------ ------ ------ ------ Total Nonperforming Assets $ 873 $ 1,439 $ 1,339 $ 994 ====== ====== ====== ====== Reserve for loan losses to total nonperforming assets 557.6% 332.8% 348.5% 413.3% ====== ====== ====== ====== Accruing loans past due 90 days $ 437 $ 781 $ 555 $ 505 ====== ====== ====== ====== Potential problem loans are those loans identified on management's watch list in which Management has some doubt as to the borrower's ability to comply with the present repayment terms and loans which Management is actively monitoring due to changes in the borrower's financial condition. At June 30, 2000, potential problem loans totaled $6,078,000, a decrease of $67,000 from the December 31, 1999 balance. The decrease in potential problem loans during 2000 is primarily due to decreases from consumer indirect automobile loans. The Corporation's credit policies are reviewed and modified on an ongoing basis in order to remain suitable for the management of credit risk within the loan portfolio as conditions change. At June 30, 2000 there are no significant concentrations of credit in the loan portfolio. The Corporation had outstanding loan and credit commitments to make loans totaling $100,136,000 and $87,614,000 at June 30, 2000 and December 31, 1999, respectively. The increase in outstanding loan commitments results in part from an increase in the unused portion of home equity lines of credits from a home equity loan sale program in the second quarter of 2000. Mortgage and commercial construction loan demand increased in the second quarter of 2000 as seasonal weather conditions improved and the construction season began. Consumer loan demand increased in the second quarter as demand for home improvement and automobile loans increased. 19 Total deposits increased $32,711,000 during the first half to $489,542,000. Noninterest-bearing deposits increased to $86,805,000, at June 30, 2000 for an increase of $6,131,000, while interest-bearing deposits climbed to $402,737,000 for an increase of $26,560,000. Federal funds purchased and securities sold under agreements to repurchase decreased $9,744,000 during the first half. Due to the volatility of customer repurchase agreements, most funds generated by repurchase activity enter the Corporation's earning assets as short-term investments. LIQUIDITY Liquidity measures a corporation's ability to generate cash or otherwise obtain funds at reasonable prices to fund commitments to borrowers as well as the demand of depositors and debt holders. Principal internal sources of liquidity for the Corporation and the Bank are cash and cash equivalents, Federal funds sold, and the maturity structures of investment securities and portfolio loans. Securities and loans available for sale provide another source of liquidity through the cash flows of these interest-bearing assets as they mature or are sold. The Corporation continues to maintain a relatively high liquid position in order to take advantage of interest rate fluctuations. As of June 30, 2000, short-term security investments with maturities of one year or less totalled $7,978,000, which represented 6.4% of total securities. Adding cash and due from banks of $27,094,000, and Federal Funds sold and other interest bearing instruments of $3,036,000, total liquid assets represented 6.2% of total assets. The Corporation's subsidiary bank has established short-term lines of credit at correspondent banks, the Federal Home Loan Bank and the Federal Reserve Bank of Cleveland in the amounts of $16,000,000, $25,000,000 and $24,872,000, respectively, with credit available in the amounts of $12,000,000, $6,000,000 and $24,827,000, respectively. CAPITAL RESOURCES LNB Bancorp, Inc. continues to maintain a strong capital position. Total shareholders' equity increased to $53,011,000, at June 30, 2000. The increase resulted primarily from $4,100,000 of net income generated from the first half of operations less a cash dividend declared to shareholders of $2,000,000. The increase in interest rates experienced in the first half of 2000 has caused a decrease in the overall market value of available for sale securities which resulted in a decrease in shareholders' equity of $159,000 for the six months ended June 30, 2000. As of June 30, 2000, the LNB Bancorp, Inc. held 100,000 shares of common stock as treasury stock. LNB Bancorp, Inc. purchased 2,004 of these shares in the first quarter of 1998 and 97,996 shares in 1997 for a total cost of $2,900,000. The Corporation continues to monitor growth to stay within the constraints established by the regulatory authorities. Under Federal banking regulations, an institution is deemed to be well-capitalized if it has a Risk-based Tier 1 capital ratio of 6.00 percent or greater, a Risk-based Total capital ratio of 10.00 percent or greater and a Leverage ratio of 5.00 percent or greater. The Corporation's Risk-based capital and Leverage ratios along with the ratios required to be adequately capitalized have exceeded the ratios for a well-capitalized financial institution for all periods presented above. The Corporation's capital and leverage ratios as of June 30, 2000 and 1999 follow together with 20 those ratios required for the Corporation to be considered adequately capitalized. June 30, --------------------- 2000 1999 ------ ------ Tier I capital ratio 11.75% 11.64% Required Tier I capital ratio 4.00% 4.00% Total capital ratio 12.90% 12.61% Required total capital ratio 8.00% 8.00% Leverage ratio 8.44% 8.21% Required leverage ratio 3.00% 3.00% The Corporation regularly evaluates acquisition opportunities and conducts due diligence activities in connection with possible acquisition in markets near or within the Corporation's current geographic market. As a result, acquisition discussions and, in some cases, take place and future acquisitions could occur. Corporate management believes that it's current capital resources are sufficient to support any foreseeable acquisition activity. RESULTS OF OPERATIONS Interest and fees on loans for the first half of 2000 increased $2,216,000 when compared to the first half of 1999. Increased loan income resulted from the impact of increases in the loan portfolio of $19,906,000 and by increases in interest rates. Interest and dividends on securities was $3,714,000 for the first half of 2000 for an increase of $185,000 over the same period in 1999. Interest and dividends on securities represented 16.6% of total interest income at June 30, 2000 compared to 17.6% at June 30, 1999. Interest on Federal funds sold and short-term investments was $85,000 at June 30, 2000 and June 30, 1999. Total interest expense increased by $1,619,000 when compared to the first half of 1999. The interest expense increase was fueled by increases in deposit account interest of $1,253,000 and an increase in interest expense from Federal Home Loan Bank advances of $62,000. Also, total interest expense for the first half of 2000 was impacted by increases in interest rates paid on savings accounts, market access accounts, certificate of deposit accounts and repurchase agreements when compared to the first half of 1999. Total other income increased by $34,000 when compared to the first half of 1999. This increase resulted from increases in income from fiduciary fees of $43,000, increases in service charges of $20,000, increases in other service charges, and exchanges and fees of $163,000 and decreases in other income of $163,000. The Corporation continuously monitors noninterest expenses for greater profitability. The entire staff is geared to improving productivity at all levels. Noninterest expense for the six months ended June 30, 2000 was $10,740,000, 4.2% above the first six months of 1999. This increase was due primarily to increases in salaries and benefits, and increases in credit card and merchant expenses. The effective tax rate increased slightly from 34.0% during the first half of 1999 to 34.2% during the first half of 2000. The increase in the effective tax rate is due primarily to the decreases in tax exempt 21 interest income to total interest income. Net income was $4,100,000 and $3,796,000 for the six months ended June 30, 2000 and 1999, respectively. Net income per basic and diluted share was $.97 and $.90 for the six months ended June 30, 2000 and 1999, respectively, after giving effect for a two percent stock dividend payable July 1, 2000. IMPACTS OF ACCOUNTING AND REGULATORY PRONOUNCEMENTS Corporate management is not aware of any current recommendations by the Financial Accounting Standards Board or by regulatory authorities which, if they were implemented, would have a material effect on the liquidity, capital resources or operations of the Corporation. GRAMM-LEACH-BLILEY ACT OF 1999 In February of 2000, the Corporation filed an application with the Federal Reserve Bank of Cleveland to be regulated as a financial holding company. In March of 2000, LNB Bancorp, Inc. received approval to operate as a financial holding company. The Corporation is strategically reviewing its new business opportunities under the Gramm-Leach-Bliley Act. 22 PART I - OTHER INFORMATION ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Market Risk Market risk is the risk of loss in a financial instrument arising from adverse changes in market indices such as interest rates, foreign exchange rates and equity prices. The Corporation's principal market risk exposure is interest rate risk, with no material impact on earnings from changes in foreign exchange rates or equity prices. There have been no material changes in the asset and liability mix of the Corporation since December 31, 1998, which would impact the Corporation's level of market risk. Interest rate risk is the exposure to changes in market interest rates. Interest rate sensitivity is the relationship between market interest rates and net interest income due to the repricing characteristics of assets and liabilities. The Corporation monitors the interest rate sensitivity of its on - and - off balance sheet positions by examining its near-term sensitivity and its longer term gap position. Corporate management has determined no significant changes in the Corporation's interest rate risk profile since December 31, 1999. With the Federal Reserve Board's recent announcements to increase the prime lending rate by 25 basis points to 8.75% on February 3, 2000, and increase by 25 basis points to 9.00% on March 22, 2000 and subsequent increase by 50 basis points to 9.50% on May 16, 2000, the Corporation does not anticipate any significant changes in the net interest margin. Also, Corporate management does not anticipate any significant changes in the Corporation's market risk of interest rate risk portfolio. 23 Part II - OTHER INFORMATION ITEM 1 - Legal Proceedings None ITEM 2 - Changes in Securities None ITEM 3 - Defaults Upon Senior Securities None ITEM 4 - Submission of Matters to a Vote of Security Holders None ITEM 5 - Other Information None ITEM 6 - Exhibits and Reports on Form 8-K (a) Exhibit (11) - Computation of Shares Used for Earnings Per Share Calculation. Exhibit (13) - Second Quarter Report to shareholders of LNB Bancorp, Inc., June 30, 2000. (b) Reports on Form 8-K There were no reports on Form 8-K filed for the six months ended June 30, 2000. SIGNATURE 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: August 14, 2000 /s/ Gregory D. Friedman _________________________ Gregory D. Friedman, Executive Vice President and Chief Financial Officer Date: August 14, 2000 /s/ Mitchell J. Fallis _________________________ Mitchell J. Fallis, Vice President and Chief Accounting Officer 24 LNB Bancorp, Inc. Form 10-Q Exhibit Index Pursuant to Item 601 (a) of Regulation S-K S-K Reference Exhibit (11) Computation of Shares Used for Earnings Per Share Calculations Footnote 2 Earnings Per Share on pages 14- 15 of this Form 10Q is incorporated by reference. (12) Second Quarter Report to Shareholders of LNB Bancorp, Inc. June 30, 2000 - EDGAR Version (27) Financial Data Schedule 25 LNB Bancorp, Inc. Exhibit to Form 10 - Q (For the six months ended June 30, 2000) S - K Reference Number (13) Second Quarter Report to Shareholders of LNB Bancorp, Inc. (dated June 30, 2000) EDGAR Version DESCRIPTION: Three sided pamphlet: Outside cover: white with picture showing pen on NASDAQ page Second Quarter Report LNB Bancorp, Inc. June 30, 2000 Inside contains: Message to shareholders, Unaudited EDGAR version Consolidated Balance Sheets for period ending June 30, 2000 and June 30, 1999, respectively, Unaudited EDGAR version Consolidated Statements of Income for the Six Months ended June 30, 2000 and June 30, 1999, respectively, Branch Merchandising: Keeping our customers informed Directors and Officers of LNB Bancorp, Inc. 26 Message to Shareholders It's a pleasure, once again, to report on the progress of LNB Bancorp, Inc., and its wholly owned subsidiary, The Lorain National Bank, after the first half of 2000. During the first half of 2000, LNB Bancorp, Inc. reached record milestones in earnings, assets, and dividends. We have also achieved growth in deposits, loans, and shareholders' equity. We are pleased to announce that earnings have increased 8 percent for the first half of the year, compared to the same period one year ago. Earnings for the first half of 2000 reached $4,100,000, up from $3,796,000 during the first half of 1999. Second quarter's earnings for 2000 surpassed the $2-million mark for the first time for any quarter in the history of LNB Bancorp, Inc. reaching $2,120,000 compared with $1,963,000 for the second quarter of 1999. Basic and diluted earnings per share for the first half of 2000 reached $.97, an 8 percent increase over the $.90 amount reported for the first half of 1999. Earnings for the first half of 2000 were higher than a year ago because of higher net interest income and noninterest income, offset in part by slightly higher operating expenses. Increases in net interest income for the first half of 2000 were fueled by strong commercial loan growth. Cash dividends declared per share for the first half of 2000 increased 9 percent compared to the first half of 1999. The year to date cash dividends declared per share in 2000 increased by $.04 to $.47 per share, up from $.43 per share in 1999. Second quarter 2000 regular cash dividends surpassed the one-million dollar mark for the first time in the Bancorp's history. In addition, we are pleased to announce that a two percent stock dividend was paid to shareholders on July 1, 2000. The stock dividend increased the common stock outstanding of LNB Bancorp, Inc. by 82,562 shares to 4,210,646 shares. Cash was issued in lieu of fractional shares. Assets eclipsed the $600 million mark for the first time in the history of the Bancorp climbing 4 percent to $614.1 million, as of June 30, 2000, up $23.6 million from June 30, 1999. Net loans grew by $27.5 million from one year ago to $434.6 million at June 30, 2000 for a 7 percent increase. Commercial loan growth was strong accounting for most of the total loan growth during the twelve months ended June 30, 2000. Deposits climbed 6 percent to $489.5 million, up $25.3 million from one year ago. Increases in demand, market access and certificates of deposit accounted for the deposit increase. Lorain National Bank operates 21 retail branches and 28 ATMs in nine local communities. Shareholders' equity increased by $3.4 million during the twelve months ended June 30, 2000 for a 7 percent increase. Shareholders equity amounted to $53.0 million or $12.59 per share at June 30, 2000, compared with $49.6 million or $12.04 per share at June 30, 1999. The annualized return on average shareholders' equity rose .33 basis points to 15.86 percent for the first half of 2000 from 15.53 percent for the first half of 1999. For our shareholders seeking investor information electronically, our newly-revised investor relations section of our web site can be viewed at www.4LNB.com. We appreciate and thank you for your continuing support and look forward to addressing you after the completion of our third quarter of operations. 27 /s/ Stanley G. Pijor /s/ Gary C. Smith --------------------- ------------------ Stanley G. Pijor Gary C. Smith Chairman of the Board President and Chief Executive Officer NET INCOME Millions of Dollars (A Net Income graph follows in printed version with net income on the y- axis and years 1996 through 2000 on the x-axis. The graph is a vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) DIVIDENDS PER SHARE Dollars* (A Dividends Per Share graph follows in printed version with dividends per share on the y-axis and years 1996 through 2000 on the x-axis. The graph is a vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) BASIC EARNINGS PER SHARE Dollars* (A Basic Earnings Per Share graph follows in printed version with earnings per share on the y-axis and years 1996 through 2000 on the x-axis. The graph is a vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) Basic Earnings Net Income Dividends Per Share Per Share Year Millions of Dollars Dollars* Dollars* 2000 $4,100 $ .47 $0.97 1999 $3,796 $ .43 $0.90 1998 $3,432 $ .39 $0.81 1997 $3,120 $ .31 $0.73 1996 $2,777 $ .27 $0.66 *Adjusted for stock dividends and splits 28 Consolidated Balance Sheets June 30, 2000 1999 - ------------------------------------------------------------------------- ASSETS: Cash and Due From Banks $ 27,094,000 $ 25,427,000 Federal Funds Sold and Short-term Investments 3,036,000 12,849,000 Federal Home Loan Bank and Federal Reserve Bank Stock, at Cost 3,046,000 2,256,000 Securities Held to Maturity, at Cost 44,785,000 44,543,000 Securities Available for Sale, at Fair Value 77,412,000 75,061,000 Loans 439,422,000 410,843,000 Reserve for Loan Losses (4,868,000) (3,774,000) - ------------------------------------------------------------------------ NET LOANS 434,554,000 407,069,000 - ------------------------------------------------------------------------ Premises, Equipment and Intangible Assets, (net) 15,320,000 15,679,000 Accrued Interest Receivable and Other Assets 8,871,000 7,586,000 - ------------------------------------------------------------------------ TOTAL ASSETS $614,118,000 $590,470,000 - ------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY: Noninterest-Bearing Deposits $ 86,805,000 $ 82,760,000 Interest-Bearing Deposits 402,737,000 381,417,000 - ------------------------------------------------------------------------- TOTAL DEPOSITS 489,542,000 464,177,000 - ------------------------------------------------------------------------- Securities Sold under Repurchase Agreements and Other Short-term Borrowings 42,378,000 38,343,000 Federal Home Loan Bank Advances 24,345,000 34,345,000 Accrued Interest, Taxes, Expenses and Other Liabilities 4,842,000 3,978,000 - ------------------------------------------------------------------------- TOTAL LIABILITIES 561,107,000 540,843,000 - ------------------------------------------------------------------------- Preferred Stock -0- -0- Common Stock 4,228,000 4,223,000 Additional Capital 22,703,000 22,604,000 Retained Earnings 30,155,000 26,177,000 Accumulated Other Comprehensive Income(Loss) (1,175,000) (477,000) Treasury Stock at Cost (2,900,000) (2,900,000) - ------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 53,011,000 49,627,000 - ------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $614,118,000 $590,470,000 - ------------------------------------------------------------------------- 29 TOTAL ASSETS Millions of Dollars (A Total Assets graph follows in printed version with total assets on the y-axis and years 1996 through 2000 on the x-axis. The graph is a vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) TOTAL DEPOSITS Millions of Dollars (A Total Deposits graph follows in printed version with total deposits on the y-axis and years 1996 through 2000 on the x-axis. The graph is a vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) TOTAL SHAREHOLDERS' EQUITY millions of dollars (A Total Shareholder's Equity graph follows in printed version with total shareholder's equity on the y-axis and years 1996 through 2000 on the x-axis. The graph is a vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) Total Shareholders' Total Assets Total Deposits Equity Year Millions of Dollars Millions of Dollars Millions of Dollars 2000 $614.1 $489.5 $53.0 1999 $590.5 $464.2 $49.6 1998 $508.4 $432.6 $46.7 1997 $457.0 $384.5 $43.6 1996 $424.5 $357.6 $42.4 30 Consolidated Statements of Income Six Months Ended June 30, 2000 1999 - ------------------------------------------------------------------------- INTEREST INCOME: Interest and Fees on Loans $18,661,000 $16,445,000 Interest and Dividends on Securities: 3,670,000 3,529,000 Interest on Federal Funds Sold and Short-term Investments 129,000 85,000 - ------------------------------------------------------------------------- TOTAL INTEREST INCOME 22,460,000 20,059,000 - ------------------------------------------------------------------------- INTEREST EXPENSE: Interest on Deposits 7,422,000 6,169,000 Interest on Securities Sold under Repurchase Agreements and Other Short-Term Borrowings 832,000 528,000 Interest on Federal Home Loan Bank Advances 679,000 617,000 - ------------------------------------------------------------------------- TOTAL INTEREST EXPENSE 8,933,000 7,314,000 - ------------------------------------------------------------------------- NET INTEREST INCOME 13,527,000 12,745,000 Provision for Loan Losses 600,000 700,000 - ------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 12,927,000 12,045,000 - ------------------------------------------------------------------------- OTHER INCOME: Investments and Trust Services Division Income 1,117,000 1,074,000 Fees and Service Charges 2,902,000 2,719,000 Gains From Sales of Loans, Securities, and Buildings -0- 158,000 Other Operating Income 26,000 60,000 - ------------------------------------------------------------------------- TOTAL OTHER INCOME 4,045,000 4,011,000 - ------------------------------------------------------------------------- OTHER EXPENSES: Salaries and Employee Benefits 5,105,000 4,915,000 Net Occupancy Expense of Premises 758,000 790,000 Furniture and Equipment Expenses 1,289,000 1,201,000 Supplies and Postage 476,000 509,000 Ohio Franchise Tax 330,000 293,000 Other Operating Expenses 2,782,000 2,598,000 - ------------------------------------------------------------------------- TOTAL OTHER EXPENSES 10,740,000 10,306,000 - ------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 6,232,000 5,750,000 - ------------------------------------------------------------------------- Income Taxes 2,132,000 1,954,000 - ------------------------------------------------------------------------- NET INCOME $ 4,100,000 $ 3,796,000 - ------------------------------------------------------------------------- - ------------------------------------------------------------------------- PER SHARE DATA: - ------------------------------------------------------------------------- BASIC EARNINGS PER SHARE $ .97 $ .90 - ------------------------------------------------------------------------- DILUTED EARNINGS PER SHARE $ .97 $ .90 - ------------------------------------------------------------------------- DIVIDENDS DECLARED PER SHARE $ .47 $ .43 31 - ------------------------------------------------------------------------- (LOGO) LNB Bancorp, Inc. and its subsidiary Lorain National Bank Logos NASDAQ Listing, FDIC, Federal Home Loan Bank, Equal Housing Lender 32 Inside cover Branch Merchandising: Keeping our customers informed Top right column color photograph of current advertisement Despite the world's fast-paced advances in information technology, today's consumer still remains largely dependent on traditional means of communication. Recognizing that fact, Lorain National Bank recently enhanced its customer communications plan during the second quarter of 2000 by adding "merchandising" messages to all of its full-service bank lobbies. Merchandising is not new. In fact, it's arguable that merchandising has been around in some form since the inception of retail sales. If you're not familiar with the term, you're probably familiar with the look - virtually all retail establishments at shopping centers and malls employ merchandising signs and posters to communicate sales events or special pricing. While not really new to Lorain National, the size and quantity of merchandising messages has changed dramatically. "We have taken this opportunity to add another important layer of communication to our customers while they are in our lobbies," says James H. Weber, Sr. V.P., Marketing. "It's an important addition to our offices because it adds an unspoken element to our communications mix." Lorain National sees branch merchandising as an addition to, not a substitute for dialogue between customers and bank service representatives. The fact is, bank customers spend very little time in bank lobbies when not transacting business. In an effort to capture their attention, entering or exiting the banking office, or while waiting for service, the bank has an opportunity to alert customers of current specials or new products. During the third quarter of this year, Lorain National Bank is promoting its relatively new investment vehicle, the Market Access Account. Market Access is a deposit account which features tiered market rates and comes bundled with a free interest-bearing checking account, a Visa Gold credit card and a BetterWay Reserve overdraft line of credit. It's a product designed to offer customers a relatively liquid, high-interest account to park investment or savings dollars. Lorain National's merchandising consists of wall signs and cards, teller window signs and free-standing posters adjacent to literature racks. The artwork applied to the merchandising is designed to mesh with the graphic style used on bank literature - which is currently being re-printed with a "family" appearance. The entire merchandising program works in conjunction with advertising media employed outside the bank. Currently, Lorain National employs several forms of advertising communication, including an Internet web site (www.4LNB.com), daily and weekly newspapers, outdoor billboards, radio commercials and direct mail. The artwork depicted above in miniature represents a typical branch merchandising element currently in use. 33 Back Cover: White background with blue along top of page Three column format Directors and Officers of LNB Bancorp, Inc. Directors: - --------------------------------------------------------- Stanley G. Pijor Jeffrey F. Riddell Chairman of the Board President and LNB Bancorp, Inc. and Chief Executive Officer, Lorain National Bank Consumeracq, Inc. and Consumers Builders Supply Co. James F. Kidd Vice Chairman of the Board Thomas P. Ryan LNB Bancorp, Inc. and Executive Vice President Lorain National Bank and Secretary/Treasurer LNB Bancorp, Inc. Daniel P. Batista Executive Vice President Attorney/Shareholder and Secretary Wickens, Herzer, Panza, Lorain National Bank Cook & Batista John W. Schaeffer, M.D. Robert M. Campana President Managing Director North Ohio Heart Center, Inc. P.C. Campana, Inc. Gary C. Smith Terry D. Goode President and Vice President Chief Executive Officer Lorain County Title Company LNB Bancorp, Inc. and Lorain National Bank Wellsley O. Gray Retired Eugene M. Sofranko President and James R. Herrick Chief Executive Officer President Lorain Glass Company, Inc. Liberty Auto Group, Inc. Leo Weingarten David M. Koethe Retired Retired, former Chairman of the Board The Lorain Printing Company Benjamin G. Norton Human Resource Consultant LTI Power Systems Directors Emeritii of Lorain National Bank: James L Bardoner T.L. Smith, M.D. Paul T. Stack Retired, Former President Retired Physician Retired Manufacturer's Dorn Industries, Inc. Representative 34 Officers: - --------------------------- Stanley G. Pijor Chairman of the Board James F. Kidd Vice Chairman of the Board Gary C. Smith President and Chief Executive Officer Thomas P. Ryan Executive Vice President and Secretary/Treasurer Gregory D. Friedman, CPA Executive Vice President and Chief Financial Officer Kevin W. Nelson Executive Vice President and Chief Operating Officer Debra R. Brown Senior Vice President Branch Administration Sandra L. Dubell Senior Vice President and Senior Lending Officer Michael D. Ireland Senior Vice President and Senior Operations Officer Emma N. Mason Senior Vice President and Senior Trust Officer James H. Weber Senior Vice President and Senior Marketing Officer Mitchell J. Fallis, CPA Vice President and Chief Accounting Officer (Logo) LNB Bancorp, Inc. Mail: LNB Bancorp, Inc.*457 Broadway*Lorain, Ohio 44052-1739 E-Mail: emailservices@4LNB.com*Internet:www.4LNB.com Telephone: (440) 244-6000*Toll Free: (800) 860-1007 Telefax: (440) 244-4815*Telebanker: (440) 245-4562 35 LNB Bancorp, Inc. Exhibit to Form 10 - Q (For the six months ended June 30, 2000) S - K Reference Number (27) Financial Data Schedule EX-27 2 0002.txt
9 0000737210 LNB BANCORP, INC. 1,000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 27,094 3,036 0 0 77,412 47,831 45,055 429,692 4,868 614,118 489,542 47,738 4,842 18,985 4,228 0 0 48,783 614,118 18,661 3,714 85 22,460 7,422 8,933 13,527 0 0 10,740 6,232 6,232 0 0 4,100 .97 .97 4.90 626 437 0 6,078 4,667 533 134 4,868 3,930 0 938
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