-----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, RbLK4Jr+bGMxf7FeBFP+i/wbbjVAmoTY46v48vIoU3uQpdJjEfIRo3vOdDGIhLMr ICgZKprBKa8U/hqSU0dR7g== 0000737210-99-000015.txt : 19991110 0000737210-99-000015.hdr.sgml : 19991110 ACCESSION NUMBER: 0000737210-99-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991109 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: 10-Q SEC ACT: SEC FILE NUMBER: 000-13203 FILM NUMBER: 99744342 BUSINESS ADDRESS: STREET 1: 457 BROADWAY CITY: LORAIN STATE: OH ZIP: 44052-1769 BUSINESS PHONE: 2162446000 10-Q 1 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 September 30, 1999 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 October 25, 1999: 4,122,775 shares Class of Common Stock: $1.00 par value 2 LNB Bancorp, Inc. Quarterly Report on Form 10-Q Quarter Ended September 30, 1999 Part I - Financial Information Item 1 - Financial Statements Interim financial information required by Regulation 210.01-01 of Regulation S-X is included in this Form 10-Q as referenced below: Page Number(s) Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Income 5 Condensed Consolidated Statements 9 of Cash Flows Notes to the Condensed Consolidated Financial Statements 11 Item 2 - Management's Discussion and Analysis 16 of Financial Condition and Results of Operations Item 3 - Quantitative and Qualitative Disclosures 22 About Market Risk 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 23 Security Holders 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 SEPTEMBER 30, DECEMBER 31, CONDENSED CONSOLIDATED BALANCE SHEETS 1999 1998 ------------- ------------- (Unaudited) ASSETS: Cash and due from banks $ 19,937,000 $ 26,177,000 Federal funds sold and short-term investments 12,926,000 6,624,000 Federal Home Loan Bank and Federal Reserve Bank Stock, at cost 2,670,000 2,189,000 Securities: Available for sale, at fair value 75,756,000 78,128,000 Held to maturity, at cost (fair value $42,033,000 and $40,253,000, respectively) 44,415,000 38,202,000 ------------- ------------- Total Securities 122,841,000 118,519,000 ------------- ------------- Loans: Portfolio Loans 402,223,000 359,475,000 Loans available for sale 11,321,000 10,391,000 ------------- ------------- Total loans 413,544,000 369,866,000 Reserve for loan losses (4,108,000) (3,483,000) ------------- ------------- Net loans 409,436,000 366,383,000 ------------- ------------- Bank premises and equipment, net 10,796,000 10,989,000 Intangible assets 4,350,000 4,666,000 Accrued interest receivable 3,701,000 3,685,000 Other assets 3,549,000 3,303,000 Other real estate owned -0- 1,400,000 ------------- ------------- TOTAL ASSETS $587,536,000 $541,746,000 ============= ============= STATEMENT CONTINUED ON NEXT PAGE 4 STATEMENT CONTINUED FROM PREVIOUS PAGE LIABILITIES AND SHAREHOLDERS' EQUITY: Noninterest-bearing deposits $ 79,861,000 $ 85,558,000 Interest-bearing deposits 395,280,000 358,290,000 ------------- ------------- Total deposits 475,141,000 443,848,000 ------------- ------------- Securities sold under repurchase agreements and other short-term borrowings 22,710,000 22,960,000 Federal Home Loan Bank advances 34,345,000 22,045,000 Accrued interest payable 1,559,000 1,487,000 Accrued taxes, expenses and other liabilities 3,250,000 2,730,000 ------------- ------------- Total Liabilities 537,005,000 493,070,000 ------------- ------------- Shareholders' equity: Common stock $1.00 par: Shares authorized 5,000,000 Shares issued 4,222,775 and 4,222,575, respectively and Shares outstanding 4,122,775 and 4,122,575, respectively 4,223,000 4,223,000 Additional capital 22,604,000 22,602,000 Retained earnings 27,233,000 24,210,000 Accumulated other comprehensive income(loss) (629,000) 541,000 Treasury Stock at cost, 100,000 shares (2,900,000) (2,900,000) ------------- ------------- Total Shareholders' Equity 50,531,000 48,676,000 ------------- ------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $587,536,000 $541,746,000 ============= ============= See notes to unaudited condensed consolidated financial statements. 5 FORM 10-Q LNB BANCORP, INC. PART 1 - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS NINE MONTHS ENDED CONDENSED CONSOLIDATED STATEMENTS SEPTEMBER 30, OF INCOME (UNAUDITED) ------------------------- 1999 1998 INTEREST INCOME: ------------ ------------ Interest and fees on loans: Taxable $25,169,000 $22,720,000 Tax-exempt 20,000 32,000 Interest and dividends on securities: Taxable 5,169,000 5,317,000 Tax-exempt 162,000 151,000 Interest on Federal funds sold and short-term investments 250,000 113,000 ------------ ------------ TOTAL INTEREST INCOME 30,770,000 28,333,000 ------------ ------------ INTEREST EXPENSE: Interest on Certificates of Deposit of $100,000 and over 1,967,000 1,742,000 Interest on other deposits 7,486,000 7,706,000 Interest on securities sold under repurchase agreements and other short-term borrowings 870,000 882,000 Interest on Federal Home Loan Bank advances 1,067,000 98,000 ------------ ------------ TOTAL INTEREST EXPENSE 11,390,000 10,428,000 ------------ ------------ NET INTEREST INCOME 19,380,000 17,905,000 Provision for loan losses 1,250,000 1,263,000 ------------ ------------ NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 18,130,000 16,642,000 ------------ ------------ OTHER INCOME: Investment and trust services income 1,587,000 1,358,000 Service charges on deposit accounts 2,175,000 1,848,000 Other charges, fees and exchanges 2,071,000 1,856,000 Gains on sales of loans, securities and buildings 158,000 -0- Other operating income 72,000 49,000 ------------ ------------ TOTAL OTHER INCOME 6,063,000 5,111,000 STATEMENT CONTINUED ON NEXT PAGE 6 STATEMENT CONTINUED FROM PREVIOUS PAGE OTHER EXPENSES: Salaries and employee benefits 7,481,000 6,576,000 Net occupancy expense 1,136,000 1,005,000 Furniture and equipment expenses 1,627,000 1,617,000 Supplies and postage 727,000 790,000 Credit card and merchant expenses 703,000 564,000 Ohio franchise tax 414,000 353,000 Amortization of intangible assets 316,000 355,000 Other operating expenses 3,001,000 2,545,000 ------------ ------------ TOTAL OTHER EXPENSES 15,405,000 13,805,000 ------------ ------------ INCOME BEFORE INCOME TAXES 8,788,000 7,948,000 INCOME TAXES 3,001,000 2,690,000 ------------ ------------ NET INCOME $ 5,787,000 $ 5,258,000 ============ ============ PER SHARE DATA: BASIC EARNINGS PER SHARE $ 1.40 $ 1.27 ====== ====== DILUTED EARNINGS PER SHARE $ 1.40 $ 1.27 ====== ====== DIVIDENDS DECLARED PER SHARE $ .67 $ .61 ====== ====== 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 SEPTEMBER 30, OF INCOME (UNAUDITED) -------------------------- 1999 1998 INTEREST INCOME ------------ ------------ Interest and fees on loans: Taxable $ 8,740,000 $ 7,945,000 Tax-Exempt 4,000 10,000 Interest and dividends on securities: Taxable 1,748,000 1,808,000 Tax-Exempt 54,000 49,000 Interest on Federal funds sold and short-term investments 165,000 18,000 ------------ ----------- TOTAL INTEREST INCOME 10,711,000 9,830,000 ------------ ----------- INTEREST EXPENSE: Interest on Certificates of Deposit of $100,000 and over 718,000 664,000 Interest on other deposits 2,566,000 2,551,000 Interest on securities sold under repurchase agreements and other short-term borrowings 342,000 330,000 Interest on Federal Home Loan Bank advances 450,000 33,000 ------------ ----------- TOTAL INTEREST EXPENSE 4,076,000 3,578,000 ------------ ----------- NET INTEREST INCOME 6,635,000 6,252,000 Provision for possible loan losses 550,000 838,000 NET INTEREST INCOME AFTER PROVISION ------------ ----------- FOR POSSIBLE LOAN LOSSES 6,085,000 5,414,000 ------------ ----------- OTHER INCOME: Investment and trust services income 513,000 332,000 Service charges on deposit accounts 773,000 699,000 Other charges, fees and exchanges 754,000 602,000 Other operating income 12,000 25,000 ------------ ----------- TOTAL OTHER INCOME 2,052,000 1,658,000 STATEMENT CONTINUED ON NEXT PAGE 8 STATEMENT CONTINUED FROM PREVIOUS PAGE OTHER EXPENSES: Salaries and employee benefits 2,566,000 2,073,000 Net occupancy expense 346,000 334,000 Furniture and equipment expenses 426,000 439,000 Supplies and postage 218,000 247,000 Credit card and merchant expenses 276,000 185,000 Ohio franchise tax 121,000 84,000 Amortization of intangible assets 106,000 131,000 Other operating expenses 1,040,000 821,000 ------------ ------------ TOTAL OTHER EXPENSES 5,099,000 4,314,000 ------------ ------------ INCOME BEFORE FEDERAL INCOME TAXES 3,038,000 2,758,000 FEDERAL INCOME TAXES 1,047,000 932,000 ------------ ------------ NET INCOME $ 1,991,000 $ 1,826,000 ============ ============ PER SHARE DATA: BASIC EARNINGS PER SHARE $ .48 $ .44 ====== ====== DILUTED EARNINGS PER SHARE $ .48 $ .44 ====== ====== DIVIDENDS DECLARED PER SHARE $ .23 $ .21 ====== ====== See notes to unaudited condensed consolidated financial statements. 9 FORM 10-Q LNB BANCORP, INC. PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS NINE MONTHS ENDED CONDENSED CONSOLIDATED STATEMENTS SEPTEMBER 30, OF CASH FLOWS (UNAUDITED) ------------------------- 1999 1998 CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------ Interest received $31,063,000 $27,947,000 Other income received 5,926,000 4,883,000 Interest paid (11,392,000) (10,277,000) Cash paid for salaries and employee benefits (7,131,000) (6,320,000) Net occupancy expense of premises paid (876,000) (744,000) Furniture and equipment expenses paid (626,000) (597,000) Cash paid for supplies and postage (727,000) (790,000) Cash paid for other operating expenses (3,401,000) (2,011,000) Federal income taxes paid (2,498,000) (2,798,000) ------------ ----------- NET CASH PROVIDED BY OPERATING ACTIVITIES: 10,338,000 9,293,000 ------------ ----------- CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from maturities of securities available for sale 19,500,000 9,278,000 Proceeds from maturities of securities Held to maturity 181,000 27,366,000 Purchase of securities held to maturity (7,080,000) (155,000) Purchase of securities available for sale (18,333,000) (38,938,000) Net decrease in credit card loans 333,000 600,000 Net (increase) in long-term loans (44,599,000) (32,427,000) Purchases of bank premises and equipment (1,052,000) (756,000) Proceeds from sales of bank premises and equipment -0- 7,000 Proceeds from liquidation of Other Real Estate Owned 1,400,000 -0- ------------ ----------- NET CASH USED IN INVESTING ACTIVITIES (49,650,000) (35,025,000) ------------ ----------- STATEMENT CONTINUED ON NEXT PAGE 10 STATEMENT CONTINUED FROM PREVIOUS PAGE CASH FLOWS FROM FINANCING ACTIVITIES: Net increase in demand and other noninterest-bearing deposits (6,823,000) 5,978,000 Net increase (decrease) in savings and passbook deposits 734,000 (3,168,000) Net increase in time deposits 36,256,000 19,843,000 Net increase in securities sold under repurchase agreements and other short-term borrowings (250,000) 7,872,000 Proceeds from Federal Home Loan Bank advances 12,300,000 -0- Cash paid on line of credit -0- (600,000) Purchase of Treasury Stock -0- (57,000) Proceeds from exercise of stock options 2,000 3,000 Dividends paid (2,845,000) (2,556,000) ------------ ----------- NET CASH PROVIDED BY FINANCING ACTIVITIES 39,374,000 27,315,000 ------------ ------------ NET INCREASE IN CASH AND CASH EQUIVALENTS 62,000 1,583,000 CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 32,801,000 24,407,000 ------------ ------------ CASH AND CASH EQUIVALENTS AT END OF QUARTER $32,863,000 $25,990,000 ============ ============ RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES: NET INCOME $5,787,000 $5,258,000 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,261,000 1,281,000 Amortization of deferred loan fees and costs, net (218,000) 796,000 Provision for loan losses 1,250,000 1,263,000 Amortization of intangible assets 316,000 355,000 (Increase)in accrued interest receivable (16,000) (371,000) Decrease in other assets 54,000 537,000 Increase in accrued interest payable 72,000 151,000 Increase (decrease) in accrued taxes, expenses and other liabilities 1,729,000 161,000 Others, net 103,000 (138,000) ------------ ------------ NET CASH PROVIDED BY OPERATING ACTIVITIES $10,338,000 $9,293,000 ============ ============ 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 September 30, 1999, compared to December 31, 1998, and the results of its operations for the three and nine months ended September 30, 1999 and cash flows for the nine months ended September 30, 1999 compared to the same periods in 1998. 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. This report contains statements that constitute forward-looking statements and are subject to certain risks and uncertainties that could cause actual facts to differ materially from those presented in this report. Readers are cautioned not to place undue reliance on these forward-looking statements which speak only as of the date of this report. 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. BASIS OF PRESENTATION The unaudited condensed consolidated balance sheet as of September 30, 1999, the unaudited condensed consolidated statements of income for the three and nine months ended September 30, 1999 and the unaudited condensed consolidated statements of cash flows for the nine months ended September 30, 1999 and 1998 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, 1998 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, 1998 Annual Report to Shareholders. The results of operations for the period ended September 30, 1999 are not necessarily indicative of the operating results for the full year. 12 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 probable loan losses inherent in the loan portfolio 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, depending upon the adequacy of the reserve for loan losses. RECLASSIFICATIONS Certain 1998 amounts have been reclassified to conform to the 1999 presentation. 13 2. EARNINGS PER SHARE Earnings per share is calculated as follows: For the 9 Months ended September 30, 1999 Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $5,787,000 Basic EPS Income available to common stockholders $5,787,000 4,122,717 $1.40 Effect of Dilutive Securities Incentive Stock Options -0- 8,216 -0- ---------- --------- ----- Dilutive EPS Income available to common stockholders + assumed conversions $5,787,000 4,130,933 $1.40 ========== ========= ===== For the 9 Months ended September 30, 1998 Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $5,258,000 Basic EPS Income available to common stockholders $5,258,000 4,122,952 $1.27 Effect of Dilutive Securities Incentive Stock Options -0- 9,648 -0- ---------- --------- ----- Dilutive EPS Income available to common stockholders + assumed conversions $5,258,000 4,132,600 $1.27 ========== ========= ===== For the 3 Months ended September 30, 1999 Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $1,991,000 Basic EPS Income available to common stockholders $1,991,000 4,122,775 $ .48 Effect of Dilutive Securities Incentive Stock Options -0- 7,767 -0- ---------- --------- ----- Dilutive EPS Income available to common stockholders + assumed conversions $1,991,000 4,130,542 $ .48 ========== ========= ===== 14 For the 3 Months ended September 30, 1998 Income Shares Per-Share (Numerator) (Denominator) Amount Net Income $1,826,000 Basic EPS Income available to common stockholders $1,826,000 4,122,525 $ .44 Effect of Dilutive Securities Incentive Stock Options -0- 9,648 -0- ---------- --------- ----- Dilutive EPS Income available to common stockholders + assumed conversions $1,826,000 4,132,173 $ .44 ========== ========= ===== 3. COMPREHENSIVE INCOME The Corporation adopted SFAS No. 130 "Reporting Comprehensive Income" on January 1, 1998. This statement requires companies to report all items that are recognized as components of comprehensive income under accounting standards. As required, the Corporation displays the accumulated balance of other comprehensive income as a separate component of shareholders' equity. The Corporation's comprehensive income for the nine months ended September 30, 1999 and 1998 are as follows: For the nine months ended September 30, 1999 1998 -------------------------------- Net income $5,787,000 $5,258,000 Other comprehensive income(loss): Unrealized gain (loss) on securities available for sale, net of tax (benefit) of ($324,000) and $290,000 (629,000) 563,000 ----------- ----------- Comprehensive Income $5,158,000 $5,821,000 The Corporation's comprehensive income for the three months ended September 30, 1999 and 1998 are as follows: For the three months ended September 30 1999 1998 ------------------------------------ Net income $1,991,000 $1,826,000 Other comprehensive income(loss): Unrealized gain (loss) on securities available for sale, net of tax (benefit) of ($78,000) and $241,000 (152,000) 467,000 ----------- ------------ Comprehensive Income $1,839,000 $2,293,000 4. DIVIDEND REINVESTMENT AND CASH STOCK PURCHASE PLAN The Board of Directors adopted a dividend reinvestment and cash stock 15 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 three quarters of 1999. In the first three quarters of 1999, stock was purchased in the open market at the current market price. 16 PART I - FINANCIAL INFORMATION ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITION & RESULTS OF OPERATIONS FINANCIAL CONDITION Total assets of the Corporation increased $45,790,000 during the first nine months in 1999, to $587,536,000. This growth was funded by increases in demand deposits, savings deposits and certificates of deposit. Total earning assets increased 11.0% to $549,311,000 at September 30, 1999 from December 31, 1998. The ratio of earning assets to total assets increased from 91.4% at December 31, 1998 to 93.5% at September 30, 1999. The loan to deposit ratio has increased from 83.33% at 1998 year-end to 87.04% at September 30, 1999. Federal funds sold and short-term investments increased by $6,302,000 during the first nine months of 1999, to $12.9 million, with $10.0 million designated for potential Y2K liquidity purposes. Total securities increased $4,322,000 ending the third quarter at $122,841,000. At September 30, 1999 gross unrealized gains (losses)in the investment securities portfolio were approximately $67,000 and ($1,105,000), respectively. Net loans grew by $43,053,000 during the first nine months to $409,436,000 at September 30, 1999 for a 12% growth rate. Commercial and consumer loan growth was strong accounting for 53% and 36% of total loan growth while mortgage loans accounted for 11% of total loan growth during the nine months ended September 30, 1999. Loan increase was supported by spring and summer home equity loan sale programs which resulted in new loans totaling over $2 million. Also, the increase in consumer loans is attributable to an increase in indirect automobile loans. The reserve for loan losses ended the quarter at $4,108,000. Activity for the nine months ended September 30, 1999 included provision for loan losses of $1,250,000, recoveries of $185,000 and loan charge-offs of $810,000. The reserve for loan losses as a percentage of ending loans increased .05% from .94% at December 31, 1998 to .99% at September 30, 1999. Corporate management believes that the reserve for loan losses as a percentage of ending loans at September 30, 1999 remains at an appropriate level. The ratio of the reserve for loan losses to nonperforming assets remained at an adequate level even though it decreased to 413.3% at September 30, 1999. Corporate management believes that the current level of the reserve for loan losses is adequate based upon an analysis of identified risks and analysis of historical trends. The level of nonperforming assets decreased by $1,493,000 during the first nine months of 1999. This decrease is the result of a decrease in non- accrual loans of $93,000 as well as by a decrease in other real estate owned in the amount of $1,400,000. The decrease in Other Real Estate Owned results from the liquidation of assets. The decrease in nonaccrual loans is due to decreases in nonaccrual principal balances of $373,000 which have been paid off and brought current, loans charged-off in the amount of $260,000, liquidation of non-accrual loans of $588,000 and increases in nonaccrual principal balances of $1,128,000. The increase in nonaccrual loans in the first nine months of 1999 was due primarily to nine commercial loan customers, one mortgage loan customer and several personal loans. Management does not believe that this increase in non-accrual loans is indicative of a failing local economy and that this 17 change did not result from any change in underwriting standards. Nonperforming assets at September 30, 1999 totaled $994,000, up from $494,000 at June 30, 1999. The third quarter increase in nonperforming assets of $500,000 resulted from loans being brought current in the amount of $37,000, loans charged-off in the amount of $79,000, liquidation of non-accrual loans of $115,000, decreases in Other Real Estate Owned of $209,000 and increases in nonaccrual loans of $940,000. The increase in nonaccrual loans in the third quarter of 1999 was due primarily to three commercial loan customers and twenty five consumer loan customers. The level of nonperforming assets at September 30, 1999 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 09/30/99 06/30/99 03/31/99 12/31/98 -------- -------- -------- -------- Nonperforming Assets: Nonaccrual loans $ 994 $ 285 $ 848 $1,087 Restructured loans 0 0 0 0 Other Real Estate Owned 0 209 633 1,400 -------- -------- -------- -------- Total Nonperforming Assets $ 994 $ 494 $1,481 $2,487 ======== ======== ======== ======== Reserve for possible loan losses to total nonperforming assets 413.3% 764.0% 235.2% 140.1% ======== ======== ======== ======== Accruing loans past due 90 days $ 505 $ 494 $ 479 $ 213 ======== ======== ======== ======== 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 September 30, 1999, potential problem loans totaled $4,434,000, an increase of $1,493,000 from the December 31, 1998 balance of $2,941,000. The increase in potential problem loans during 1999 is primarily due to increases from the consumer loans portfolio. The Corporation's credit policies are reviewed and modified on an on-going basis in order to remain suitable for the management of credit risk within the loan portfolio as conditions change. At September 30, 1999, there are no significant concentrations of credit in the loan portfolio. The Corporation had outstanding loan and credit commitments to make loans totaling $105,278,000 and $76,927,000 at September 30, 1999 and December 31,1998, 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 and third quarters of 1999. Mortgage and commercial construction loan demand increased in the second and third quarters of 1999 as seasonal weather conditions improved and the construction season moved forward. Consumer loan demand increased in the first and second quarters and leveled off in the third quarter as demand for home improvement and automobile loans increased. Total deposits increased $31,293,000 during the first nine months to 18 $475,141,000. Noninterest-bearing deposits decreased to $79,861,000, at September 30, 1999 for a decrease of $5,697,000, while interest-bearing deposits climbed to $395,280,000 for an increase of $36,990,000. Federal funds purchased and securities sold under agreements to repurchase decreased $250,000 during the first nine months of 1999. Due to the volatility of customer repurchase agreements, most funds generated by repurchase activity enter the Corporation's earning assets as short-term investments. Federal Home Loan Bank (FHLB) advances increased to $34.3 million at September 30, 1999, up $12.3 million from 1998 year end. Of this increase, $20.0 million and $2.3 million in FHLB advances were used to fund a portion of the growth in consumer and commercial loans, respectively. The remaining $10.0 million in FHLB advances are designated for potential Y2K liquidity purposes. 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 September 30, 1999, short-term security investments with maturities of one year or less totalled $14,296,000 which represented 11.6% of total securities. Adding cash and due from banks of $19,937,000 and Federal funds sold and short-term investments of $12,926,000, total liquid assets represented 8.0% of total assets. The Corporation's subsidiary bank has established short-term lines of credit at correspondent banks and the Federal Home Loan Bank in the amount of $37,800,000. CAPITAL RESOURCES LNB Bancorp, Inc. continues to maintain a strong capital position. Total shareholders' equity reached an all time high of $50,531,000, at September 30, 1999, an increase of $2,363,000, or 5% from one year ago. The increase resulted primarily from $5,787,000 of net income generated from the first nine months of operations less a cash dividend payable to shareholders of $2,762,000. The increase in interest rates experienced in the first three quarters of 1999 has caused a decrease in the market value of available for sale securities which resulted in a decrease in shareholders' equity within accumulated other comprehensive income of $1,170,000 for the nine months ended September 30, 1999. As of September 30, 1999, 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 have exceeded the ratios for a well-capitalized financial 19 institution for all periods presented. The Corporation's capital and leverage ratios as of September 30, 1999 and 1998 follow together with those ratios required for the Corporation to be considered adequately capitalized . September 30 ----------------- 1999 1998 ------ ------ Tier I capital ratio 11.77% 12.44% Required Tier I capital ratio 4.00% 4.00% Total capital ratio 12.81% 13.66% Required total capital ratio 8.00% 8.00% Leverage ratio 8.26% 8.66% Required leverage ratio 3.00% 3.00% The Corporation regularly evaluates acquisition opportunities and conducts due diligence activities in connection with possible acquisitions in markets near or within the Corporation's current geographic market. As a result, acquisition discussions and, in some cases negotiations, 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 was $25,189,000 for the first nine months of 1999 for an increase of $2,437,000 when compared to the first nine months of 1998. Increased loan income was the result of the net increase in the loan portfolio of $43,678,000 offset slightly by decreases in interest rates. Interest and dividends on securities was $5,331,000 for the first nine months of 1999 for a decrease of $137,000 over the same period in 1998. Decreased security income results from a net increase in the volume of securities which was offset by decreases in yields on those securities. Interest and dividends on securities represented 17.3% of total interest income at September 30, 1999 compared to 19.3% at September 30, 1998. Interest on Federal funds sold and short-term investments was $250,000 at September 30, 1999 compared to $112,000 at September 30, 1998. The increase resulted from increases in the average balances invested in these forms of financial instruments plus increases in interest rates. Total interest expense increased by $962,000 when compared to the first nine months of 1998. The interest expense increase was fueled by an increase in interest expense from Federal Home Loan Bank advances of $969,000, offset by decreases in deposit account interest of $5,000 and repurchase agreement interest of $12,000. Also, total interest expense for the first nine months of 1999 was impacted by a net increase in deposits of $31,293,000, partially offset by decreases in interest rates paid on savings and certificate of deposit accounts when compared to the first nine months of 1998. Total other income increased by $952,000 when compared to the first nine months of 1998. This increase resulted from increases in income from investment and trust services fees of $229,000, increases in service charges of $327,000 and increases in other charges, exchanges and fees of $215,000. The increase in investment and trust services fees results from increases in the volume of assets under management of $50,000,000 from 1998 year end. The increase in service charges is due, in part, to reevaluating the assessment of transaction account charges plus increases in the volume of accounts. The increase in other charges, exchanges and 20 fees is the result of pricing increases in credit card and merchant fees. The Corporation reported a non-recurring gain on sale of a building in the second quarter of 1999. Other operating income increased by $23,000. The Corporation continuously monitors noninterest expenses for greater profitability. The entire staff is geared to improving productivity at all levels. Noninterest expense for the nine months ended September 30, 1999 was $15,405,000, 11.6% above the first nine months of 1998. This increase was due primarily to certain loan collection expenses incurred in 1999, increases in salaries and benefits, increases in credit card and merchant expenses plus the operating expenses of one additional branch office which was placed into service in June of 1998. The effective tax rate remained constant at 34.1% during the first nine months of 1999 and 1998. Net income was $5,787,000 and $5,258,000 for the nine months ended September 30, 1999 and 1998, respectively. Net income per basic and diluted share was $1.40 and $1.27 for the nine months ended September 1999 and 1998, respectively. 4. YEAR 2000 ISSUE Several of the Corporation's and Bank's regulators including the Securities and Exchange Commission, Federal Reserve Board, and the Office of the Comptroller of Currency have issued guidance relative to the management and disclosures for year 2000 issues. A discussion of the year 2000 issue as it relates to the Corporation, the Bank and their customers, suppliers and vendors follows. The Corporation has formed a strategic task force to perform a comprehensive review of its computer systems to identify the systems that could be affected by the "Year 2000" issue and has developed an implementation plan to resolve the issue. The Year 2000 problem is the result of computer programs being written using two digits rather than four to define the applicable year. Any of the Corporation's programs that have time sensitive software may recognize a date using "00" as the year 1900 rather than the year 2000. The Corporation expects to incur internal staff costs, consulting, and other expenses to identify, correct or reprogram, and test the systems for the year 2000 compliance issue. The Corporation estimates that compliance costs for the year 2000 issue through 1999 will not exceed $250,000. The Corporation does not expect that year 2000 compliance costs to be expensed over the next year to have a material effect on the financial position, liquidity or results of operations. Financial institutions may experience increases in problem loans and credit losses in the event that borrowers fail to properly respond to the "Year 2000" issue. Cost of funds may become greater, if customers react to publicity about this issue by withdrawing deposits. Accordingly, the Corporation has formed an internal task force to assess potential problems relating to credit, liquidity, and third party risk, and where appropriate, develop contingency plans. This task force has conducted a survey of significant credit and deposit relationships to determine their "Year 2000" readiness and to evaluate the potential of credit and liquidity risk to the Corporation. Also, the "Year 2000" issue creates risk for the Corporation from unforeseen problems in its own computer systems and from third parties' with whom the Corporation deals on financial transactions. Such failures of the Corporation, and/or third parties' computer systems could have a material impact on the 21 Corporation's ability to conduct its business, and especially to process and account for the transfer of funds electronically. The Corporation set June 1999 as the date it should be substantially compliant with the Year 2000 readiness process. As of that date, the Corporation had successfully completed upgrades, testing and validation of its internal mission critical systems. The Corporation has and will continue to work extensively in the area of consumer awareness and customer risk assessment. Furthermore, the Corporation continues to work with regulatory agencies and other third party providers to ensure Year 2000 compliance. Also, the Corporation completed its liquidity plan and designed its Year 2000 contingency plan. With the extensive testing, work and planning that has gone into the Y2K project, the Corporation is confident that there should be no interruption in service relating to Year 2000 issues. Although the Corporation successfully completed its Year 2000 readiness on schedule in June, the Corporation will continue to work on the Year 2000 project through the remainder of 1999 and into the Year 2000. For the remainder of 1999, customer confidence and employee awareness issues will be extremely important as well as testing and validating contingency plans. Year 2000 preparedness will continue to be a top priority through the remainder of 1999 and into 2000. Based upon successful testing of mission critical hardware and software, the Corporation does not anticipate that it will have to rely on a contingency plan relating to these areas. However, the Corporation has developed a contingency plan that would cover the failure of mission critical hardware and software. The contingency plan also covers Y2K failure(s) that might result from a failure(s) outside of the control of the Corporation; such as a utility company failure. The Corporation's contingency plan for Y2K failure of its core processing systems will be to handle and process customer transactions manually until the system failure is corrected. In the most reasonably likely worst case scenario where any of the Corporation's mission critical systems, either internal or external, would fail, the Corporation will be operating in a manual mode. In preparation for the unlikely event of the most reasonably likely worst case scenario, the Corporation is in the process of planning and training all of its' employees and will have all customer records backed up to ensure the accuracy of our customer records. 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. 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, 1998. With the Federal Reserve Board's recent announcement to increase the federal funds rate to 5.25% on June 29, 1999, the Corporation does not anticipate any changes in net interest margin. Also, Corporate management dose 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 (3)(i) - LNB Bancorp, Inc. Articles of Incorporation (b) Exhibit (3)(ii) - LNB Bancorp, Inc. Code of Regulations (c) Exhibit (11) - Computation of Shares Used for Earnings Per Share Calculation. Exhibit (19) - Third Quarter Report to Shareholders of LNB Bancorp, Inc., September 30, 1999 - EDGAR Version. (d) Exhibit (27) - Financial Data Schedule. (e) Reports on Form 8-K There were no reports on Form 8-K filed for the nine months ended September 30, 1999. 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: November 9, 1999 /s/ Gregory D. Friedman _________________________ Gregory D. Friedman, CPA Senior Vice President, Chief Operating Officer and Chief Financial Officer Date: November 9, 1999 /s/ Mitchell J. Fallis _________________________ Mitchell J. Fallis, CPA 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 Number (3)(i) LNB Bancorp, Inc. Articles of Incorporation. (3)(ii) LNB Bancorp, Inc. Code of Regulations. (11) Computation of Shares Used for Earnings Per Share Calculations Footnote 2 Earnings Per Share on pages 12- 13 of this Form 10Q is incorporated by reference. (13) Third Quarter Report to Shareholders of LNB Bancorp, Inc. September 30, 1999 - EDGAR Version. (27) Financial Data Schedule. 25 LNB Bancorp, Inc. Exhibit to Form 10 - Q (For the nine months ended September 30, 1999) S - K Reference Number (3)(i) LNB Bancorp, Inc. Articles of Incorporation 26 F0881-0730 ARTICLES OF INCORPORATION OF LNB BANCORP, INC. The undersigned incorporators, acting as the incorporators of LNB Bancorp, Inc. under the Ohio General Corporation Law (ORC 1701.01.99), hereby adopt the following Articles of Incorporation for such corporation: ARTICLE I The name of the corporation is LNB Bancorp, Inc. ARTICLE II The place in the State of Ohio where the principal office of the corporation is to be located in the city of Lorain, county of Lorain. ARTICLE III The purpose for which the corporation is formed is to engage in any lawful act or activity for which corporations may be formed under the Ohio General Corporation Law (ORC Sections 1701.01 et. seg.). ARTICLE IV The aggregate number of Common Shares which the Corporation shall have the authority to issue is 5,000,000 shares, each of $1.00 par value. Shares of the authorized and outstanding Common Stock shall be subject to redemption be the Corporation at the direction of the vote of a majority of the Board if Directors meeting at a regular or specifically called meeting for said purpose. Furthermore, the Corporation, through its Board of Directors, shall have the power to purchase, hold, sell and transfer the shares of its own capital stock provided that it does not use its funds or property for the purchase of its own shares of capital stock when such use will cause any impairment of its capital, except when otherwise permitted by law, and provided further that shares of its own capital stock belonging to it are not voted upon directly or indirectly. ARTICLE V The amount of stated capital with which the corporation will commence business is at least five hundred dollars ($500.00). ARTICLE VI The Board of Directors of the corporation is hereby authorized to fix and determine and to vary the amount of working capital of the corporation, to determine whether any and, if any, what part of its surplus, however created or arising, shall be used or disposed of or declared in dividends or paid to shareholders, and without action by the shareholders, to use and apply such surplus or any part thereof at any time or from time to time in the purchase or acquisition of shares of any class, voting trust certificates for shares, bonds, debentures, notes, script, warrants, obligations, evidences of indebtedness of the corporation or other securities of the corporation, to such extent or amount and in such manner and upon such terms as the Board of Directors of the corporation shall deem expedient to the extent not prohibited by law. ARTICLE VII Each officer, director or member of any committee designated by the Board of Directors of the corporation shall, in the performance of his duties, be fully protected in relying in good faith upon the books of 27 accounts or reports made to the corporation by any of its officers of employees or by an independent public accountant or be an appraiser selected with reasonable care be the Board of Directors of the corporation or by any such committee or in relying in good faith upon other records of the corporation. ARTICLE VIII The names and addresses of the incorporators of LNB Bancorp, Inc. are: Daniel P. Batista 209 Sixth Street Lorain, OH 44052 David M. Koethe 1310 Colorado Ave. Lorain, OH 44052 Stanley G. Pijor 457 Broadway Lorain, OH 44052 George L. Roth 5466 Willow Lane Vermilion, OH 44089 Leo Weingarten 2803 Toledo Ave. Lorain, OH 44055 ARTICLE IX In the absence of fraud, no contract or other transaction between the corporation and any other person, corporation, firm, syndicate, association, partnership, or joint venture shall be wholly or partially invalidated or otherwise affected by reason of the fact that one or more of the directors of the corporation, firm, syndicate or association, or member of such partnership or joint venture, of transaction, provided, that the fact such director or directors of the corporation are so situated or so interested or both, shall be disclosed or shall have been known to the Board of Directors of the corporation. Any director or directors of the corporation who is (are) also a director or officer of such other corporation, firm syndicate or association, or a member of such partnership, or joint venture, or is pecuniarily or otherwise interested in such contract or transaction, may be counted for the purpose of determining the existence of a quorum above provided (unless ordered by a court) shall be made by the corporation only as authorized upon a determination that indemnification is proper in the circumstances because the standard of conduct set forth above has been met. Such determination shall be made (a) by the Board of Directors by a majority vote of a quorum consisting of directors who were not parties to such action suit or proceeding; or (b) if such quorum is not attainable, or even if obtainable, if a majority vote of a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by a majority of a quorum of the shareholders of the corporation consisting of shareholders who were not parties to such action, suit or proceeding. ARTICLE X The Board of Directors, by resolution adopted by a majority of the full Board of Directors, may designate from among its members an Executive Committee, which committee shall have and may exercise, to the extent 28 provided by law, all of the authority of the Board of Directors in the management of the corporation. The designation of such committee and the delegation thereto of authority shall not operate to relieve the Board of Directors, or any member thereof, of any responsibility imposed upon it or him by law. ARTICLE XI Each shareholder shall be entitled to one vote for each share of stock standing in his 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. ARTICLE XII Upon the offering of sale for cash of shares of stock of the corporation, each shareholder shall have the right, during a reasonable time, and on reasonable terms fixed by the directors, to purchase such shares in proportion to their respective holdings of shares of the corporation, unless the shares offered or sold are: (a) treasury shares; (b) issued as a share dividend; (c) issued or agreed to be issued for consideration other than money; (d) issued by the Board of Directors; (e) issued or agreed to be issued upon conversion of convertible shares authorized in the Articles, or upon exercise of the conversion rights conferred and authorized by the Board of Directors; (f) offered to shareholders in satisfaction of their pre-emptive rights and not purchased by such shareholders, and thereupon issued and agreed to be issued for a consideration no less than that at which such shares were so offered to such shareholders, less reasonable expenses, compensation, or discount paid or allowed for sale, underwriting, or purchase of such shares, unless by the affirmative vote or written order of the holders of two-thirds of the shares otherwise entitled to such pre-emptive rights, if pre-emptive rights are restored as to any of such shares not theretofore issued or agreed to be issued; (g) released from pre-emptive rights by the affirmative vote or written consent of the holders of two thirds of the shares entitled to such pre-emptive rights. Any such vote or consent shall be entered into the records of the corporation and shall be binding on all shareholders and their transferee for the time specified in such note or consent up to but not exceeding one year, and shall protect all persons who within such time acquire the shares or options on or conversion or other rights with respect to the share so released; (h) released form pre-emptive rights by the affirmative note or written consent of the holders of a majority of the shares entitled to such pre-emptive rights, for offering and sale, or the grant of options with respect thereto, to any or all employees of the corporation or its subsidiary corporations or to a trustee on their behalf, under a plan adopted or to be adopted by the directors for that purpose. The above paragraph notwithstanding, there are no pre-emptive rights when this corporation issues or offers securities in exchange for the outstanding securities of another corporation. Pre-emptive rights apply only to when this corporation sells, or offers for sale, securities for cash securities of another corporation. Pre-emptive rights apply only to when this corporation sells, or offers for sale, securities for cash. ARTICLE XIII (THIRTEENTH: FAIR PRICE AND SUPER VOTE REQUIREMENT) A. Definitions as used in this Article Thirteenth 1. "Affiliate" or "associate" shall have the respective meanings given to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1989. 29 2. A person shall be a "beneficial owner" of any Voting Stock: a) which such person or any of its Affiliates or Associates beneficially owns, directly or indirectly; or b) which such person or any of its Affiliates or Associates has be itself or with others (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or c) which is beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has an agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. 3. Business Combination" shall include: a) Any merger or consolidation of the Corporation or any of its subsidiaries with or into an Interested Shareholder, regardless of which person is the surviving entity; b) any sale, lease, exchange, mortgage, pledge, or other disposition (in one transaction or a series of transactions) from the Corporation or any of its subsidiaries to an Interested Shareholder, or from an Interested Shareholder to the Corporation or any of its subsidiaries, of assets having an aggregate Fair Market Value of ten percent (10%) or more of the Corporations total stockholders equity; c) the issuance, sale or other transfer by the Corporation or any subsidiary thereof of any securities of the Corporation of any subsidiary thereof to an Interested Shareholder (other than an issuance or transfer of securities which is effected on a pro rata basis to all shareholders of the Corporation): d) the acquisition by the Corporation of any of its subsidiaries of any securities of an Interested Shareholder; e) the adoption of any plan or proposal for the liquidation or dissolution of the Corporation proposed by or on behalf of an Interested Shareholder; f) any reclassification or recapitalization of securities of the Corporation if the effect, directly or indirectly, of such transaction is to increase the relative voting poser of an Interested Shareholder; or g) any agreement, contract or other arrangement providing for or resulting in any of the transaction described in this definition of Business Combination. 4. "Continuing Director" shall mean any member of the Board of Directors of the Corporation which is unaffiliated with the Interested Shareholder and was a member of the Board of Directors prior to the time that the Interested Shareholder became and Interested Shareholder; any successor of a Continuing Director which is unaffiliated with the Interested Shareholder and is approved to succeed a Continuing Director by the Continuing Directors; any member of the Board of Directors who is appointed to fill a vacancy on the Board of Directors who is unaffiliated with the Interested Shareholder and is approved by the Continuing Directors. 5. "Fair Market Value" shall mean: a) in the case of securities listed on a national securities exchange or quoted in the National Association of Securities 30 Dealers Automated Quotations System (or any successor thereof), the highest sales price or bid quotation, as the case may be, reported for securities of the same class or series traded on the national securities exchange or in the over-the-counter market during the 30-day period immediately prior to the date in question, or if no such report or quotation is available, the fair market value as determined by the Continuing Directors; and b) in the case of other securities and of other property or consideration(other than cash), the Fair Market Value as determined by the Continuing Directors; provided, however, in the event of the power and authority of the Continuing Directors ceases and terminated pursuant to Subdivision F of this Article THIRTEENTH as a result of there being less than five Continuing Directors at any time, then (a) for purposes of clause (ii) of the definition of "Business Combination," any sale, lease, exchange, mortgage, pledge, or other disposition of assets form the Corporation or any of its subsidiaries to an Interested Shareholder or from an Interested Shareholders to the Corporation or any of its subsidiaries, regardless of the Fair Market Value thereof, shall constitute a Business Combination, and (b) for purposes of paragraph 1 of Subdivision D of this Article Thirteenth, in determining the amount of consideration received or to be received per share by the Independent Shareholders in a Business Combination, there shall be excluded all consideration other than cash and the Fair Market Value of securities listed on a national securities exchange or quoted in the National Association of Securities Dealers Automated Quotations System (of any successor thereof) for which there is a reported sales price or bid quotation, as the case may be, during the 30-day period immediately prior to the date in question. 6. "Independent Shareholder" shall mean shareholders of the Corporation other than the Interested Shareholder engaged on or proposing the Business Combination. 7. "Interested Shareholder" shall mean: (a) any person (other than the Corporation or any of its subsidiaries), and (b) the Affiliates and Associated of such person, who, or which together, are: a) the beneficial owner, directly or indirectly, of 10% or more of the then outstanding Voting Stock; or b) an assignee of or other person who has succeeded to any shares of the Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by an Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. Notwithstanding the foregoing, no Trust Department, or designated fiduciary or other trustee of such Trust Department of the Corporation or a subsidiary of the Corporation, or similar fiduciary capacity of the Corporation with direct voting control of the outstanding Voting Stock shall be included or considered as an Interested Shareholder. Further, no profit sharing, employee stock ownership, employee stock purchase and savings, employee pension, or other employee benefit plan of the Corporation or any of its subsidiaries, and no trustee of any such plan in its capacity as such trustee, shall be included or considered as an Interested Shareholder. 31 8. A "Person" shall mean an individual, partnership, trust, corporation, or other entity and includes any two or more of the foregoing acting in concert. 9. "Voting Stock" shall mean all outstanding common shares of capital stock of the Corporation. B. Supermajority Vote to Effect Business Combination. No Business Combination shall be effected or consummated unless: 1. authorized and approved by Continuing Directors and, if otherwise required by law to authorize or approve the transaction, the approval or authorization of shareholders of the Corporation, by the affirmative vote of holders of shares mandated by the Ohio Revised Code: or 2. authorized and approved by the affirmative vote of holders of not less than 75% of the outstanding Voting Stock voting together as a single class. The authorization and approval required by this Subdivision B is in addition to any authorization and approval required by Subdivision C of this Article THIRTEENTH. C. Fair Price Required to Effect Business Combination. No Business Combination shall be effected or consummated unless: 1. all the conditions and requirements set forth in Subdivision D of this Article THIRTEENTH have been satisfied; or 2. authorized and approved by the Continuing Directors; or 3. authorized and approved by the affirmative vote of holders of not less than 66 2/3% of the outstanding Voting Stock held be all Independent Shareholders voting together as a single class. Any authorization and approval required by this Subdivision C is an addition to any authorization and approval required by Subdivision B of this Article THIRTEENTH. D. Conditions and Requirements to Fair Price. All the following conditions and requirements must be satisfied in order for clause (1) of Subdivision C of this Article THIRTEENTH to be applicable. 1. The cash and Fair Market Value of the property, securities or other consideration to be received by the Independent Shareholders in the Business Combination per share for each share of capital stock of the Corporation must not be less than the sum of: a) the highest per share price (including brokerage commissions, transfer taxes, soliciting dealer's fees and similar payments) paid by the Interested Shareholder in acquiring any shares; and b) the amount, if any, by which interest on the per share price, calculated at the Treasury Bill rate form time to time in effect, from the date the Interested Shareholder first became an Interested Shareholder until the Business Combination has been consummated, exceeds the per share amount of cash dividends received by the Independent Shareholders during such period. The "Treasury Bill Rate" means for each calendar quarter, or part thereof, the interest rate of the last auction in the preceding calendar of 91-day United States Treasury Bills expressed as a bond equivalent yield. For purposes of this paragraph (1), per share amounts shall be appropriately adjusted for any recapitalization, reclassification, stock dividend, stock split, reverse split, or other similar transaction. Any 32 Business Combination which does not result in the Independent Shareholders receiving consideration for or in respect of their shares of capital stock of the Corporation shall not be treated as complying with the requirements of this paragraph (1). 2. The form of the consideration to be received by the Independent Shareholders owning the Corporation's shares must be the same as was previously paid by the Interested Shareholder(s); provided, however, if the Interested Shareholder previously paid for such shares with different forms of consideration, the form of the consideration to be received by the Independent Shareholders must be in the form as was previously paid by the Interested Shareholder in acquiring the largest number of shares. The provisions of this paragraph (2) are not intended to diminish the aggregate amount of cash and Fair Market Value of any other consideration that any holder of the Corporation's shares is otherwise entitled to receive upon the liquidation or dissolution of the Corporation, under the terms of any contract with the Corporation or an Interested Shareholder, or otherwise. 3. From the date the Interested Shareholder first becomes an Interested Shareholder until the Business Combination has been consummated, the following requirements must be complied with unless the Continuing Directors otherwise approve: a) the Interested Shareholder has not received, directly or indirectly, the benefit (except proportionately as a shareholder) of any loan, advance, guaranty, pledge, or other financial assistance, tax credit or deduction, or other benefit form the Corporation or any of its subsidiaries: b) there shall have been no failure to declare and pay in full, when and as due or scheduled, any dividends required to be paid on any class or series of the Corporation's shares. c) there shall have been (a) no reduction in the annual rate of dividends paid on Common Shares of the Corporation (except as necessary to reflect any split of such shares), and (b) an increase in the annual rate of dividends as necessary to reflect reclassification (including a reverse split), recapitalization or any similar transaction which has the effect of reducing the number of outstanding Common Shares; and d) there shall have been no amendment other modification to any profit-sharing, employee stock ownership, employee stock purchase and savings, employee pension or other employee benefit plan of the Corporation or any of its subsidiaries the effect of which is to change in any manner the provisions governing the voting of any shares of capital stock of the Corporation in or covered by such plan. 4. A proxy or information statement describing the Business Combination and complying with the requirements of the Securities Exchange Act of 1934, as amended, and the rules and regulations under it (or any subsequent provisions replacing the Act and the rules and regulations under it) has been mailed at least 30 days prior to the completion of the Business Combination to the holders of all outstanding Voting Stock. If deemed advisable by the Continuing Directors, the proxy or information statement shall contain a recommendation by the Continuing Directors as to the advisability (or inadvisability) of the Business Combination and/or an opinion by an investment banking firm, selected by the Continuing Directors and retained at the expense of the Corporation, as to the fairness (or unfairness) of the Business Combination to the Independent Shareholders. 33 E. Other Applicable Voting Requirements. The affirmative votes or approvals required to be received from shareholders of the Corporation under Subdivisions B, C, and H of this Article THIRTEENTH shall apply even though no vote of a lesser percentage vote, may be required by law, or by other provisions of these Articles of Incorporation, or otherwise. Any authorization, approval or other action of the Continuing Directors under this Article Thirteenth is in addition to any required authorization, approval or other action of the Board of Directors. F. Continuing Directors. All actions required or permitted to be taken by the Continuing Directors shall be taken with or without a meeting by the vote or written consent of two-thirds of the Continuing Directors, regardless of whether the Continuing Directors constitute a quorum of the members of the Board of Directors then in office. In the event that the number of Continuing Directors is at any time less than five, all power and authority of the Continuing Directors under this Article THIRTEENTH shall thereupon cease and terminate, including, without limitation, the authority of the Continuing Directors to authorize and approve a Business Combination under Subdivisions B and C of this Article THIRTEENTH and to approve a successor Continuing Director. Two thirds of the Continuing Directors shall have the power and duty, consistent with their fiduciary obligations, to determine for the purpose of the Article THIRTEENTH, on the basis of information known to them: 1. whether any person is an Interested Shareholder; 2. whether any person in an Affiliate or Associate of another; 3. whether any person has an agreement, arrangement, or understanding with another or is acting in concert with another; and 4. the Fair Market Value of property, securities or other considerations (other than cash). The good faith determination of the Continuing Directors on such good matters shall be binding and conclusive for purposes of the Article THIRTEENTH. G. Effects on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article THIRTEENTH shall be construed to relieve any Interested Shareholder from any fiduciary obligations imposed by law. H. Repeal. Notwithstanding any other provisions of these Articles of Incorporation (and notwithstanding the fact that a lesser percentage vote may be required by law or other provision of these Articles of Incorporation), the provisions of this Article Thirteenth may not be repealed, amended, supplemented or otherwise modified, unless: 1. the Continuing Directors (or, if there is no Interested Shareholder, a majority vote of the whole Board of Directors of the Corporation) recommend such appeal, amendment, supplement or modification and such repeal, amendment, supplement or modification is approved by the affirmative vote of the holders of not less than 66-2/3% of the outstanding Voting Stock; or 2. such repeal, amendment, supplement or modification is approved by the affirmative vote of holders of (a) not less than 75% of the outstanding Voting Stock voting together as a single class, and (b) not less than 66-2/3% of the outstanding Voting Stock held by all shareholders other than Interested Shareholders voting together as a single class. 34 Article XIV (FOURTEENTH: FURTHER CONSIDERATION TO EFFECT BUSINESS COMBINATION) No Business Combination (as defined in Article Thirteenth) shall be effected or consummated unless, in addition to the consideration set forth in Subdivisions B, C, D and E of Article THIRTEENTH, the Board of Directors of the Corporation, including the Continuing Directors shall consider all of the following factors and any other factors which it (they) deem relevant: 1. the social and economic effects of the transaction on the Corporation and its subsidiaries, employees depositors, loan and other customers, creditors and other elements of the communities in which the Corporation and its subsidiaries operate or are located; 2. the business and financial conditions and earnings prospects of the Interested Shareholder, including, but not limited to, debt services another existing or likely financial obligations of the Interested Shareholder, and the possible effect on other elements of the communities in which the Corporation aud its subsidiaries operate or are located, and 3. the competence, experience and integrity of the Interested Shareholder and his (its) or their management. 35 LNB Bancorp, Inc. Exhibit to Form 10 - Q (For the nine months ended September 30, 1999) S - K Reference Number (3)(ii) LNB Bancorp, Inc. Code of Regulations 36 CODE OF REGULATIONS OF LNB BANCORP, INC. ARTICLE I Offices Section 1. Principal Office. The principal office of the corporation shall be at such place in the City of Lorain, Ohio, as may be designated from time to time by the Board of Directors. Section 2. Other Offices. The corporation shall also have offices at such other place without, as well as within, the State of Ohio, as the Board of Directors may from time to time determine. ARTICLE II Meeting of Shareholders Section 1. Annual Meeting. The annual meeting of the shareholders of this corporation for the purpose of fixing or changing the number of directors of the corporation, electing directors and transacting such other business as may come before the meeting, shall be held on the 3rd Tuesday in April of each year, but if a legal holiday, then on the next business day following, or at such time as may be fixed by the Board of Directors. Section 2. Special Meetings. Special meetings of the shareholders may be called at any time by the Chairman of the Board of Directors, President, or a Vice President, or a majority of the Board of Directors acting with or without a meeting, or the holder or holders of one-fourth of all shares outstanding and entitled to vote thereat. Section 3. Place of Meetings. Meetings of shareholders shall be held at the main office of the corporation unless the Board of Directors decides that a meeting shall be held at some other place within or without the State of Ohio and causes the notice thereof to so state. Section 4. Notice of Meetings. Unless waived, a written, printed or typewritten notice of each annual or special meeting stating the day, hour and place and purpose or purposes thereof shall be served upon or mailed to each shareholder of record (a) as of the day next preceding the day on which notice is given or (b) if a record date therefore is duly fixed, or record as of said date. Such notice shall he given not more than sixty (60) days, nor less than ten (10) days before any such meeting. If mailed, it shall be directed to a shareholder at his address as the name appears upon the records of the corporation. All notices with respect to any shares of record in the names of two or more persons may be given to whichever of such persons is named on the hooks of the corporation and notice so given shall be effective as to all the holders of record of such shares. Every person who by operation of law, transfer, or otherwise shall become entitled to any share or right or interest therein shall be bound by every notice in respect of such share which, prior to his name and address being entered upon the books of the corporation as the registered holder of such share, shall have been given to the person in whose name such share appeared of record. Section 5. Waiver of Notice. Any shareholder, either before or after any meeting, may waive any notice required to be given by law or under these Regulations; and whenever all of the shareholders entitled to vote shall 37 meet in person or by proxy and consent to holding a meeting, it shall be valid for all purposes without call or notice, and at such meeting any action may be taken. Section 6. Quorum. The shareholders present in person or by proxy at any meeting for the determination of the number of directors, or the election of directors, or for the consideration and action upon reports, required to be laid before such meeting, shall constitute a quorum. At any meeting called for any other purpose, the holders of shares entitling them to exercise a majority of the voting power of the corporation, present in person or represented by proxy, shall constitute a quorum, except when a greater proportion is required by law, the Articles of Incorporation or this Code of Regulations. At any meeting at which a quorum is present, all questions and business which shall come before the meeting shall be determined by the vote of the holders of a majority of such voting shares as are represented in person or by proxy, except when a greater proportion is required by law or the Articles of Incorporation. At any meeting, whether a quorum is present or not, the holders of a majority of the voting shares represented by shareholders present in person or by proxy may adjourn from time to time and from place to place without notice other than by announcement at the meeting. At any such adjourned meeting at which a quorum is present, any business may be transacted which might be transacted at the meeting as originally notified or held. Section 7. Proxies. Any shareholder of record who is entitled to attend a shareholders' meeting, or to vote thereat or to assent or give consents in writing, shall be entitled to be represented at such meetings or to vote thereat or to assent or give consents in writing, as the case may be, or to exercise any other of his rights, by proxy or proxies appointed by a writing signed by such shareholder, which need not be sealed, witnessed or acknowledged. A telegram, cablegram, wireless message or photogram appearing to have been transmitted by a shareholder, or a photograph, photostatic or equivalent reproduction of a writing appointing a proxy or proxies shall be a sufficient writing. No appointment of a proxy shall be valid after the expiration of eleven (11) months after it is made, unless the writing specifies the date on which it is to expire or the length of time it is to continue in force. Unless the writing appointing a proxy or proxies otherwise provides: 1. Each and every proxy shall have the power of substitution, and when three (3) or more persons are appointed, a majority of them or their respective substitutes may appoint a substitute or substitutes to act for all; 2. If more than one proxy is appointed, then (a) with respect to voting or giving consents at a shareholders' meeting, a majority of such proxies as attend the meeting, or if only one attends then that one may exercise all the voting and consenting authority thereat; and if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such authority with respect to an equal number of shares; (b) with respect to exercising any other authority, a majority may act for all; 3. A writing appointing a proxy shall not be revoked by the death or incapacity of the maker unless before the vote is taken or the authority granted is otherwise exercised, written notice of such death or incapacity is given to the corporation by the executor or the administrator of the estate of such maker or by the fiduciary 38 having control of the shares in respect of which the proxy was appointed; 4. The presence of a shareholder at a meeting shall not operate to revoke a writing appointing a proxy. A shareholder, without affecting any vote previously taken, may revoke such writing not otherwise revoked by giving notice to the corporation in writing or in open meeting. Section 8. Voting. At any meeting of shareholders, each shareholder of the corporation shall, except as otherwise provided by law or by the Articles of Incorporation or by these Regulations be entitled to one vote in person or by proxy for each share of the corporation registered in his name on the books of the corporation (1) on the date fixed pursuant to subparagraph (f) of Section 2 of Article IV of these Regulations as to the record date for the determination of shareholders entitled to vote at such meeting, notwithstanding the prior or subsequent sale, or other disposal of such share or shares or transfer of the same on the books of the corporation on or after the date so fixed, or (2) if no such record date shall have been fixed, then at the time of such meeting. Section 9. Financial Reports. At the annual meeting of shareholders, or the meeting held in lieu thereof, there shall be laid before the shareholders a financial statement consisting of: (1) a balance sheet containing a summary of the assets, liabilities, stated capital, and surplus (showing separately any capital surplus arising from unrealized appreciation of assets, other capital surplus, and earned surplus) of the corporation as of a date not more than four (4) months before such meeting; if such meeting is an adjourned meeting, said balance sheet may be as of a date riot more than four (4) months before the date of the meeting as originally convened; and (2) a statement of profit and loss and surplus, including a summary of profits, dividends paid, and other changes in the surplus accounts of the corporation for the period commencing with the date marking the end of the period for which the last preceding statement of profit and loss under this section was made and ending with the date of said balance sheet. An opinion signed by the President or a Vice President or the Treasurer or an Assistant Treasurer, or by a public accountant or firm of public accountants, shall be appended to such financial statement, stating that the financial statement presents fairly the corporation's financial position and the results of its operations in conformity with generally accepted accounting principles applied on a basis consistent with that of the preceding period, or such other opinion as is in accordance with sound accounting practice. Section 10. Action Without Meeting. Any action which may be authorized or taken at any meeting of shareholders may be authorized or taken without a meeting in a writing or writings signed by all of the holders of shares who would be entitled to notice of a meeting of the shareholders held for such purpose. Such writing or writings shall be filed with or entered upon the records of the corporation. ARTICLE III Directors Section 1. Number of Directors. The election of directors shall take place at the Annual Meeting of Shareholders, or at a special meeting called for the purpose, and shall be by ballot. Directors shall be elected for one term and shall continue office until their successors are elected and qualified. The number of members of the Board of Directors constituting 39 the entire Board shall be determined by a two-thirds majority vote of the Continuing Directors (or, if there is no Interested Shareholder, a majority vote of the whole Board of Directors of the Corporation), and such exact numbers hall be fifteen (15) until otherwise so determined, provided, however, that in no event shall a change be made to the number of directors elected greater than one position in any one year. Section 2. Election and Term of Directors. The directors shall be divided into three classes: Class I, Class II, and Class III. Such classes shall be as nearly equal in number as possible. The term of office of the initial Class I directors shall expire at the Annual Meeting of Shareholders in 1984, the term of office of the initial Class II directors shall expire at the Annual Meeting of Shareholders in 1985, and the term of office of the initial Class III directors shall expire at the Annual Meeting of Shareholders in 1986, or thereafter in each case when their respective successors are elected and have qualified. At each annual election held after classification of directors, the directors chosen to succeed those whose terms then expire shall be identified as being of the same class as the directors they succeed and shall be elected for a term expiring at the third succeeding annual meeting of thereafter when their respective successors in each case are elected and have qualified. If the number of directors is changed, any increase or decrease in directors shall be apportioned among the classes so as to maintain all classes as nearly equal in number as possible, and any additional director elected to any class shall hold office for a term which shall coincide with the terms of such class. Upon the effectiveness of this provision, the Board of Directors is authorized to take such steps as are necessary to implement these provisions. Section 3. Vacancies. Vacancies in the Board of Directors may be filled by a majority vote of the remaining Directors. In the event the remaining Directors see fit to fill such a vacancy, the individual so elected shall serve the unexpired term of the vacated Director whom said individual is replacing, or until such time as a successor is elected and qualified. Section 4. Nomination of Directors. Nomination for election to the Board of Directors may be made by the Board of Directors or by any stockholder of any outstanding class of capital stock of the Bank entitled to vote for the election of Directors. Nominations, other than those made by or on behalf of the existing management of the Bank, shall be made in writing and shall be delivered or mailed to the President of the Bank, not less than fourteen (14) days nor more than fifty (50) days prior to any meeting of stockholders 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 nominations shall be mailed or delivered to the President of the Bank not later than the close of business on the 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) principal occupation of each proposed nominee; c) the total number of shares of capital stock of the Bank that will be voted for each proposed nominee; d) the name and resident address of the notifying shareholders; and e) the number of shares of capital stock of the bank 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 tellers may disregard all votes cast for each such nominee. 40 Section 5. Removal of Directors. A Director shall be removed from the Board of Directors only by the affirmative vote of the holders of 75% of the outstanding voting stock qualified to vote at a meeting for the election of Directors. Section 6. Amendments. Amendments to any provision of Article III of these Regulations shall require the affirmative vote of the holders of 75% of the outstanding voting stock of the Corporation, unless such amendments are approved by a two-thirds majority of the Continuing Directors (or, if there is no Interested Shareholder, such amendment is approved by a majority vote of the whole Board of Directors), then such amendment procedure shall meet the requirements of Article X, Amendments. For purposes of this Article 111, the terms "Continuing Directors(s)" and "Interested Shareholder(s)" are defined in Article XIII of the Articles of Incorporation. ARTICLE IV Powers, Meeting and Compensation of Directors Section 1. Director's Qualifying Shares. The Board of Directors of The Lorain National Bank may hold as directors' qualifying shares a minimum of One Thousand Dollars ($1,000.00) of value (market value) of the shares of the registered bank holding company, which is the parent corporation of the wholly owned subsidiary bank, and in so doing, act as directors duly qualified to serve as directors of the subsidiary bank. Section 2. Meetings of the Board. A meetings of the Board of Directors shall be held immediately following the adjournment of each shareholders' meeting at which directors are elected, and notice of such meeting need not be given. The Board of Directors may, by by-laws or resolution, provide for other meetings of the Board. Special meetings of the Board of Directors may be held at any time upon call of the Chairman of the Board of Directors, President, a Vice President, Treasurer, Secretary or any two members of the Board. Notice of any special meeting of the Board of Directors shall he mailed to each director, addressed to him at his residence or usual place of business, at least two (2) days before the day on which the meeting is to be held. If the purpose of the meeting, or other exigent events requires the Board of Directors to meet in a more timely manner, in the discretion of the individual(s) calling the meeting, such notice of the meeting may be given by telephone or in person as soon as practicable before the meeting, up to the start of such meeting called. If less than two (2) days notice is given, the purpose of the meeting must be specified in the notice. Every notice shall state the time and place of the meeting. Notice of any meeting of the hoard need not he given to any director, however, if waived by him in writing or by telegraph, cable, radio, wireless, or telephonic communication whether before or after such meeting is held, or if he shall be present at such meeting; and any meeting of the Board shall be a legal meeting without any notice thereof having been given, if all the directors shall be present thereat. Meetings of the Board shall be held at the office of the Corporation in the City of Lorain, Ohio, or at such other place, within or without the State of Ohio, as the Board may determine from time to time and as may be specified in the notice thereof. Meetings of the Board of Directors may also be held by the utilization of simultaneous telephonic communications linking all directors present at such meetings, and all such business conducted via such telephonic communication shall be considered legally enforceable by the Corporation. 41 Section 3. Quorum. A majority of the Board of Directors shall constitute a quorum for the transaction of business, provided that whenever less than a quorum is present at the time and place appointed for any meeting of the Board, a majority of those present may adjourn the meeting from time to time, without notice other than by announcement at the meeting, until a quorum shall be present. Section 4. Action Without Meeting. Any action which may be authorized or taken without a meeting in a writing or writings signed by all the directors, which writing or writings shall be filed with or entered upon the records of the corporation. Section 5. Compensation. The directors, as such, shall not receive any salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance, if any, may be allowed for attendance at each regular or special meeting of the Board; provided that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of the executive committee or of any standing or special committee may by resolution of the Board be allowed such compensation for their services as the Board may deem reasonable, and additional compensation may be allowed to directors for special services rendered. Section 6. By-Laws. For the government of its actions, the Board of Directors may adopt by-laws consistent with the Articles of Incorporation and these Regulations. Section 7. Amendment of Article IV. Amendment to any provision of Article IV of these Regulations shall require the affirmative vote of the holders of 75% of the outstanding voting stock of the Corporation, unless such amendment is approved by a two-thirds of the Continuing Directors (or, if there is no Interested Shareholder, such amendment is approved by a majority vote of the whole Board of the Corporation), then such amendment procedure shall meet the requirements of Article X, Amendments. For purposes of this Article IV, the terms "Continuing Directors(s)" and "Interested Shareholders(s)" are (refined in Article XIII of the Articles of Incorporation. ARTICLE V Committees Section 1. Committees. The Board of Directors may by resolution provide for such standing or special committees as it deems desirable, and discontinue the same at pleasure. Each such committee shall have such power and perform such duties, not inconsistent with law, as may be delegated to it by the Board of Directors. Vacancies in such committees shall he filled by the Board of Directors or as it may provide. ARTICLE VI Officers Section 1. General Provisions. The Board of Directors shall elect a President, such number of Vice Presidents as the Board may from time to time determine, a Secretary, and Treasurer, and, in its discretion, a Chairman of the Board of Directors and a Vice Chairman of the Board of Directors. The President or the Chairman of the Board of Directors shall be the Chief Executive Officer of the Corporation, as the Board of Directors, from time to time, determines. The Board of Directors may from time to time create such other officers, subordinate officers and 42 assistant officers as may determine. The President and the Chairman of the Board shall be, but the other officers need not be, chosen from among the members of the Board of Directors. Section 2. Term of Office. The officers of the corporation shall hold office at the pleasure of the Board of Directors and, unless sooner removed by the Board of Directors, until the reorganization meeting of the Board of Directors following the date of their election and until their successors are chosen and qualified. The Board of Directors may remove any officer at any time, with or without cause, by a majority vote. A vacancy in any office, however created, shall be filled by the Board of Directors. ARTICLE VII Duties of Officers Section 1. Chairman of the Board. The Chairman of the Board, if one be elected, shall preside at all meetings of the shareholders and Board of Directors and shall have such other powers and duties, including those of the Chief Executive officer of the corporation, as may be prescribed by the Board of Directors or prescribed by Ohio's General Corporate Act. Section 2. Vice Chairman of the Board. The Vice Chairman of the Board, if one be elected, shall preside at all meetings of the shareholders and Board of Directors, in the absence of the Chairman of the Board, and shall have such other powers and duties, as may be prescribed by the Board of Directors or prescribed by Ohio's General Corporate Act. Section 3. President. The President shall have the authority to sign all certificates for shares and all deeds, mortgages, bonds, contracts, notes and other instruments requiring his signature; and shall have such other powers and duties, including those of the Chief Executive Officer of the corporation, as may be prescribed by the Board of Directors or prescribed by Ohio's General Corporate Act. In the absence of, or if a Chairman of the Board shall not have been elected or a Vice Chairman of the Board shall not have been elected, the President shall preside at the meetings of the shareholders and the meetings of the Board of Directors. Section 4. Vice Presidents. The Vice Presidents shall perform such duties as are conferred upon them by these regulations or as may from time to time be assigned to them by the Board of Directors, the Chairman of the Board, or the President. The authority of the Vice Presidents to sign in the name of the corporation all certificates for shares and authorized deeds, mortgages, bonds, contracts, notes and other instruments, shall be coordinated, by appropriate resolution by the Board of Directors, with like authority of the President. Any one or more of the Vice Presidents may be designated as a "Executive Vice President" or Senior Vice President." Section 5. Secretary. The Secretary shall keep minutes of all the proceedings of the shareholders and Board of Directors, and shall make proper record of the same, which shall be attested by him, sign all certificates for shares, and all deeds, mortgages, bonds, contracts, notes, and other instruments executed by the corporation requiring his signature; give notice of meetings of shareholders and directors; produce upon request at each meeting of shareholders for the election of directors a certified list of shareholders arranged in alphabetical order; keep such books as may be required by the Board of Directors and file all reports to 43 States, to the Federal Government, and to foreign countries; and perform such other and further duties as may from time to time be assigned to him by the Board of Directors, the Chairman of the Board, or by the President. Section 6. Treasurer. The Treasurer shall have general supervision of all finances; he shall receive and have in charge all money, bills, notes, deeds, leases, mortgages and similar property belonging to the corporation, and shall do with the same as may from time to time be required by the Board of Directors. He shall cause to be kept adequate and correct accounts of the business transactions of the corporation, including accounts of its assets, liabilities, receipts, disbursements, gains, losses, stated capital, and shares, together with such other accounts as may be required, and, upon the expiration of his term of office, shall turn over to his successor or the Board of Directors all property, books, papers and money of the corporation in his hands; and he shall perform such other duties as from time to time may be assigned to him by the Board of Directors. Section 7. Assistant and Subordinate Officers. The Board of Directors may appoint such assistant and subordinate officers as it may deem desirable. Each such officer shall hold office during the pleasure of the Board of Directors, and perform such duties as the Board of Directors may prescribe. Section 8. Director Emeritus-Consultant. An individual who was formerly a Director of this corporation may be appointed to the position of Director Emeritus-Consultant, after he has retired from being an active member of the Board of Directors. The Board of Directors may appoint a retired Director of LNB Bancorp, Inc., Director Emeritus-Consultant, as it may deem desirable. Each such Director Emeritus-Consultant shall hold office during the pleasure of the Board of Directors and perform such duties as the Board of Directors may prescribe. This position is further qualified as follows: a) A Director Emeritus-Consultant may attend meetings of the Board of Directors. b) A Director Emeritus-Consultant will be paid at the same rate a Director is paid, for those meetings he attends. c) A Director Emeritus-Consultant will have no vote at said Board meetings. Section 9. Duties of Officers May Be Delegated. In the absence of any officer of the corporation, or for any other reason the Board of Directors may deem sufficient, the Board of Directors may delegate, for the time being, the powers or duties, or any of them, of such officer to any other officer, or to any other Director. ARTICLE VIII Certificates for Shares Section 1. Form and Execution. Certificates for share shall be issued to each shareholder in such form as shall be approved by the Board of Directors. Such certificates shall be signed by the Chairman of the Board of Directors or the President or a Vice President or by the Secretary or an Assistant Secretary or the Treasurer or an Assistant Treasurer of the corporation, which certificates shall certify the number and class of shares held by the shareholder in the corporation, but no certificates for shares shall be delivered until such shares are fully paid. When such a certificate is countersigned by an incorporated transfer agent or registrar, the signature of any said officers of the corporation may be 44 facsimile, engraved, stamped or printed. Although any officer of the corporation whose manual or facsimile signature is affixed to a shares certificate shall cease to be such officer before the certificate delivered, such certificate, nevertheless, shall be effective in all respects when delivered. Such certificates for shares shall be transferable in person or by attorney, but, except as hereinafter provided in the case of lost, mutilated or destroyed certificates, no transfer of shares shall be entered upon the records of the corporation until the previous certificates, if any, given for the same shall have been surrendered and canceled. Section 2. Lost, Mutilated or Destroyed Certificates. If any certificate for shares is lost, mutilated or destroyed, the Board of Directors may authorize the issuance of a new certificate in place thereof upon such terms and conditions as it may deem advisable. The Board of Directors in its discretion may refuse to issue such new certificates until the corporation has been identified by a final order or decree of a court of competent Jurisdiction. Section 3. Registered Shareholders. A person in whose name shares are of record on the books of the corporation shall conclusively be deemed the unqualified owner thereof for all purposes and to have capacity to exercise all rights of ownership. Neither the corporation nor any transfer agent of the corporation shall be bound to recognize any equitable interest in or claim to such shares on the part of any other person, whether disclosed upon such certificate or otherwise, nor shall they be obliged to see to the execution of any trust or obligation. ARTICLE IX Fiscal Year The fiscal year of the corporation shall end on the 31st day of December in each year, or on such other day as may be fixed from time to time by the Board of Directors. ARTICLE X Amendments These Regulations may be amended or repealed at any meeting of shareholders called for that purpose by the affirmative vote of the holders or record of shares entitled them to exercise a majority of the voting power on such proposal or, without a meeting, by the written consent of the holders of record of shares entitling them to exercise a Majority of the voting power on such proposal. 45 LNB Bancorp, Inc. Exhibit to Form 10 - Q (For the nine months ended September 30, 1999) S - K Reference Number (13) Third Quarter Report to Shareholders of LNB Bancorp, Inc. (dated September 30, 1999) EDGAR Version DESCRIPTION: Three sided pamphlet: Outside cover: tan with white stripe Third Quarter Report LNB Bancorp, Inc. Logo on right hand side LNB Bancorp, Inc. September 30, 1999 Inside contains: Message to shareholders, Unaudited EDGAR version Consolidated Balance Sheets for period ending September 30, 1999 and September 30, 1998, respectively, Unaudited EDGAR version Consolidated Statements of Income for the Nine Months ended September 30, 1999 and September 30, 1998, respectively, Investment and Trust Services Division Banking Offices and ATMS 46 Message to Our Shareholders It's a pleasure to report that we are well on our way to another successful year of operations at LNB Bancorp, Inc. and its wholly owned subsidiary, The Lorain National Bank. As of September 30, 1999, we have achieved significant growth in earnings, dividends, assets, loans, deposits and shareholders' equity. We are pleased to announce that earnings increased 10% in the first nine months ended September 30, 1999 compared with the same period one year ago. Earnings for the first nine months of 1999 reached $5,787,000, up from $5,258,000 during the first nine months of 1998. Earnings for the third quarter of 1999 were strong, at $1,991,000 compared with $1,826,000 for the third quarter of 1998. Basic earnings per share for the first nine months of 1999 reached $1.40, a 10% increase from the $1.27 per basic share reported for the same period in 1998. Earnings thus far in 1999 were higher than a year ago because of higher net interest income and other noninterest income, offset in part by higher loan loss provision and operating expenses. Increases in net interest income for the nine months were fueled by strong loan growth. Cash dividends declared per share for the first nine months of 1999 increased 10% compared with the same period last year. The year-to- date cash dividends declared per share in 1999 increased by $.06 to $.67 per share, up from $.61 per share in 1998. Asset growth improved substantially. Total assets climbed 12% to $587.5 million at September 30, 1999, up $63.9 million from September 30, 1998. Net loans grew by $52.3 million from one year ago to $409.4 million at September 30, 1999, for a 14% increase. Consumer and commercial loan growth accounted for 50% and 39% of total loan growth, respectively, while mortgage loans accounted for 11% of total loan growth during the 12 months ended September 30, 1999. Total deposits climbed 10% to $475.1 million, up $41.8 million from one year ago. Increases in demand, savings and certificates of deposit accounted for the deposit increase. Federal Home Loan Bank (FHLB) advances increased to $34.3 million at September 30, 1999, up $32.3 million from one year ago. Of this increase, $20.0 million and $2.3 million in FHLB advances were used to fund a portion of the growth in consumer and commercial loans, respectively. The remainder of the FHLB advances are designated for potential Y2K liquidity purposes. Total shareholders' equity increased by $2.3 million during the 12 months ended September 30, 1999, for a 5.% increase. Total shareholders' equity amounted to $50.5 million or $12.26 per share at September 30, 1999 compared with $48.2 million or $11.55 per share at September 30, 1998. The annualized return on average shareholders' equity rose to 15.58% for the nine months ended September 30, 1999, from 15.09 for the same period one year ago. We appreciate and thank you for your continuing support and look forward to addressing you after the completion of another year of successful operations. 47 Sincerely, /s/ James F. Kidd /s/ Stanley G. Pijor James F. Kidd Stanley G. Pijor President and Chairman of the Board 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 1995 through 1999 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 1995 through 1999 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 1995 through 1999 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 Dividends Net Income Per Share Per Share Year Millions of Dollars Dollars* Dollars* 1999 $5,782 $ 1.40 $ .67 1998 $5,258 $ 1.27 $ .61 1997 $4,780 $ 1.14 $ .49 1996 $4,280 $ 1.02 $ .43 1995 $3,574 $ 0.86 $ .37 *Adjusted for stock dividends and splits 48 Consolidated Balance Sheets September 30 1999 1998 - -------------------------------------------------------------------------- ASSETS: Cash and Due from Banks $ 19,937,000 $ 22,054,000 Federal Funds Sold and Short-Term Investments 12,926,000 3,936,000 Federal Home Loan Bank and Federal Reserve Bank Stock, at Cost 2,670,000 2,155,000 Securities Held to Maturity, at Cost 44,415,000 68,848,000 Securities Available for Sale, at Fair Value 75,756,000 46,914,000 Loans 413,544,000 361,799,000 Reserve for Possible Loan Losses (4,108,000) (4,675,000) - -------------------------------------------------------------------------- NET LOANS 409,436,000 357,124,000 - -------------------------------------------------------------------------- Premises, Equipment and Intangible Assets, (net) 15,146,000 15,562,000 Accrued Interest Receivable and Other Assets 7,250,000 7,018,000 - -------------------------------------------------------------------------- TOTAL ASSETS $587,536,000 $523,611,000 - -------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY: Noninterest-Bearing Deposits $ 79,861,000 $ 74,543,000 Interest-Bearing Deposits 395,280,000 358,765,000 - -------------------------------------------------------------------------- TOTAL DEPOSITS 475,141,000 433,308,000 - -------------------------------------------------------------------------- Securities Sold under Repurchase Agreements and Other Short-Term Borrowings 22,710,000 36,222,000 Federal Home Loan Bank Advances 34,345,000 2,045,000 Accrued Interest, Taxes, Expenses and Other Liabilities 4,809,000 3,868,000 - -------------------------------------------------------------------------- TOTAL LIABILITIES 537,005,000 475,443,000 - -------------------------------------------------------------------------- Common Stock 4,223,000 4,222,000 Additional Capital 22,604,000 22,602,000 Retained Earnings 27,233,000 23,681,000 Accumulated Other Comprehensive Income(Loss) (629,000) 563,000 Treasury Stock, at Cost (2,900,000) (2,900,000) - -------------------------------------------------------------------------- TOTAL SHAREHOLDERS' EQUITY 50,531,000 48,168,000 - -------------------------------------------------------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $587,536,000 $523,611,000 - -------------------------------------------------------------------------- (LOGO) LNB Bancorp, Inc. and its subsidiary Lorain National Bank TOTAL ASSETS millions of dollars (A Total Assets graph follows in printed version with earnings per share on the y-axis and years 1995 through 1999 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.) 49 TOTAL SHAREHOLDERS' EQUITY millions of dollars (A Total Shareholders' Equity graph follows in printed version with dividends per share on the y-axis and years 1995 through 1999 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 Equity Year Millions of Dollars Millions of Dollars 1999 $587.5 $ 50.5 1998 $523.6 $ 48.2 1997 $496.8 $ 44.4 1996 $433.6 $ 43.3 1995 $413.5 $ 40.0 50 Consolidated Statements of Income Nine Months Ended September 30, 1999 1998 - ------------------------------------------------------------------------- INTEREST INCOME: Interest and Fees on Loans $25,189,000 $22,752,000 Interest and Dividends on Securities 5,331,000 5,468,000 Interest on Federal Funds Sold and Short-term Investments 250,000 113,000 - -------------------------------------------------------------------------- TOTAL INTEREST INCOME 30,770,000 28,333,000 - -------------------------------------------------------------------------- INTEREST EXPENSE: Interest on Deposits 9,453,000 9,448,000 Interest on Securities Sold Under Repurchase Agreements and Other Short-term Borrowings 870,000 882,000 Interest on Federal Home Loan Bank Advances 1,067,000 98,000 - -------------------------------------------------------------------------- TOTAL INTEREST EXPENSE 11,390,000 10,428,000 - -------------------------------------------------------------------------- NET INTEREST INCOME 19,380,000 17,905,000 Provision for Loan Losses 1,250,000 1,263,000 - -------------------------------------------------------------------------- NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 18,130,000 16,642,000 - -------------------------------------------------------------------------- OTHER INCOME: Investment and Trust Services Division Income 1,587,000 1,358,000 Fees and Service Charges 4,246,000 3,704,000 Gains From Sales of Loans, Securities, and Buildings 158,000 -0- Other Operating Income 72,000 49,000 - -------------------------------------------------------------------------- TOTAL OTHER INCOME 6,063,000 5,111,000 - -------------------------------------------------------------------------- OTHER EXPENSES: Salaries and Employee Benefits 7,481,000 6,576,000 Net Occupancy Expense of Premises 1,136,000 1,005,000 Furniture and Equipment Expenses 1,627,000 1,617,000 Supplies and Postage 727,000 790,000 Ohio Franchise Tax 414,000 353,000 Other Operating Expenses 4,020,000 3,464,000 - -------------------------------------------------------------------------- TOTAL OTHER EXPENSES 15,405,000 13,805,000 - -------------------------------------------------------------------------- INCOME BEFORE INCOME TAXES 8,788,000 7,948,000 - -------------------------------------------------------------------------- Income Taxes 3,001,000 2,690,000 - -------------------------------------------------------------------------- NET INCOME $5,787,000 $5,258,000 - -------------------------------------------------------------------------- - -------------------------------------------------------------------------- PER SHARE DATA: - -------------------------------------------------------------------------- BASIC EARNINGS PER SHARE $ 1.40 $ 1.27 DILUTED EARNINGS PER SHARE $ 1.40 $ 1.27 - -------------------------------------------------------------------------- DIVIDENDS DECLARED PER SHARE $ .67 $ .61 ========================================================================== 51 Logos FDIC Insured, Federal Home Loan Bank System, Equal Housing Lender 52 Investment and Trust Services Division The Investment and Trust Services Division of Lorain National Bank continues rapid growth with assets under management climbing to $369.2 million as of September 30, 1999. Up $83.7 million from one year ago, this represents a 29% increase. The Division's fee income increased 17% for the first nine months of 1999 to $1,587,000. Lorain National Bank's Investment and Trust Services Division serves more than 1,000 individual and corporate clients. The Investment and Trust Services Division offers a comprehensive range of high quality products and investment services designed to satisfy a wide range of customer needs. The major areas of services and products include investment agencies, employee benefit plans, personal trust services and non-profit agency accounts. Personal attention and prompt response are the hallmarks of the service provided to our clients. As one of the areas largest providers of investment management services and trust services, the Division is able to serve the investment needs of a variety of clients. With the addition of an investment and trust office at the Ely Square branch office, we now have the following two convenient locations to serve you. Main Office Ely Square Office 457 Broadway 124 Middle Avenue Lorain, Ohio 44052 Elyria, Ohio 44035 Telephone:(440) 244-7226 Telephone:(440) 244-7133 or 323-2374 We invite you to meet our investment and trust professionals. Collectively, they have more than 130 years of experience. They would be pleased to work with you, your attorney, your accountant, and/or other business consultants to develop the optimum plan for the management of your assets. If you would like to arrange an appointment with one of our officers to discuss your specific needs, you may contact any of the officers listed below: Emma N. Mason Gerald S. Falcon Neal Conger Senior Vice President and Vice President and Vice President and Senior Trust Officer Trust Operations Officer Trust Officer (440)244-7226 (440)244-7263 (440)244-7350 Edward J. Baker Brian D. Morgan Vice President and Vice President and Employee Benefits Officer Trust Officer (440)244-7262 (440)244-7369 We appreciate and thank our existing clients for their continuing support and look forward to establishing and serving new client relationships. Sincerely, /s/Emma N. Mason Emma N. Mason Senior Vice President and Senior Trust Officer ASSETS UNDER MANAGEMENT million of dollars (An Assets Under Management graph follows in printed version with assets on the y-axis and years 1995 through 1999 on the x-axis. The graph is a 53 vertical bar graph. The co-ordinates, by year, which are presented in the table below are plotted on the previously described grid.) NET INCOME thousands of dollars (A Net Income graph follows in printed version with income on the y-axis and years 1995 through 1999 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.) Assets Under Management Net Income Year Millions of Dollars Thousands of Dollars 1999 $369.2 $1,587 1998 $285.5 $1,358 1997 $253.3 $ 955 1996 $185.1 $ 801 1995 $189.0 $ 756 54 Back Cover: White background with tan along top of page and black lettering Four column format Banking Offices and ATMS ATM service available wherever you see this symbol ** Lorain Banking Offices Elyria Banking Offices Main Office **Ely Square Office 457 Broadway 124 Middle Avenue Lorain, Ohio 44052 Elyria, Ohio 44035 (440) 244-7185 (440) 323-4621 **Sixth Street Drive-In Office **Cleveland Street Office 200 Sixth Street 801 Cleveland Street Lorain, Ohio 44052 Elyria, Ohio 44035 (440) 244-7242 (440) 365-8397 **Cooper-Foster Park **Lake Avenue Office Road Office 42935 North Ridge Road 1920 Cooper-Foster Park Road Elyria Township, Ohio 44035 Lorain, Ohio 44053 (440) 233-7196 (440) 282-1252 **Midway Mall Office **Kansas Avenue Office 6395 Midway Mall Blvd. 1604 Kansas Avenue Elyria, Ohio 44035 Lorain, Ohio 44052 (440) 324-6530 (440) 288-9151 **Oberlin Avenue Office 3660 Oberlin Avenue Lorain, Ohio 44053 (440) 282-9196 Village of LaGrange **Pearl Avenue Office Banking Office 2850 Pearl Avenue **Village of LaGrange Office Lorain, Ohio 44055 546 North Center Street (440) 277-1103 Village of LaGrange, Ohio 44050 **West Park Drive Office (440) 355-6734 2130 West Park Drive Lorain, Ohio 44053 Oberlin Banking Offices (440) 989-3131 Kendal at Oberlin Office 600 Kendal Drive Amherst Banking Office Oberlin, Ohio 44074 **Amherst Office (440) 774-5400 1175 Cleveland Avenue Amherst, Ohio 44001 **Oberlin Office (440) 988-4423 40 East College Street Oberlin, Ohio 44074 Avon Lake Banking Office (440) 775-1361 **Avon Lake Office 240 Miller Road Olmsted Township Avon Lake, Ohio 44012 Banking Offices (440) 933-2186 **Olmsted Township Office 27095 Bagley Road Olmsted Township, Ohio 44138 (440) 235-4600 55 The Renaissance Office Other Offices 26376 John Road Executive Offices Olmsted Township, Ohio 44138 457 Broadway (440) 427-0041 Lorain, Ohio 44052 (440) 244-7123 Vermilion Banking Office **Vermilion Office Branch Administration 4455 East Liberty Avenue 457 Broadway Vermilion, Ohio 44089 Lorain, Ohio 44052 (440) 967-3124 (440) 244-7253 Westlake Banking Offices Commercial, Consumer **Crossings of Westlake Ohio and Mortgage Loans 30210 Detroit Road 457 Broadway Westlake, Ohio 44145 Lorain, Ohio 44052 (440) 892-9696 (440) 244-7220 (440) 244-7272 Westlake Village Office (440) 244-7216 28550 Westlake Village Drive Westlake, Ohio 44145 Credit Cards (440) 808-0229 2130 West Park Drive Lorain, Ohio 44053 Community-Based (440) 989-3308 Automated Teller Machine Locations Customer Service **Captain Larry's Marathon 2130 West Park Drive 1317 State Route 60 Lorain, Ohio 44053 Vermilion, Ohio (440) 989-3348 **Convenient Food Mart Human Resources 5375 West Erie Avenue 2130 West Park Drive Lorain, Ohio Lorain, Ohio 44053 (440) 989-3139 **Dad's Sunoco 7580 Leavitt Road Operations State Route 58 2130 West Park Drive Amherst, Ohio Lorain, Ohio 44053 (440) 989-3315 **Gateway Plaza Convenient 3451 Colorado Avenue Purchasing Lorain, Ohio 2150 West Park Drive Lorain, Ohio 44053 **Lakeland Medical Center (440) 989-3260 3700 Kolbe Road Lorain, Ohio Trust and Investment Management Services **Lorain County 457 Broadway Community College Lorain, Ohio 44052 1005 North Abbe Road (440) 244-7226 Elyria, Ohio All Other Departments & **Lowe's Home Information Not Listed Improvement Warehouse Telebanker (440) 245-4562 620 Midway Boulevard Telebanker (800) 610-9033 Elyria, Ohio Toll Free (800) 860-1007 Lorain (440) 244-6000 **Midway Mall Food Court Elyria (440) 236-5047 3343 Midway Mall Blvd. Elyria, Ohio Internet www.4LNB.com 56 (LOGO) LNB Bancorp, Inc. and its subsidiary Lorain National Bank 57 LNB Bancorp, Inc. Exhibit to Form 10 - Q (For the nine months ended September 30, 1999) S - K Reference Number (27) Financial Data Schedule (Follows as a separate document) EX-27 2
9 0000737210 LNB BANCORP, INC. 1,000 9-MOS DEC-31-1999 JAN-01-1999 SEP-30-1999 19,937 12,926 0 0 75,756 47,085 44,703 413,544 4,108 587,536 475,141 32,710 4,809 24,345 4,223 0 0 46,308 587,536 25,169 5,331 250 30,770 9,453 11,390 19,380 1,250 0 15,405 8,788 5,787 0 0 5,787 1.40 1.40 4.77 994 505 0 4,434 3,483 810 185 4,108 2,839 0 1,269
-----END PRIVACY-ENHANCED MESSAGE-----