-----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, UvminJ5ean8jk4+H+AFY8caOyb5+qoXkrAHRRbT5TYr0Hg9u/ewg2XATz7JIHDTV in1cjkpl33wjcqfoeWxzDw== 0000737210-97-000005.txt : 19970222 0000737210-97-000005.hdr.sgml : 19970222 ACCESSION NUMBER: 0000737210-97-000005 CONFORMED SUBMISSION TYPE: PRE 14A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19970415 FILED AS OF DATE: 19970220 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LNB BANCORP INC CENTRAL INDEX KEY: 0000737210 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341406303 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: PRE 14A SEC ACT: 1934 Act SEC FILE NUMBER: 000-13203 FILM NUMBER: 97540180 BUSINESS ADDRESS: STREET 1: 457 BROADWAY CITY: LORAIN STATE: OH ZIP: 44052-1769 BUSINESS PHONE: 2162446000 PRE 14A 1 1 LNB BANCORP, INC. LORAIN, OHIO NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO THE SHAREHOLDERS OF LNB BANCORP, INC. March 17, 1997 The Annual Meeting of Shareholders of LNB Bancorp, Inc. will be held at 521 Broadway, Lorain, Ohio 44052, on Tuesday, April 15, 1997, at 10:00 a.m., Eastern Daylight Savings Time, for the purpose of considering and voting upon the following matters as more fully described in the Proxy Statement. PROPOSALS: 1. ELECTION OF DIRECTORS - To elect five (5) directors to hold office until their term expires (April 18, 2000) or until their successors are elected and qualified. 2. STOCK DIVIDEND - Increase the outstanding common stock of LNB Bancorp, Inc. by declaration of a stock dividend consisting of approximately 82,771 shares of common stock of $1.00 par value each, and the terms and conditions thereof. 3. OTHER BUSINESS - To transact such other business as may properly come before the meeting. Shareholders of record at the close of business on March 7, 1997 will be entitled to vote the number of shares held of record in their names on that date. The transfer books will not be closed. We urge you to sign and return the enclosed proxy as promptly as possible, whether or not you plan to attend the meeting in person. This proxy may be revoked prior to its exercise. By Order of the Board of Directors /s/ Thomas P. Ryan Thomas P. Ryan Executive Vice President and Secretary/Treasurer YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED PROXY FORM(S) WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. -1- 2 THIS PAGE LEFT INTENTIONALLY BLANK -2- 3 LNB BANCORP, INC. 457 BROADWAY LORAIN, OHIO 44052 PROXY STATEMENT MARCH 17, 1997 This proxy solicitation is made on behalf of the Board of Directors of LNB Bancorp, Inc., (hereinafter called the "Corporation") being a One Bank Holding Company owning all of the stock of The Lorain National Bank (hereinafter called the "Bank"). As of this date, the number of shares of Common Stock outstanding and entitled to vote at the Annual Meeting of Shareholders to be held on April 15, 1997, is 4,138,533. Only those shareholders of record at the close of business on March 7, 1997 shall be entitled to vote. This proxy may be revoked prior to its exercise. The cost of this solicitation is being paid by the Corporation. VOTING Each shareholder shall be entitled to one vote for each share of stock standing in their name on the books of the Corporation. No holder of shares of any class shall have the right to vote cumulatively in the election of directors. Shares held in accounts by the Bank's Trust and Investment Management Division will be voted by the trustee in accordance with written instructions from account administrators or account plan participants, and where no instructions are received, as the trustee deems proper. Shares of Common Stock represented by proxies in the accompanying form which are properly executed and returned to the Corporation will be voted at the Annual Meeting of Shareholders in accordance with the shareholders' instruction contained in such proxies. Where no such instructions are given, the shares will be voted for the election of directors as described herein; in support of the increase in the number of authorized shares; and at the discretion of the proxy holders on such other matters as may come before the meeting. The Board of Directors has no reason to believe that any of the nominees will be unable to serve as a director. In the event, however, of the death or unavailability of any nominee or nominees, the proxy to that extent will be voted for such other person or persons as the Board of Directors may recommend. The results of votes taken at the Annual Meeting will be disclosed in the Corporation's First Quarterly Report for 1997 on Form 10-Q, as filed with the Securities and Exchange Commission (SEC). The disclosure will include for each proposal, the number of votes for, the number of votes against and the number of abstentions. In addition, the disclosure will set forth the number of votes received by each candidate running for a directorship and the percentage of these votes as to the total shares outstanding. ELECTION OF DIRECTORS Article III of the Code of Regulations of the Corporation provides that directors are to be divided into three (3) classes. Each class serves a term of three (3) years, or until their respective successors are elected and qualified. In that the term of office for five (5) members of the present Board of Directors will expire on April 15, 1997, the management has nominated the hereinafter named five (5) individuals for election to serve until April 18, 2000, or until their successors are elected and qualified. The affirmative vote of the holders of at least a majority of a quorum is required in order to elect each director. Under the Code of Regulations of the Corporation, a quorum is constituted by the presence, in person or by proxy, of a majority of the voting power of the Corporation. -3- 4 Other nominations may be made only in accordance with the notice procedures set forth in Article III of the Code of Regulations of the Corporation. The procedure states that nominations for election to the Board of Directors may be made by the Board of Directors or by any shareholder of any outstanding class of capital stock of the Corporation entitled to vote for the election of directors. Nominations, other than those made by or on behalf of the existing management of the Corporation, shall be made in writing and shall be delivered or mailed to the President of the Corporation not less than fourteen (14) days nor more than fifty (50) days prior to any meeting of shareholders called for the election of directors, provided however, that if less than twenty-one (21) days notice of the meeting is given to shareholders, such nomination shall be mailed or delivered to the President of the Corporation no later than the close of business on the seventh (7th) day following the day on which the notice of the meeting was mailed. Such notification shall contain the following information as to the extent known to the notifying shareholder: (a) the name and address of each proposed nominee; (b) the principal occupation of each proposed nominee; (c) the total number of shares of capital stock of the Corporation that will be voted for each proposed nominee; (d) the name and resident address of the notifying shareholder; and (e) the number of shares of capital stock of the Corporation owned by the notifying shareholder. Nominations not made in accordance herewith may, at his discretion, be disregarded by the Chairman of the meeting, and upon his instructions, the vote teller may disregard all votes cast for each such nominee. Unless otherwise instructed, it is the intention of the persons named in the proxy to vote for the election of the following five(5) nominees: 1) James F. Kidd 2) Jeffrey F. Riddell 3) Thomas P. Ryan 4) Paul T. Stack 5) Robert M. Campana THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH NOMINEE. The following individuals are directors whose term of office is scheduled to expire on April 21, 1998: 1) Daniel P. Batista 2) David M. Koethe 3) Stanley G. Pijor 4) Eugene M. Sofranko 5) Leo Weingarten The following individuals are directors whose term of office is scheduled to expire on April 20, 1999: 1) James L. Bardoner 2) Wellsey O. Gray 3) Benjamin G. Norton 4) T.L. Smith, M.D. -4- 5 DIRECTOR'S COMMITTEES The Bank has six (6) standing committees upon which members of the Board of Directors serve. They are: 1) The Audit Committee 4) The Pension/Fringe Benefit Committee 2) The Executive Committee 5) The Incentive Stock Option Committee 3) The Trust Committee 6) The Compensation Committee Membership of each of these committees is indicated by footnote on page 7. The Audit Committee met three (3) times during the last fiscal year. It establishes policies for the administration of the Bank's Audit Division. The Executive Committee met thirteen (13) times during the last fiscal year. This committee is authorized to approve matters relating to loans, the purchase of bills, notes, and other evidence of debt. The Trust Committee reviews the various trusts accepted by the Bank's Trust and Investment Management Division. It held six (6) meetings during the last fiscal year. The Pension/Fringe Benefit Committee reviews indirect compensation of officers and employees. It did not meet during the last fiscal year. The Incentive Stock Option Committee determines who will receive stock options and the number of shares to be granted under the terms of the Incentive Stock Option Plan. The actions of the Incentive Stock Option Committee are subject to the approval of the Compensation Committee. It did not meet during the last fiscal year. The Compensation Committee meets to review all officers' salaries. It held one (1) meeting during the last fiscal year. The Bank has no designated Nominating Committee. Nominees for the Board of Directors are determined by a vote of the total Board of Directors. The Bank held thirteen (13) Board of Directors meetings during the last fiscal year. Of the directors who served during 1996, Leo Weingarten attended fewer than 75% of the total number of meetings of the Board of Directors and all committee meetings of which the aforementioned director was a member. The Corporation held twelve (12) Board of Directors meetings during the last fiscal year. Of the directors who served during 1996, no one attended fewer than 75% of the total of twelve (12) meetings held. DIRECTOR'S COMPENSATION Each outside director of the Bank is entitled to receive an annual retainer fee of $2,500. Bank officers, who are also directors of the Bank, do not receive an annual retainer fee. All of the directors of the Corporation are also directors of the Bank. A director's fee of $500 is paid to outside directors for each meeting attended. Directors, who are also officers of the Corporation, receive a fee of $250 for their attendance at the Corporation's board meetings and receive no director's fees for their attendance at the meetings of the Bank's board. Mr. Stanley G. Pijor entered into a Consulting Agreement (The Agreement) with the Bank and the Corporation dated March 15, 1994. The Agreement provides that Mr. Pijor shall receive a consulting fee of $85,000 each year for a period of five (5) years commencing January 1, 1996. The Agreement also stipulates that Mr. Pijor will be provided with an automobile and will be reimbursed for reasonable expenses relative to his duties as a consultant during the term of the Agreement. Termination of the Agreement (by either party) would not prejudice Mr. Pijor's right to receive the benefits referred to above for a period of up to two (2) years. -5- 6 LORAIN NATIONAL BANK LNB BANCORP, PRINCIPAL OCCUPATION DIRECTOR INC. DIRECTOR NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE JAMES L. BARDONER RETIRED, FORMER PRESIDENT 1974 1983 Age 78 Dorn Industries, Inc. (1-2-4-5-6) (Manufacturing Company) DANIEL P. BATISTA ATTORNEY/PARTNER 1976 1983 Age 62 Cook & Batista Co.,L.P.A.(A) (2-3-5-6) ROBERT M. CAMPANA MANAGING DIRECTOR 1996 1996 Age 37 P.C.Campana, Inc. (3) WELLSLEY O. GRAY SALES CONSULTANT 1973 1983 Age 63 Smith Dairy Company (1-3) JAMES F. KIDD PRESIDENT AND CHIEF 1989 1989 Age 57 EXECUTIVE OFFICER (2-3-4) LNB Bancorp, Inc. and The Lorain National Bank DAVID M. KOETHE CHAIRMAN OF THE BOARD 1975 1983 Age 61 The Lorain Printing Company(B) (2-3-4-5-6) BENJAMIN G. NORTON EMPLOYEE AND 1983 1983 Age 57 COMMUNITY RELATIONS MANAGER (3-7) RELTEC Corporation STANLEY G. PIJOR CHAIRMAN OF THE BOARD 1969 1983 Age 66 LNB Bancorp, Inc. and (2-3-4-6) The Lorain National Bank JEFFREY F. RIDDELL PRESIDENT 1995 1995 Age 45 Consumers Builders Supply (1) Company VICE PRESIDENT AND CHIEF EXECUTIVE OFFICER Consumeracq, Inc. THOMAS P. RYAN EXECUTIVE VICE PRESIDENT 1989 1989 Age 58 AND SECRETARY/TREASURER LNB Bancorp, Inc. EXECUTIVE VICE PRESIDENT AND SECRETARY The Lorain National Bank -6- 7 LORAIN NATIONAL BANK LNB BANCORP, PRINCIPAL OCCUPATION DIRECTOR INC. DIRECTOR NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE T.L. SMITH, M.D RETIRED PHYSICIAN 1968 1983 Age 83 (1-2-4-5-6) EUGENE M. SOFRANKO PRESIDENT AND CHIEF 1974 1983 Age 66 EXECUTIVE OFFICER (1-2-4-5-6) Lorain Glass Company, Inc. PAUL T. STACK RETIRED MANUFACTURER'S 1974 1983 Age 67 REPRESENTATIVE (1-2-3-6) Coley's Inc. LEO WEINGARTEN RETIRED 1964 1983 Age 77 (2-4-5-6) (1) Member of Audit Committee (5) Member of Incentive Stock Option (2) Member of Executive Committee Committee (3) Member of Trust Committee (6) Member of Compensation Committee (4) Member of Pension/Fringe Benefit(7) Alternate Member of Executive Committee and Compensation Committees (A) The Bank has retained the law firm of Cook & Batista Co., L.P.A. as legal counsel for the last several years. During the last fiscal year, The Lorain National Bank has paid to Cook & Batista, Co., L.P.A. an amount of $115,634. It is anticipated that this relationship will continue during the current fiscal year. (B) During the last fiscal year, The Lorain National Bank has paid to The Lorain Printing Company an amount of $62,503 for printing services and supplies. It is anticipated that such business relationship will continue during the current fiscal year. (C) During the last fiscal year the Bank paid to Stanley G. Pijor the sum of $1,031,574 which constituted the lump sum distribution of his retirement benefits payable under the provisions of the Lorain National Bank Retirement Pension Plan. Mr. Pijor was also a party to a Consulting Agreement with the Bank dated March 15, 1994, which provides Mr. Pijor shall receive a consulting fee of $85,000 each year for a period of five (5) years commencing on January 1, 1996. The Agreement also stipulates that Mr. Pijor will be provided with an automobile and will be reimbursed for reasonable expenses relative to his duties as a consultant during the term of the Agreement. Termination of the Agreement (by either party) would not prejudice Mr. Pijor's rights to receive the benefits referred to above for a period of up to two (2) years. Mr. Pijor was also a party to a Supplemental Retirement Agreement entered into with the Bank on December 31, 1987. Under the terms of this Agreement, Mr. Pijor shall receive an annual supplemental retirement benefit in the amount of $50,000 for a period on ten (10) years. The payment of these supplemental retirement benefits commenced in January of 1996. -7- 8 EXECUTIVE COMPENSATION LNB Bancorp, Inc. did not pay any separate compensation, other than Corporation director fees, to its executive officers during 1996, 1995, and 1994. All executive compensation was paid by Lorain National Bank. The information which follows discloses the annual and long term compensation for services in all capacities to the Corporation and the Bank for the fiscal years ended December 31, 1996, 1995 and 1994, for all persons who were, during 1996, (i) the chief executive officer and (ii) the other most highly compensated Officers of the Bank who made in excess of $100,000 during 1996 (the Named Executive Officers). SUMMARY COMPENSATION TABLE The named executive officers disclosure requirements affect the Chief Executive Officer and those executive officers earning more than $100,000 in salary and bonuses. In 1996, 1995 and 1994, Mr. James F. Kidd, President and Chief Executive Officer, and Mr. Thomas P. Ryan, Executive Vice President and Secretary/Treasurer, met the criteria for disclosure. The following table discloses the annual salary, bonuses and all other compensation awards and payouts for services in all capacities to the Corporation and the Bank for the fiscal years ended December 31, 1996, 1995 and 1994. Compensation (1) ----------------------------------------------- Annual Name and -------------------------------- All Principal Position Year Salary Bonuses Other (2) ---------------------------------------------------------------------- James F. Kidd 1996 $151,154 $32,500 $20,600 President and Chief 1995 $124,000 $15,000 $18,427 Executive Officer 1994 $104,556 $15,000 $15,646 Thomas P. Ryan 1996 $104,050 $15,375 $18,755 Executive Vice President 1995 $ 99,375 $15,000 $15,693 and Secretary/Treasurer 1994 $ 92,323 $15,000 $14,450 (1) The aggregate of Other Annual Compensation is less than 10% of the total of annual salary and bonus for all individuals for all years presented and therefore is not required to be reported under the SEC rules. (2) All Other Compensation consisted of the following: James F. Kidd: 1996 1995 1994 Contribution, in Mr. Kidd's behalf to: The Bank's Stock Purchase Plan $ 4,500 $ 4,176 $ 3,909 The Bank's Employee Stock Ownership Plan $10,925 $10,236 $ 8,860 Mr. Kidd's Supplemental Life Insurance $ 2,250 $ 2,239 $ 2,077 Corporation director's fees $ 2,925 $ 1,775 $ 800 Thomas P. Ryan: 1996 1995 1994 Contribution, in Mr. Ryan's behalf to: The Bank's Stock Purchase Plan $ 3,583 $ 3,431 $ 3,508 The Bank's Employee Stock Ownership Plan $ 8,698 $ 8,518 $ 7,993 Mr. Ryan's Supplemental Life Insurance $ 2,079 $ 1,969 $ 1,949 Corporation director's fees $ 2,700 $ 1,775 $ 1,000 Anniversary Stock Award $ 1,695 $ 0 $ 0 OPTION GRANTS TABLE (last fiscal year) There were no stock options granted by the Corporation or the Bank in 1996. LONG TERM INCENTIVE PLAN AWARD TABLE (last fiscal year) There were no long term incentive plans or plan awards in 1996. -8- 9 OPTION EXERCISES AND YEAR END VALUE TABLE (last fiscal year) AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUE(1) Value of Number of Unexercised Unexercised In-the-Money Option Option Shares Shares Shares Acquired Value at FY-End(#) at FY-End ($) on Realized Exercisable/ Exercisable/ Name Exercise(#) ($)(2) Unexercisable Unexercisable(2) -------------------------------------------------------------------------- James F. Kidd 0 $0 2,101/0 $18,933/$0 Thomas P. Ryan 0 $0 2,101/0 $18,933/$0 (1) All amounts reflect the 2% stock dividend in April of 1996. (2) Market value of underlying securities at exercise date or year end, as the case may be, minus the exercise or price of "in-the-money" options. COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION The Compensation Committee consists of: James L. Bardoner, Daniel P. Batista, David M. Koethe, Stanley G. Pijor, T.L. Smith, Eugene M. Sofranko, Paul T. Stack and Leo Weingarten. Mr. Batista is a shareholder of the law firm of Cook and Batista Co., L.P.A., which performs legal services for the Bank. During 1996, the Bank paid to Cook and Batista Co., L.P.A. legal fees in the amount of $115,634. The amount of Mr. Batista's interest in such fees cannot be practicably determined. Mr. Koethe is the Chairman of The Board of The Lorain Printing Company. During 1996, the Bank paid to The Lorain Printing Company an amount of $62,530 for printing services and supplies. The amount of Mr. Koethe's interest in such payments cannot be practicably determined. During 1996, the Bank paid to Stanley G. Pijor the sum of $1,031,574 which constituted the lump sum distribution for his retirement benefits payable under the provisions of the Lorain National Bank Retirement Pension Plan. Mr. Pijor was also a party to a Consulting Agreement with the Bank dated March 15, 1994, which provides Mr. Pijor shall receive a consulting fee of $85,000 each year for a period of five (5) years, said payments having commenced on January 1, 1996. This Consulting Agreement also stipulates that Mr. Pijor will be provided with an automobile and will be reimbursed for reasonable expenses relative to his duties as a consultant during the term of the Agreement. Mr. Pijor was also a party to a Supplemental Retirement Agreement entered into with the Bank on December 31, 1987. Under the terms of this supplemental Retirement Agreement, Mr. Pijor is to receive supplemental retirement benefits in the amount of $50,000 per year, for a period of ten (10) years. The payment of these supplemental retirement benefits commenced in January of 1996. COMPENSATION COMMITTEE REPORT The Lorain National Bank's Compensation Committee has the responsibility of evaluating and recommending to the Board of Directors, for its approval, the amount of compensation, including salary, bonus, and other benefits, for all officers of the Bank, including the named Executive Officers and the Chief Executive Officer. It is the philosophy and policy of the Compensation Committee to establish a compensation program for Bank officers to attract, motivate and retain a highly qualified management team. The criteria used to determine the recommended compensation of Bank officers includes their level of responsibility, performance, experience, the Committee's 10 judgment as to the past performance and expected further contribution. -9- A comparison to the industry peer group as well as national and regional surveys are also used. In addition, Mr. James F. Kidd, as the Bank's Chief Executive Officer, evaluates the performance of other officers and presents his evaluations and salary recommendations for all officers, other than himself, to the Compensation Committee. The Committee is also advised by independent compensation consultants, concerning compensation of Bank officers. Based upon the foregoing, the Compensation Committee prepares a report on recommended base salaries for all officers. In addition, in some cases, the Compensation Committee recommends bonuses for certain officers of the Bank, based upon the attainment of preestablished performace goals. The recommendations of the Compensation Committee regarding base salaries and bonuses for all officers are sublect to approval by the Board of Directors. As to the Chief Executive Officer, Mr. James F. Kidd's compensation, including salary, bonus, and other benefits is also based upon a recommendation of the Compensation Committee, which is then approved by the Board of Directors. The factors and criteria considered by the Compensation Committee included the pay level for CEOs of comparable banks, the financial performance of the Bank, and the individual performance and leadership of Mr. Kidd. Based upon the foregoing, and based upon the attainment of preestablished performance goals established by the Compensation Committee, the Compensation Committee recommended a base salary and bonus for Mr. Kidd for 1996, in the amounts set forth in the Summary Compensation Table, which amounts were approved by the Board of Directors. The members of the Compensation Committee are: James L. Bardoner T.L. Smith, M.D. Daniel P. Batista Eugene M. Sofranko David M. Koethe Paul T. Stack Stanley G. Pijor Leo Weingarten EMPLOYMENT AGREEMENTS As of September 1, 1995, Mr. James F. Kidd entered into an Employment Agreement with LNB Bancorp, Inc. and The Lorain National Bank. The Agreement provides for Mr. Kidd's employment until he reaches the age of 65 as President. Mr. Kidd shall be compensated at the initial rate of One Hundred and Twenty Four Thousand Dollars ($124,000) with an annual compensation review each year thereafter. Mr. Kidd will continue to receive his present fringe benefits and such additional benefits as are set forth in the Bank's Employee Benefit Program. If the Agreement is terminated earlier, other than for just cause, or by Mr. Kidd, then he will be entitled to the salary and benefits described above for a period of up to two (2) years. As of September 1, 1995, Mr. Thomas P. Ryan entered into an Employment Agreement with LNB Bancorp, Inc. and The Lorain National Bank. The Agreement provides for Mr. Ryan's employment until he reaches the age of 65 as Executive Vice President. Mr. Ryan shall be compensated at the initial rate of Ninety Seven Thousand Five Hundred Dollars ($97,500) with an annual compensation review each year thereafter. Mr. Ryan will continue to receive his present fringe benefits and such additional benefits as are set forth in the Bank's Employee Benefit Program. If the Agreement is terminated earlier, other than for just cause, or by Mr. Ryan, then he will be entitled to the salary and benefits described above for a period of up to two (2) years. PENSION PLAN The Bank sponsors The Lorain National Bank Retirement Pension Plan (the Plan) covering substantially all employees of the Bank. An employee is eligible to participate on January 1 or July 1 after the 11 attainment of age twenty-one (21) and completion of one year of service, as defined in the Plan. The Bank's 1996 contribution to the Plan was $249,461. The amount of contributions with respect to a specific person is not and cannot readily be calculated on an individual basis. -10- Participants are eligible for normal retirement upon reaching age sixty-five (65). Annual benefit payments are determined as a percentage for the five (5) consecutive plan years that yield the highest average salary. Participants in the Plan prior to January 1, 1989 will have annual benefit payments reduced if they have less than fifteen (15) years of continuous employment upon retirement. Participants who join the Plan after January 1, 1989 will have benefit payments reduced if they have less than twenty-five (25) years of continuous employment upon retirement. The normal form of benefit payment is a joint and survivor annuity. Benefits become fully vested after a participant has completed five (5) years of service. The Plan also provides for the payment of early retirement, death, disability, and deferred vested benefits in the form of a lump sum distribution, or monthly annuity. Annual benefit payments under the provisions of the Plan are computed by a formula, the factors of which include annual compensation, years of service and the social security taxable wage base. The Plan was amended, effective January 1, 1995, to allow the payment of accrued benefits in the form of a lump sum distribution upon retirement at normal retirement age. The estimated present value of the accrued benefit using the Plan's actuarial equivalence assumptions for the Named Executive Officers ranged from $308,000 to $315,000 as of December 31, 1996. Assuming the participant selects the benefit payable in a ten (10) year Certain and Life Annuity at normal retirement date, the following table reflects annual benefits payable to the employee based upon average annual compensation levels and twenty-five (25) years of service. Employee's Annual Estimated Pension Final Average Payments Assuming Minimum of Annual Compensation 25 Years of Service $250,000* $76,144 200,000* 76,144 150,000 76,144 100,000 49,269 *The current annual compensation limit with respect to determining an employee's annual pension payment is currently limited by the Internal Revenue Code to $150,000. The Plan reflects the annual compensation limit and this results in a maximum annual pension payment of $76,144. Therefore, an employee's annual estimated pension payment for final average compensation levels of $150,000 and above remains at the $76,144 level. Pension benefits accrued prior to 1995 are grand fathered, if their calculated benefit is greater than $76,144. These pension payments do not reflect any additional retirement benefits which the employee may receive in the form of Social Security and other forms of supplemental retirement benefits. Messrs. Kidd and Ryan have thirty-two (32) and thirty-five (35) credited years of service respectively, under the provisions of the Plan. Benefit payments under the provisions of the Plan are computed using formulas, the factors of which include annual compensation, years of 12 service, social security taxable wage base, and, in the case of a lump sum distribution, current interest rates are also taken into consideration. On July 30, 1996, the Bank entered into Supplemental Retirement Agreements (SRA) with Mr. James F. Kidd and Mr. Thomas P. Ryan. The purpose of the SRA is to provide supplemental retirement benefits to Messrs. Kidd and Ryan in addition to the benefits provided by the Bank's qualified retirement plan, to assist the Bank in retaining their services through their normal retirement dates. The SRA provides for payments, monthly or annually, at Messrs. Kidd and Ryan's election, in the event of: (a) normal retirement; **(b) reduced supplemental retirement benefits in the event of early retirement; (c)disability prior to retirement; (d) death; or (e) discharge "without cause." -11- 13 Under the terms of their SRA, Messrs. Kidd and Ryan will receive supplemental retirement benefits for a period of ten (10) years. The full benefit amount is equal to seventy percent (70%) of the compensation paid in the final year of employment, minus the Bank's pension benefit and Social Security benefits. Mr. Kidd and Mr. Ryan are entitled to the full benefit amount if they retire on their normal retirement date;** 75% of the full benefit amount if they retire at age 64; 50% of the full benefit amount if they retire at age 63; 25% of the full benefit amount if they retire at age 62; and no SRA benefit if they retire prior to age 62. In the event of disability prior to retirement, the disabled individual would receive their full SRA benefit amount beginning at age 65. In the event of death prior to retirement, after meeting the eligibility and employment requirements, the applicable benefit (based upon the decedent's age) is payable to his designated beneficiary. In the event of discharge "without cause", the discharged individual would receive their full SRA benefit amount, as if he retired at age 65, commencing at the recipient's discretion. The SRA is a non-qualified defined benefit agreement. As of December 31, 1996, the monthly benefits that would be paid at normal retirement age, would be $8,287 and $2,151 for Mr. Kidd and Mr. Ryan respectively. **Mr. Kidd's normal retirement date is November 1, 2004 **Mr. Ryan's normal retirement date will be April 1, 2003 PERFORMANCE GRAPH The graph which follows compares the five (5) year cumulative total return from investing $100 on December 31, 1991 in each of LNB Bancorp, Inc. common stock, the Standard & Poor's 500 index (S&P 500 Index) of companies and the National Association of Securities Dealers Association Quotation System Bank Index (NASDAQ Bank Index) of companies, with dividends assumed to be reinvested when received. Comparison of Five Year Cumulative Total Return* AMONG LNB BANCORP, INC, THE S&P 500 INDEX AND NASDAQ BANK INDEX (PERFORMANCE GRAPH FOLLOWS IN PRINTED VERSION WITH YEARS 1991 THROUGH 1996 ON THE X-AXIS AND CUMULATIVE INVESTMENT ON THE Y-AXIS IN $100 INCREMENTS RANGING FROM $0 TO $400. THE CO-ORDINATES, BY YEAR, WHICH ARE PRESENTED IN THE TABLE BELOW ARE PLOTTED ON THE PREVIOUSLY DESCRIBED GRID ALONG WITH AN ACCOMPANYING LEGEND FOR IDENTIFICATION PURPOSES.) * $100 INVESTED ON 12/31/91 IN STOCK OR INDEX - INCLUDING REINVESTMENT OF DIVIDENDS. DECEMBER 31, --------------------------------------------------------------------------- 1991 1992 1993 1994 1995 1996 --------------------------------------------------------------------------- LNB Bancorp, Inc. $100 $115 $141 $187 $200 $218 --------------------------------------------------------------------------- S&P 500 Index $100 $108 $118 $120 $165 $203 --------------------------------------------------------------------------- NASDAQ Bank Index $100 $146 $166 $165 $246 $326 --------------------------------------------------------------------------- -12- 14 BENEFICIAL OWNERSHIP OF SHARES The following table reflects as of December 31, 1996, any person known to the Corporation to be the beneficial owner of more than five percent (5%) of any class of the Corporation's voting securities, consisting of common stock only, as well as the total number of shares of common stock beneficially owned by each director, nominee, and the director and executive officers of the Corporation as a group. Five Percent Beneficial Ownership Amount and Nature Percent Name and Address of of Beneficial of Beneficial Owner Ownership Class Standen and Co. as nominee for The Lorain National Bank 613,091(1) 14.81% 457 Broadway Lorain, Ohio 44052 (1) The Bank, a wholly owned subsidiary of LNB Bancorp, Inc. (a U. S. Corporation) disclaims beneficial ownership of all shares. The shares were held by the Bank in various accounts administered by it, as fiduciary, for the benefit of beneficiaries, donors, or principals of such accounts. The Bank, as fiduciary, had (a) sole power to vote 111,583 shares; (b) sole investment power to purchase/sell, but no power to vote on 243,748 shares; (c)shared investment power with sole power to vote with respect to 33,446 shares; and (d) no investment power and no power to vote on 224,314 shares. Shares of the Corporation held by the Bank in various fiduciary capacities will be voted only in accordance with directions, approvals or instructions where called by the governing instruments or by law, and in the absence of special factors affecting any individual account, will be voted in accordance with management's recommendations where the Bank as fiduciary has authority to determine the manner of voting. BENEFICIAL OWNERSHIP OF MANAGEMENT (As of December 31, 1996) Sole Shared Total Amount Investment and Investment and of Beneficial Percent Name Voting Power Voting Power Ownership of Class James L. Bardoner 8,326 609 8,935 .22% Daniel P. Batista 22,882 44,474 67,356 1.63% Robert M. Campana 4,361 0 4,361 .11% Wellsley O. Gray 8,073 4,642 12,715 .31% James F. Kidd 47,215 0 47,215 1.14% David M. Koethe 53,500 180 53,680 1.30% Benjamin G. Norton 44,072 45,461 89,533 2.16% Stanley G. Pijor 61,550 32,507 94,057 2.27% Jeffrey F. Riddell 11,117 26,747 37,864 .91% Thomas P. Ryan 32,473 1,244 33,717 .81% T. L. Smith, M.D. 12,997 8,932 21,929 .53% Eugene M. Sofranko 6,560 21,422 27,982 .68% Paul T. Stack 8,801 1,220 10,021 .24% Leo Weingarten 103,553 8,519 112,072 2.71% Executive Officers who are not Directors 109,736 385 110,121 2.66% ------- -------- ------- ------ All Directors and Executive Officers as a Group 535,216 196,342 731,558 17.68% ======= ======== ======= ====== -13- 15 INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS Some of the directors of the Corporation and the companies with which they are associated, are customers of and had banking transactions with the Bank in the ordinary course of the Bank's business during 1996. Loans and commitments to loans included in such transactions were made on substantially the same terms, including interest rates and collateral, as were those prevailing at the time for comparable transactions with other persons, and in the opinion of the management of the Bank, do not involve more than a normal risk of collectibility or present other unfavorable features. STOCK DIVIDEND The Board of Directors has the authority to declare and implement common stock dividends without shareholder approval. However, as it has in prior years, the Board has elected to seek shareholder approval for the proposed stock dividend. A stock dividend of approximately 82,771 shares of common stock (2%) is recommended by the Board of Directors. THE BOARD HAS STIPULATED THAT THE PROPOSED 2% STOCK DIVIDEND WOULD REQUIRE APPROVAL, IN THE FORM OF AN AFFIRMATIVE VOTE BY SHAREHOLDERS OWNING TWO-THIRDS OR MORE OF THE STOCK OF THE CORPORATION. The stock dividend will be payable to shareholders of record April 15, 1997. This stock dividend is recommended as a distribution of earnings of the Corporation and to conserve the cash assets. The stock dividend will consist of approximately 82,771 shares which will increase the total number of shares outstanding to approximately 4,221,304. As a result of the stock dividend, a transfer of approximately $82,771 will be made from retained earnings increasing the common stock of the Corporation to approximately $4,221,000. An additional amount of approximately $2,348,000 will be transferred from retained earnings to surplus. The stock dividend will not change the common stock par value or the total equity capital of the Corporation. The number of shares to be issued and the dollar amounts discussed above are based upon shares outstanding and stock bid prices as of March 3, 1997. The actual stock dividend will be calculated based upon shares outstanding and stock bid prices on the record date. No fractional shares will be issued. The Corporation will sell full shares representing all the fractions to the highest bidder after having solicited sealed bids from at least three (3) licensed stockbrokers. The proceeds of the sale shall be distributed pro rata to shareholders who otherwise would be entitled to fractional shares. THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE DECLARATION OF A 2% STOCK DIVIDEND. PRINCIPAL ACCOUNTANTS The independent accounting firm of KPMG Peat Marwick LLP has served as the principal accountants for the Bank since 1972. A representative of the firm will be present at the Annual Meeting and will be available to respond to questions. -14- 16 SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING Shareholders may submit proposals appropriate for shareholder action at the Corporation's Annual Meeting consistent with the regulations of the Securities and Exchange Commission. For proposals to be considered for inclusion in the Proxy Statement for the 1998 Annual Meeting, they must be received by the Corporation no later than December 1, 1997. Such proposals should be directed to LNB Bancorp, Inc., Attention: Shareholder Relations, 457 Broadway, Lorain, Ohio 44052. OTHER BUSINESS Management is not aware of any other matter which may be presented for action at the meeting other than the matters set forth herein. Should any matter other than those set forth herein be presented for a vote of the shareholders, the proxy in the enclosed form directs the persons voting such proxy to vote in accordance with their judgement. COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT Section 16(a) of the Securities Exchange Act requires the Corporation's officers and directors to file reports of ownership and changes of ownership of the Corporation's registered securities on Forms 3, 4 and 5 with the Securities and Exchange Commission (SEC). The Corporation believes that all officers and directors complied with all filing requirements applicable to them with respect to transactions during fiscal year 1996. ANNUAL REPORT A copy of the Corporation's Annual Report has been mailed to shareholders prior to the meeting. The Annual Report is not intended to be part of this Proxy Statement. A report of the operations of the Corporation and the Bank for the fiscal year ended December 31, 1996 will be presented at the meeting. A copy of the Corporation's Annual Report on Form 10-K under the Securities Exchange Act of 1934 is available to shareholders without charge upon request to Thomas P. Ryan, Executive Vice President and Secretary/Treasurer, LNB Bancorp, Inc., 457 Broadway, Lorain, Ohio 44052. By Order of the Board of Directors /s/ Thomas P. Ryan Thomas P. Ryan Executive Vice President and Secretary/Treasurer -15- 17 PROXY ANNUAL MEETING LNB BANCORP, INC., LORAIN, OHIO This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoint JAMES L. BARDONER, DAVID M. KOETHE and DANIEL P. BATISTA, as Proxies, each with the power to appoint his substitute, and hereby authorize them to represent and to vote, as designated below, all the shares of Common Stock of the LNB Bancorp, Inc. held on record by the undersigned on March 7, 1997, at the Annual Meeting of Shareholders to be held on April 15, 1997 or any adjournment thereof. 1. ELECTION OF DIRECTORS [ ] FOR all nominees listed below (except as marked to the contrary below) [ ] WITHHOLD AUTHORITY to vote for all nominees listed below James F. Kidd, Jeffrey F. Riddell, Thomas P. Ryan, Paul T. Stack, Robert M. Campana (Instruction: To withhold authority to vote for any individual nominee write that nominee's name on the space provided below.) ----------------------------------------------------------------- 2. STOCK DIVIDEND - Increase the outstanding common stock of LNB Bancorp, Inc. by declaration of a stock dividend consisting of approximately 82,771 shares of common stock of $1.00 par value each, and the terms and conditions thereof. [ ] FOR [ ] AGAINST [ ] ABSTAIN END PUBLISHED PROXY CARD FRONT SIDE In their discretion, the Proxies are authorized to vote upon such other business as may properly come before the meeting. 18 This proxy when properly executed will be voted in the manner directed herein by the undersigned stockholder. If no direction is made, this proxy will be voted for proposals 1 and 2. Dated -----------, 1997 Number of shares in my/our name --------- -------------------------- (L.S.) -------------------------- (L.S.) NOTE: Please sign exactly as name appears above. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by President or other authorized officer. If a partnership, please sign in partnership name by authorized person. YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THIS PROXY FORM WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. Please read and vote on other side. -----END PRIVACY-ENHANCED MESSAGE-----