10-Q

Form 10-Q

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

þ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2005

OR

o 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 on its charter)

Ohio
State or other jurisdiction
(of Incorporation or organization) 34-1406303 

(I.R.S. Employer Identification No.)

457 Broadway, Lorain, Ohio
(Address of principal executive offices) 44052 - 1769
(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 þ NO o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). YES þ NO o

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes þ No

Outstanding at October 31, 2005: 6,576,173 shares of Common Stock, $1.00 par value per share, of the registrant.

LNB Bancorp, Inc.
Table of Contents

Part I Financial Information

Item 1. Financial Statements.

Consolidated Balance Sheets September 30, 2005 (unaudited) and December 31, 2004

Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2005 and September 30, 2004

Consolidated Statements of Changes in Shareholders’ Equity (unaudited) for the nine months ended September 30, 2005 and September 30, 2004

Consolidated Statements of Cash Flows (unaudited) for the nine months ended September 30, 2005 and September 30, 2004

Notes to the Consolidated Financial Statements (unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Item 3. Quantitative and Qualitative Disclosures about Market Risk.

Item 4. Controls and Procedures.

Part II Other Information

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Item 5. Other Information.

Item 6. Exhibits.

Signatures

2

Consolidated Balance Sheets

(Dollars in thousands except share and per share amounts)	September 30, 2005			December 31, 2004
	(unaudited)
Assets
Cash and cash equivalents:
Cash and due from banks	$	27,442		$	23,123
Short-term investments		—			3,695
Total cash and cash equivalents		27,442			26,818
Investment Securities:
Available for sale, at fair value		152,435			145,588
Federal Home Loan Bank and Federal Reserve stock, at cost		4,187			4,033
Total securities		156,622			149,621
Loans:
Loans held for sale		3,656			3,067
Portfolio loans		594,493			572,157
Allowance for loan losses		(7,890	)		(7,386	)
Net loans		590,259			567,838
Bank premises and equipment, net		10,996			11,493
Other real estate owned		399			420
Intangible assets		3,361			3,801
Other assets		23,358			21,658
Total Assets	$	812,437		$	781,649
Liabilities
Deposits:
Noninterest-bearing	$	96,537		$	96,280
Interest-bearing		559,203			509,263
Total deposits		655,740			605,543
Short-term borrowings		20,277			31,619
Federal Home Loan Bank advances		61,099			69,296
Accrued interest, taxes and other liabilities		5,843			4,617
Total Liabilities		742,959			711,075
Shareholders’ Equity
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 6,771,867 shares at September 30, 2005 and 6,766,867 shares at December 31, 2004.		6,772			6,767
Additional paid-in capital		26,334			26,243
Retained earnings		42,295			41,291
Accumulated other comprehensive loss		(2,269	)		(1,297	)
Treasury stock at cost, 195,694 shares at September 30, 2005 and 125,686 shares at December 31, 2004		(3,654	)		(2,430	)
Total Shareholders’ Equity		69,478			70,574
Total Liabilities and Shareholders’ Equity	$	812,437		$	781,649

See Notes to Consolidated Financial Statements

3

Consolidated Statements of Income

	For the Three Months Ended					For the Nine Months Ended
	September 30,					September 30,
(Dollars in thousands except share and per share amounts)	2005			2004		2005			2004
	(unaudited)					(unaudited)
Interest Income
Interest and fees on loans	$	9,712		$	8,196	$	27,847		$	23,848
Interest and dividends on investment securities:
Taxable		1,239			1,022		3,413			3,053
Tax Exempt		107			102		333			375
Interest on cash equivalents		37			23		109			56
Total interest income		11,095			9,343		31,702			27,332
Interest Expense
Deposits		3,021			1,712		7,561			4,933
Short-term borrowings		201			62		395			154
Federal Home Loan Bank advances		403			536		1,387			1,515
Total interest expense		3,625			2,310		9,343			6,602
Net Interest Income		7,470			7,033		22,359			20,730
Provision for Loan Losses		300			399		1,098			1,349
Net interest income after provision for loan losses		7,170			6,634		21,261			19,381
Noninterest Income
Deposit service charges		1,152			1,131		3,112			3,146
Trust and investment management services		555			539		1,627			1,611
Mortgage banking revenue		242			108		967			108
Income from investment in life insurance		117			157		426			477
Securities gains, net		—			158		174			381
Gains on sales of loans		—			17		132			100
Gains (losses) on sales of other assets, net		(31	)		285		(32	)		285
Other noninterest income		573			716		1,768			2,494
Total noninterest income		2,608			3,111		8,174			8,602
Noninterest Expense
Salaries and employee benefits		3,414			3,223		11,653			9,168
Net occupancy		402			407		1,368			1,190
Furniture and equipment		746			717		2,281			2,046
Electronic banking expenses		136			350		400			1,075
Supplies, postage, and delivery		290			421		934			930
Outside services		394			306		1,224			840
Marketing and public relations		258			264		863			757
Ohio franchise tax		179			181		561			549
Goodwill impairment		—			—		311			—
Other noninterest expense		945			891		3,312			2,443
Total noninterest expense		6,764			6,760		22,907			18,998
Income before income tax expense		3,014			2,985		6,528			8,985
Income tax expense		857			911		1,948			2,675
Net Income	$	2,157		$	2,074	$	4,580		$	6,310
Net Income Per Common Share
Basic	$	0.33		$	0.31	$	0.69		$	0.95
Diluted		0.33			0.31		0.69			0.95
Dividends declared		0.18			0.18		0.54			0.54
Average Common Shares Outstanding
Basic		6,625,086			6,641,095		6,635,752			6,628,097
Diluted		6,625,168			6,641,709		6,635,780			6,629,103

See Notes to Consolidated Financial Statements

4

Consolidated Statements of Shareholders’ Equity (Unaudited)

			Additional					Accumulated Other
(Dollars in thousands	Common		Paid-in		Retained			Comprehensive			Treasury
except per share amounts)	Stock		Capital		Earnings			Loss			Stock			Total
Balance, January 1, 2004	$	6,767	$	26,243	$	38,714		$	(704	)	$	(2,885	)	$	68,135
Comprehensive income:
Net income						6,310									6,310
Other comprehensive income, net of tax:
Minimum pension liability									—						—
Change in unrealized gains and losses on securities									(588	)					(588	)
Total comprehensive income															5,722
Common dividends declared, $.54 per share						(3,582	)								(3,582	)
Issuance of Treasury stock under stock option agreements				—		(121	)					455			334
Balance, September 30, 2004	$	6,767	$	26,243	$	41,321		$	(1,292	)	$	(2,430	)	$	70,609
Balance, January 1, 2005	$	6,767	$	26,243	$	41,291		$	(1,297	)	$	(2,430	)	$	70,574
Comprehensive income:
Net income						4,580									4,580
Other comprehensive loss, net of tax:
Change in unrealized gains and losses on securities									(972	)					(972	)
Total comprehensive income															3,608
Common stock repurchased												(1,224	)		(1,224	)
Issuance of common stock under employment agreement		5		91		—						—			96
Common dividends declared, $.54 per share						(3,576	)								(3,576	)
Balance, September 30, 2005	$	6,772	$	26,334	$	42,295		$	(2,269	)	$	(3,654	)	$	69,478

See Notes to Consolidated Financial Statements

5

Consolidated Statements of Cash Flows

	For the Nine Months
	Ended September 30,
(Dollars in thousands)	2005			2004
	(unaudited)
Cash flows from operating activities:
Net income	$	4,580		$	6,310
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Provision for loan losses		1,098			1,349
Depreciation and amortization		1,372			1,326
Securities gains, net		(174	)		(381	)
Amortization of premiums and discounts, net		528			686
Amortization of intangible assets		129			85
Impairment of goodwill, net		311			—
Deferred loan fee amortization		237			128
Deferred income taxes		(501	)		(713	)
Gain on sale of other assets, net		(100	)		(385	)
Changes in:
Accrued interest receivable and other assets		(1,199	)		(955	)
Accrued interest, taxes, and other liabilities		1,226			(94	)
Net cash provided by operating activities		7,507			7,356
Cash flows from investing activities:
Purchases of available for sale securities		(30,920	)		(49,570	)
Purchases of Federal Home Loan Bank Stock		(154	)		(114	)
Proceeds from principal payments and maturities of available for sale securities		18,171			40,768
Proceeds from sale of available for sale securities		4,576			17,147
Net increase in portfolio loans		(24,301	)		(34,423	)
Additions to bank premises and equipment		(953	)		(2,234	)
Proceeds from the sale of bank premises and equipment		55			444
Proceeds from sales of other real estate		689			1,392
Cash paid for acquisition of Mortgage One		—			(311	)
Net cash used in investing activities		(32,837	)		(26,901	)
Cash flows from financing activities:
Net increase in deposits		50,197			21,047
Net increase (decrease) in short-term borrowings		(11,342	)		387
Proceeds from Federal Home Loan Bank advances		108,000			104,500
Repayment of Federal Home Loan Bank advances		(116,197	)		(98,741	)
Issuance of Common stock		96			—
Common stock repurchased		(1,224	)		—
Proceeds from exercise of employee stock options		—			334
Dividends paid		(3,576	)		(3,582	)
Net cash provided by financing activities		25,954			23,945
Net increase in cash and cash equivalents		624			4,400
Cash and cash equivalents, January 1		26,818			27,749
Cash and cash equivalents, September 30	$	27,442		$	32,149
Supplemental disclosure of cash flow information:
Cash paid during the period for:
Interest paid	$	9,546		$	6,602
Income taxes paid		1,764			2,305
Supplemental disclosures of noncash investing and financing activities:
Transfer of loans to other real estate owned		668			920

See Notes to Consolidated Financial Statements

6

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Summary of Significant Accounting Policies

Consolidation

     The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its wholly-owned subsidiaries, The Lorain National Bank (the “Bank”) and Charleston Insurance Agency, Inc. Charleston Title Agency, LLC, a 49%-owned subsidiary, is accounted for under the equity method. The consolidated financial statements also include the accounts of North Coast Community Development Corporation and LNB Mortgage LLC, which are wholly-owned subsidiaries of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

     The Corporation prepares its financial statements in conformity with U.S. generally accepted accounting principles (GAAP). As such, GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Areas involving the use of management’s estimates and assumptions include the allowance for loan losses, the realization of deferred tax assets, fair values of certain securities, net periodic pension expense, and accrued pension costs recognized in the Corporation’s financial statements. Estimates that are more susceptible to change in the near term include the allowance for loan losses and the fair value of certain securities.

Segment Information

     The Corporation’s activities are considered to be a single industry segment for financial reporting purposes. The Corporation is a financial holding company engaged in the business of commercial and retail banking, investment management and trust services, title insurance, and insurance with operations conducted through its main office and banking centers located throughout Lorain, eastern Erie and western Cuyahoga counties of Ohio. This market provides the source for substantially all of the Corporation’s deposit, loan and trust activities and title insurance and insurance activities. The majority of the Corporation’s income is derived from a diverse base of commercial, mortgage and retail lending activities and investments.

Statements of Cash Flows

     For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include currency on hand, amounts due from banks, Federal funds sold, and securities purchased under resale agreements. Generally, Federal funds sold and securities purchased under agreements to resell are for one day periods.

7

Securities

     Securities that are bought and held for the sole purpose of being sold in the near term are deemed trading securities with any related unrealized gains and losses reported in earnings. As of September 30, 2005 and December 31, 2004, the Corporation did not hold any trading securities. Securities that an enterprise has a positive intent and ability to hold to maturity are classified as held to maturity. As of September 30, 2005 and December 31, 2004, the Corporation did not hold any held to maturity securities. Securities that are not classified as trading or held to maturity are classified as available for sale. As of September 30, 2005, and December 31, 2004, all securities held by the Corporation were classified as available for sale and were carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. A decline in the fair value of securities below cost, that is deemed other than temporary, is charged to earnings, resulting in establishment of a new cost basis for the security. Interest and dividends on securities, including amortization of premiums and accretion of discounts using the effective interest method over the period to maturity or call, are included in interest income.

Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock

     Shares of these types of stocks are required investments for institutions that are members of the Federal Reserve and Federal Home Loan Bank systems. The required investment in such stock is based on a predetermined formula.

Loans

     Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Unearned income includes deferred loan origination fees net of deferred direct incremental loan origination costs. Unearned income is amortized to interest income, over the contractual life of the loan, using the interest method. Net deferred loan origination fees or costs are amortized to interest income, over the contractual life of the loan, using the interest method.

     Held for sale loans are carried at the lower of amortized cost or estimated fair value, determined on an aggregate basis for each type of loan available for sale. Net unrealized losses are recognized by charges to income. Gains and losses on loan sales are recorded in noninterest income.

     Loans are generally placed on nonaccrual status (1) when they are 90 days past due for interest or principal, (2) when the full and timely collection of interest or principal becomes uncertain or (3) when part of the principal balance has been charged off. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed to interest income. Generally, a loan is returned to accrual status (a) when all delinquent interest and principal becomes current under the terms of the loan agreement, or (b) when the loan is both well-secured and in the process of collection and collectibility is no longer doubtful.

     A loan is considered impaired, based on current information and events, if it is probable that the Bank will not be able to collect the amounts due according to the loan contract, including scheduled interest payments. The measurement of impaired loans is generally based on the present value of the expected future cash flows discounted at 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 investment in the loan, an impairment allowance is established for the difference.

Allowance for Loan Losses

     The allowance for loan losses is management’s estimate of credit losses inherent in the loan portfolio at the balance sheet date. Management’s determination of the allowance, and the resulting provision, is based on judgments and assumptions, including (1) general economic conditions, (2) loan

8

portfolio composition, (3) loan loss experience, (4) management’s evaluation of credit risk relating to pools of loans and individual borrowers, (5) sensitivity analysis and expected loss models, (6) value of underlying collateral, and (7) observations of internal loan review staff or banking regulators.

     The provision for loan losses is determined based on management’s evaluation of the loan portfolio and the adequacy of the allowance or loan losses under current economic conditions and such other factors which, in management’s judgment, deserve current recognition. In addition, various regulatory agencies, as an integral part of their examination process, periodically review the Corporation’s allowance for loan losses. Such agencies may require the Corporation to recognize additions to the allowance for loan losses based on their judgments about information available to them at the time of their examinations.

Bank Premises and Equipment

     Bank premises and equipment are stated at cost less accumulated depreciation and amortization. Depreciation and amortization are computed generally on the straight-line method over the estimated useful lives of the assets. Upon the sale or other disposition of assets, the cost and related accumulated depreciation are retired and the resulting gain or loss is recognized. Maintenance and repairs are charged to expense as incurred, while renewals and improvements are capitalized. Software costs related to externally developed systems are capitalized at cost less accumulated amortization. Amortization is computed on the straight-line method over the estimated useful life.

Goodwill and Core Deposit Intangibles

     Intangible assets arise from acquisitions and include goodwill and core deposit intangibles. Goodwill is the excess of purchase price over the fair value of identified net assets in acquisitions. Core deposit intangibles represent the value of depositor relationships purchased. The Corporation follows Statement of Financial Accounting Standards (SFAS) No. 142, “Goodwill and Other Intangible Assets” and SFAS No. 147 “Acquisitions of Certain Financial Institutions”. Goodwill is not amortized, but rather is tested at least annually for impairment. Core deposit intangible assets which have finite lives continue to be amortized using an accelerated method over ten years and are subject to annual impairment testing.

Income Taxes

     The Corporation and its wholly-owned subsidiaries file a consolidated Federal income tax return. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be removed or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Comprehensive Income

     The Corporation displays the accumulated balance of other comprehensive income as a separate component of shareholders’ equity.

9

Stock-Based Compensation

     The Corporation does not have a broad based stock option incentive plan. At September 30, 2005 it did, however, have stock option agreements with three individuals. SFAS 123 has been adopted for the disclosure of these three agreements. Proforma net income, assuming the expensing of the fair value of these options, is disclosed in Note 7.

Reclassifications

     Certain amounts for 2004 have been reclassified to conform to the 2005 presentation.

2. New Accounting Pronouncements

SFAS No. 123(revised) “Share Based Payments”

     In December 2004, the FASB issued Statement No. 123 (revised December 2004), “Share Based Payment” (“SFAS 123R”), which replaces SFAS 123 and supersedes APB Opinion 25. SFAS 123R is effective for all stock-based awards granted on or after July 1, 2005. SFAS 123R requires all share-based payments to employees, including grants of employee stock options, to be valued at fair value on the date of the grant and to be expensed over the applicable vesting period. Pro forma disclosure of the income statement effects of share-based payments is no longer an alternative. In addition, companies must recognize compensation expense related to any stock-based awards that are not fully vested as of the effective date. Compensation expense for the unvested awards will be measured based on the fair value of the awards previously calculated in developing the pro forma disclosures in accordance with the provision of SFAS No. 123. The implementation of SFAS 123R has been deferred until January 1, 2006. Management believes that the proforma information provided previously under “Stock-Based Compensation” provides a reasonable estimate of the projected impact of adopting SFAS 123R on the Corporation’s results of operations.

AICPA Statement of Position (SOP) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer”

     In December 2003, the ASCAP’s Accounting Standard Executive Committee issued Statement of Position (“SOP”) 03-3, “Accounting for Certain Loans or Debt Securities Acquired in a Transfer,” (“SOP 03-3”). SOP 03-3 addresses accounting for differences between contractual cash flows and cash flows expected to be collected from an investor’s initial investment in loans or debt securities acquired in a transfer if those differences are attributable, at least in part, to credit quality. The provisions of this SOP are effective for loans acquired in fiscal years beginning after December 15, 2004. The Corporation adopted the requirements of SOP 03-3 on January 1, 2005, and the adoption did not have a material impact on the results of operations, financial position, or liquidity.

EITF No 03-01 “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments”

     In March 2004, the FASB ratified the consensus reached by the Emerging Issues Task Force in Issue 03-01, “The Meaning of Other-Than-Temporary Impairment and Its Application to Certain Investments” (“EITF 03-01”). EITF 03-01 provides guidance for determining when an investment is considered impaired, whether impairment is other-than-temporary, and measurement of an impairment loss. An investment is considered impaired if the fair value of the investment is less than its cost. Generally, an impairment is considered other-than-temporary unless the investor has the ability and intent to hold the investment for a reasonable period of time sufficient for the forecasted recovery of fair value up to (or beyond) the cost of the investment, and evidence indicating that the cost of the investment is recoverable within a reasonable period of time outweighs evidence to the contrary. If impairment is determined to be other-than-temporary, then an impairment loss should be recognized

10

through earnings equal to the difference between the investment’s cost and its fair value. In September 2004, the FASB delayed the accounting requirements of EITF 03-01 until additional implementation guidance is issued and goes into effect. In June 2005, the FASB decided not to provide additional guidance on the meaning of other than temporary impairment and to issue proposed FSP EITF 03-1-a as final. Until new guidance is issued, companies must continue to comply with the disclosure requirements of EITF 03-1 and all relevant measurement and recognition requirements in other accounting literature.

SFAS No. 154 “Accounting Changes and Error Corrections”

     This Statement replaces APB Opinion No. 20, Accounting Changes, and FASB Statement No. 3, Reporting Accounting Changes in Interim Financial Statements, and changes the requirements for the accounting for and reporting of a change in accounting principle. This Statement applies to all voluntary changes in accounting principle. It also applies to changes required by an accounting pronouncement in the unusual instance that the pronouncement does not include specific transition provisions. When a pronouncement includes specific transition provisions, those provisions should be followed. This applies to accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The Corporation does not expect that the adoption of SFAS No. 154 will have a material impact on the Corporation’s results of operations, financial position or liquidity.

3. Earnings Per Share

	For the Three Months				For the Nine Months Ended
	Ended September 30,				September 30,
(Dollars in thousands except share and per share amounts)	2005		2004		2005		2004
Net income available to common shareholders	$	2,157	$	2,074	$	4,580	$	6,310
Weighted average common shares outstanding		6,625,086		6,641,095		6,635,752		6,628,097
Dilutive effect of stock options		82		614		28		1,006
Diluted weighted average common shares outstanding		6,625,168		6,641,709		6,635,780		6,629,103
Basic earnings per common share	$	0.33	$	0.31	$	0.69	$	0.95
Diluted earnings per common share	$	0.33	$	0.31	$	0.69	$	0.95

     The preceding table sets forth the computation of basic earnings, calculated by dividing net income by the weighted-average number of common shares outstanding for the period, and diluted earnings per common share which takes into consideration the pro forma dilution of unexercised stock option awards. Stock options are the only common stock equivalents. For the three and nine month periods ended September 30, 2005, 41,939 options were not included in the computation of diluted earnings per share as they were anti-dilutive.

11

4. Securities

     The amortized cost, gross unrealized gains and losses, and fair values of securities at September 30, 2005 and December 31, 2004 are as follows:

	September 30, 2005
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
Securities available for sale:
U.S. Government agencies and corporations	$	144,011	$	18	$	(3,133	)	$	140,896
State and political subdivisions		11,173		265		(19	)		11,419
Equity securities		45		75		—			120
Federal Home Loan Bank and Federal Reserve Bank stock		4,187		—		—			4,187
Total securities	$	159,416	$	358	$	(3,152	)	$	156,622

	December 31, 2004
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
Securities available for sale:
U.S. Government agencies and corporations	$	131,789	$	168	$	(2,080	)	$	129,877
State and political subdivisions		11,148		349		(8	)		11,489
Equity securities		3,938		284		—			4,222
Federal Home Loan Bank and Federal Reserve Bank stock		4,033		—		—			4,033
Total securities	$	150,908	$	801	$	(2,088	)	$	149,621

     At September 30, 2005, the Corporation’s security portfolio had unrealized losses of $3,152 as compared to $2,088 at December 31, 2004. Management considers these declines to be temporary as current levels of interest rates as compared to the coupons on the securities held by the Corporation are different and impairment is not due to credit deterioration. The Corporation had the ability and intent to hold these securities until their value recovers. The following is a summary of the securities that had unrealized losses at September 30, 2005. The information is presented for securities that have been valued at less than amortized cost for less than 12 months and for more than 12 months.

	Less than 12 months					12 months or longer					Total
	Fair		Unrealized			Fair		Unrealized			Fair		Unrealized
(Dollars in thousands)	Value		Losses			Value		Losses			Value		Losses
U.S. Government agencies and corporations	$	39,275	$	(452	)	$	98,167	$	(2,681	)	$	137,442	$	(3,133	)
State and political subdivisions		2,307		(5	)		653		(14	)		2,960		(19	)
Total	$	41,582	$	(457	)	$	98,820	$	(2,695	)	$	140,402	$	(3,152	)

5. Loans

     Loan balances at September 30, 2005 and December 31, 2004 are summarized as follows:

(Dollars in thousands)	September 30, 2005			December 31, 2004
Commercial	$	369,695		$	339,439
Real Estate Mortgage		82,424			112,787
Installment		37,413			33,682
Purchased Installment		42,078			27,173
Home Equity Lines		66,539			62,143
Total loans		598,149			575,224
Allowance for loan losses		(7,890	)		(7,386	)
Net loans	$	590,259		$	567,838

     Nonaccrual and impaired loans at September 30, 2005 were $7.6 million and $11.1 million, respectively, as compared to $4.9 million and $6.0 million at December 31, 2004, respectively. The difference between the nonaccrual and impaired loans at September 30, 2005 is represented by three commercial loan relationships that are current and are still accruing interest; however management

12

believes that it is not probable that all amounts owed pursuant to such loans will be repaid as agreed, based on all currently available information.

6. Retirement Pension Plan

     The Corporation’s non-contributory defined benefit pension plan (the “Plan”) covers substantially all of its employees. In general, benefits are based on years of service and the employee’s level of compensation. The Corporation’s funding policy is to contribute annually an actuarially determined amount to cover current service cost plus amortization of prior service costs.

     The net periodic pension costs charged to expense amounted to $24 and $18 in the three month periods ended September 30, 2005 and 2004, respectively, and $74 and $56 in the nine month periods ended September 30, 2005 and 2004, respectively. The following table sets forth the net periodic pension and total pension expense for the three and nine month periods ended September 30, 2005 and 2004. Effective December 31, 2002, the benefits under the Plan were frozen and no additional benefits have accrued under the Plan since December 31, 2002.

	For the Three Months						For the Nine Months
	Ended September 30						Ended September 30
(Dollars in thousands)	2005			2004			2005			2004
Interest cost on projected benefit obligation		112			112			338			338
Expected return on plan assets		(88	)		(94	)		(264	)		(282	)
Amortization of unrecognized prior service liability		—			—			—			—
Recognized actuarial (gain) or loss		—			—			—			—
Net periodic pension cost	$	24		$	18		$	74		$	56
Loss recognized due to curtailment		—			—			—			—
Loss recognized due to settlement		—			—			—			—
Total pension cost	$	24		$	18		$	74		$	56
Weighted-Average Assumptions		2005			2004			2005			2004
Discount rate		5.75	%		5.75	%		5.75	%		5.75	%
Expected long-term return on plan assets		7.50	%		5.00	%		7.50	%		5.00	%
Rate of compensation increase		0.00	%		0.00	%		0.00	%		0.00	%

7. Stock Option Plans

     At December 31, 2004, all options that could be issued under the Corporation’s qualified incentive stock option plans had been issued or had expired. At September 30, 2005, the Corporation had nonqualified stock option agreements with three individuals. These option agreements are summarized as follows:

Year Issued	Number of Options		Strike Price		Vested
2000		11,939	$	18.85		11,939
2005		30,000		19.17		0
2005		2,500		16.50		0
Totals		44,439	$	19.03		11,939

     All options have a 10 year contractual life. The 2000 award was fully vested at September 30, 2005. The vesting schedule for the 30,000 share award in 2005 is in 10,000 share increments at the first, second and third anniversaries of the date of the grant. The 2,500 share award in 2005 fully vests at the first anniversary of the date of the grant.

13

     In accordance with the disclosure requirements of Statement of Financial Accounting Standard, or SFAS, No. 123, “Accounting for Stock-Based Compensation”, as amended by SFAS No. 148, “Accounting for Stock-Based Compensation – Transition and Disclosure – An amendment of FASB Statement No. 123,” the following table provides the pro forma effect on net income and earnings per share if the fair value method of accounting for stock-based compensation had been used for all awards:

	For the Three Months						For the Nine Months
	Ended September 30,						Ended Septemebr 30,
(Dollars in thousands, except per share amounts)	2005			2004			2005			2004
Net Income, as reported	$	2,157		$	2,074		$	4,580		$	6,310
Add: Stock-based compensation, net of tax, as reported		—			—			62			—
Deduct: Stock-based compensation, net of tax, that would have been reported if the fair value based method had been applied to all awards		(18	)		(19	)		(106	)		(19	)
Pro forma net income available to common shareholders	$	2,139		$	2,055		$	4,536		$	6,291
Pro forma net income per share:
Basic — as reported	$	0.33		$	0.31		$	0.69		$	0.95
Basic — pro forma		0.32			0.31			0.68			0.95
Diluted — as reported		0.33			0.31			0.69			0.95
Diluted — pro forma		0.32			0.31			0.68			0.95

8. Interest-Bearing Deposits

     Interest-bearing deposits at September 30, 2005 and December 31, 2004 were as follows:

	September 30,		December 31,
(Dollars in thousands)	2005		2004
Interest-bearing demand	$	79,683	$	82,672
Savings		98,945		104,309
Money market		89,487		93,188
Time:
Retail certificates of deposit		187,864		167,192
Brokered certificates of deposits		57,944		22,824
Public fund certificates of deposit		45,280		39,078
Total time deposits		291,088		229,094
Total Interest-bearing deposits	$	559,203	$	509,263

     At September 30, 2005 and December 31, 2004, time deposits in amounts $100,000 or more totaled $138.5 million and $89.8 million, respectively.

9. Short-Term Borrowings

     Short-term borrowings at September 30, 2005 and December 31, 2004 consisted of the following:

	September 30,		December 31,
(Dollars in thousands)	2005		2004
Securities sold under agreements to repurchase	$	13,277	$	11,619
Federal funds purchased		7,000		20,000
Total Short-term borrowings	$	20,277	$	31,619

14

10. Federal Home Loan Bank Advances

     FHLB advances at September 30, 2005 and December 31, 2004 consisted of the following:

	September 30,		December 31,
(Dollars in thousands)	2005		2004
FHLB advance - 4.61%, repaid in 2005	$	—	$	2,230
FHLB advance - 4.40%, repaid in 2005		—		1,500
FHLB advance - 4.36%, repaid in 2005		—		2,100
FHLB advance - 4.44%, repaid in 2005		—		1,000
FHLB advance - 2.06%, repaid in 2005		—		16,000
FHLB advance - 2.21%, repaid in 2005		—		360
FHLB advance - 2.87%, repaid in 2005		—		5,000
FHLB advance - 3.75%, due October 20, 2005		15,000		—
FHLB advance - 3.94%, due October 20, 2005		5,000		—
FHLB advance - 4.92%, due April 28, 2006		1,000		1,000
FHLB advance - 2.70%, due June 19, 2006		10,000		10,000
FHLB advance - 2.95%, due January 30, 2007		10,000		10,000
FHLB advance - 3.55%, due November 21, 2007		5,000		5,000
FHLB advance - 3.33%, due February 8, 2008		5,000		5,000
FHLB advance - 3.36%, due March 27, 2009		10,000		10,000
FHLB advance - 3.55%, due January 1, 2014		99		106
Total FHLB advances	$	61,099	$	69,296

11. Commitments, Credit Risk, and Contingencies

     In the normal course of business, the Bank enters into commitments with off-balance sheet risk to meet the financing needs of its customers. These instruments are currently limited to commitments to extend credit and standby letters of credit. Commitments to extend credit involve elements of credit risk and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Bank’s exposure to credit loss in the event of nonperformance by the other party to the commitment is represented by the contractual amount of the commitment. The Bank uses the same credit policies in making commitments as it does for on-balance sheet instruments. Interest rate risk on commitments to extend credit results from the possibility that interest rates may have moved unfavorably from the position of the Bank since the time the commitment was made.

     Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates of 30 to 120 days or other termination clauses and may require payment of a fee. Since some of the commitments may expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements.

     The Bank evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained by the Bank upon extension of credit is based on management’s credit evaluation of the applicant. Collateral held is generally single-family residential real estate and commercial real estate. Substantially all of the obligations to extend credit are variable rate commitments except for commitments to sell mortgages which are fixed rate commitments.

     Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Standby letters of credit generally are contingent upon the failure of the customer to perform according to the terms of the underlying contract with the third party.

15

     Most of the Bank’s business activity is with customers located within the Bank’s defined market area. As of September 30, 2005 and December 31, 2004, the Bank had no significant concentrations of credit risk in its loan portfolio. The Bank also had no exposure to highly leveraged transactions and no foreign credits in its loan portfolio.

     The nature of the Corporation’s business may result in litigation. Management, after reviewing with counsel all actions and proceedings pending against or involving the Corporation and its subsidiaries, expects that the aggregate liability or loss, if any, resulting from such actions and proceedings will not have a material effect on the Corporation’s financial position, results of operation or liquidity.

ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FINANCIAL REVIEW

     LNB Bancorp, Inc. (the “Corporation”) is a financial holding company headquartered in Lorain, Ohio, which derives substantially all of its revenue from its subsidiary, Lorain National Bank (the “Bank”). The Corporation provides a range of products and services to commercial customers and the community, and currently operates 20 banking centers throughout Lorain, eastern Erie and western Cuyahoga counties in Ohio.

     This financial review section discusses the financial condition and results of operations of the Corporation for the three and nine months ended September 30, 2005. This financial review should be read in conjunction with the financial information contained in the Corporation’s Form 10-K for the fiscal year ended December 31, 2004, and in the consolidated financial statements and notes contained in this Form 10-Q.

     This Form 10-Q contains forward-looking statements within the meaning of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995. Terms such as “will,” “should,” “plan,” “intend,” “expect,” “continue,” “believe,” “anticipate” and “seek,” as well as similar comments, are forward-looking in nature. Actual results and events may differ materially from those expressed or anticipated as a result of risks and uncertainties which include but are not limited to: significant increases in competitive pressure in the banking and financial services industries; changes in the interest rate environment which could reduce anticipated or actual margins; changes in political conditions or the legislative or regulatory environment; general economic conditions, either nationally or regionally (especially in northeastern Ohio), becoming less favorable than expected resulting in, among other things, a deterioration in credit quality of assets; changes occurring in business conditions and inflation; changes in technology; changes in monetary and tax policies; changes in the securities markets; changes in economic conditions and competition in the geographic and business areas in which the Corporation conducts its operations; as well as the risks and uncertainties described from time to time in the Corporation’s reports as filed with the Securities and Exchange Commission. We undertake no obligation to review or update any forward-looking statements, whether as a result of new information, future events or otherwise.

Critical Accounting Policy and Estimates

     The Corporation’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. It follows general practices within the banking industry and application of these principles requires management to make assumptions, estimates and judgments that affect the financial statements and accompanying notes. These

16

assumptions, estimates and judgments are based on information available as of the date of the financial statements.

     The most significant accounting policies followed by the Corporation are presented in Note 1 of the Consolidated Financial Statements. These policies are fundamental to the understanding of results of operation and financial conditions. The accounting policies considered to be critical by management are as follows:

Allowance for loan losses

     The allowance for loan losses is an amount that management believes will be adequate to absorb probable credit losses inherent in the loan portfolio, taking into consideration such factors as past loss experience, changes in the nature and volume of the portfolio, overall portfolio quality, loan concentrations, specific problem loans, and current economic conditions that affect the borrower’s ability to pay. Determination of the allowance is subjective in nature. Loan losses are charged off against the allowance when management believes that the full collectability of the loan is unlikely. Recoveries of amounts previously charged-off are credited to the allowance.

     A loan is considered impaired when it is probable that not all principal and interest amounts will be collected according to the loan contract. Residential mortgage, installment and other consumer loans are evaluated collectively for impairment. Individual commercial loans exceeding size thresholds established by management are evaluated for impairment. Impaired loans are recorded at the loan’s fair value by the establishment of a specific allowance where necessary. The fair value of all loans currently evaluated for impairment are collateral-dependent and therefore the fair value is determined by the fair value of the underlying collateral.

     The Corporation maintains the allowance for loan losses at a level adequate to absorb management’s estimate of probable credit losses inherent in the loan portfolio. The allowance is comprised of a general allowance, a specific allowance for identified problem loans and an unallocated allowance representing estimations done pursuant to either Standard of Financial Accounting Standards (SFAS) No. 5 “Accounting for Contingencies,” or SFAS No. 114, “Accounting by Creditors for Impairment of a Loan.”

     The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. For commercial and commercial real estate loans, loss factors are applied based on internal risk grades of these loans. Many factors are considered when these grades are assigned to individual loans such as current and past delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. For residential real estate, consumer and other loans, loss factors are applied on a portfolio basis. Loss factors are based on the Corporation’s historical loss experience and are reviewed for appropriateness on a quarterly basis, along with other factors affecting the collectibility of the loan portfolio.

     Specific allowances are established for all classified loans when management has determined that, due to identified significant conditions, it is probable that a loss has been incurred that exceeds the general allowance loss factor for those loans. The unallocated allowance recognizes the estimation risk associated with the allocated general and specific allowances and incorporates management’s evaluation of existing conditions that are not included in the allocated allowance determinations. These conditions are reviewed quarterly by management and include general economic conditions, credit quality trends and internal loan review and regulatory examination findings.

     Management believes that it uses the best information available to determine the adequacy of the allowance for loan losses. However, future adjustments to the allowance may be necessary and the

17

results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations

Pension accounting

     Four key variables are used for calculating the annual pension cost (1) size of employee population, (2) actuarial assumptions, (3) expected long-term rate of return on plan assets and (4) discount rate. The rate of future compensation increases is not a key variable since the plan was frozen at December 31, 2002. The effect of each of the variables on the pension expense is described below.

     Size of employee population has stayed relatively constant over the last few years, thereby causing pension cost relating to this variable to remain relatively stable.

     Actuarial assumptions are required for mortality rate, turnover rate, retirement rate, disability rate and the rate of compensation increases. These factors do not change over time, so the range of assumptions and their impact on pension expense is generally narrow.

     Expected long-term rate of return on plan assets are based on the balance in the pension asset portfolio at the beginning of the plan year and the expected long-term rate of return on that portfolio. The expected long-term rate of return is designed to approximate the actual long term rate of return on plan assets over time. The expected long-term rate of return generally is held constant so the pattern of income/expense recognition more closely matches the stable pattern of services provided by the employees over the life of pension obligation. In 2005 the expected long term rate of return on plan assets is 7.50%.

     A discount rate is used to determine the present value of the future benefit obligations. It reflects the rates available on long-term high quality fixed income debt instruments, reset annually on the measurement date. The discount rate being used in 2005 is 5.75%

Goodwill Impairment

     The Corporation maintains a balance of $2.8 million of goodwill recognized in connection with the 1997 acquisition of bank branches. Goodwill is tested annually for impairment, or whenever events or circumstances evidence that the carrying value may not be recoverable. Most recently the Corporation tested the goodwill recorded in connection with the acquisition of LNB Mortgage, LLC for impairment at May 31, 2005. Management determined that due to several factors the goodwill from the acquisition of LNB Mortgage, LLC was impaired and as a consequence incurred an impairment loss of $311,000 during the second quarter of 2005. These factors included an accumulation of losses since the purchase of LNB Mortgage, significant and unexpected operating expenses, changes in the business environment, changes in management and volume significantly below that which the company would breakeven from operations.

Income Taxes

     The Corporation’s income tax expense and related current and deferred tax assets and liabilities are presented as prescribed in SFAS No. 109 “Accounting for Income Taxes.” SFAS 109 requires the periodic review and adjustment of tax assets and liabilities based on many assumptions. These assumptions include predictions as to the Corporation’s future profitability, as well as potential changes in tax laws that could impact the deductibility of certain income and expense items. Since financial results could be significantly different than these estimates, future adjustments may be necessary to tax expense and related balance sheet accounts.

18

Introduction

     The Corporation earned 33 cents per diluted share in the third quarter of 2005, up 6.5% from 31 cents per diluted share earned in the third quarter of 2004. Net income for the third quarter of 2005 was $2,157,000, up 4.0% as compared to third quarter 2004 net income of $2,074,000. For the first nine months of 2005, the Corporation earned 69 cents per diluted share, down 27.4% from 95 cents per diluted share earned in the same period of 2004. Net income for the first nine months of 2005 was $4,580,000, down 27.4% compared to $6,310,000 for the same period of 2004.

     For the third quarter of 2005, return on average assets was 1.06%, compared to 1.09% for the third quarter of 2004. Return on average equity for the third quarter of 2005 was 12.09%, compared to 11.87% for the third quarter of 2004.

     For the first nine months of 2005, return on average assets was .77%, compared to 1.12% for the same period in 2004. Return on average equity for the first nine months of 2005 was 8.66%, compared to 12.22% for the same period in 2004.

     In the third quarter of 2005, the Corporation reestablished a 1-4 family portfolio loan program in the Bank. For the past year, all new mortgage loan activity was recorded in the Bank’s subsidiary LNB Mortgage, LLC. The revenue was recognized in noninterest income. Starting in the fourth quarter of 2005, the revenue from mortgage lending will be a combination of revenue recorded as interest income on the loans maintained for portfolio, and potentially gains on the sale of loans that are sold in the secondary market. For comparison purposes in future periods, noninterest income will be impacted by a lower level of mortgage loan revenue.

Results of Operations

Net Interest Income

     Net interest income is the difference between interest income earned on interest-earning assets and the interest expense paid on interest-bearing liabilities. Net interest income is the Corporation’s principal source of revenue, accounting for 74% and 73% of revenues for the three months and nine months ended September 30, 2005, respectively. The amount of net interest income is affected by changes in the volume and mix of earning assets and interest-bearing liabilities, the level of rates earned or paid on those assets and liabilities and the amount of loan fees earned. Throughout this discussion, net interest income is presented on both a GAAP basis and a fully taxable equivalent (FTE) basis, the latter of which presents interest on tax-exempt securities and loans as if such interest was subject to federal income tax at the statutory rate of 35%. Net interest income is affected by changes in the volumes, rates and composition of interest-earning assets and interest-bearing liabilities. The net interest margin is net interest income as a percentage of average earning assets.

   Three Months Ended September 30, 2005 as compared to the Three Months Ended September 30, 2004

     Net interest income was $7,470,000 during the third quarter of 2005 as compared to $7,033,000 during the same quarter in 2004. This is an increase of $437,000, or 6.2%. With an adjustment for tax-exempt income, consolidated net interest income for the third quarter of 2005 was $7,519,000 as compared to $7,080,000 during the same quarter a year ago. Net interest income increased in the current fiscal period due to increases in short-term interest rates and average earning asset growth.

     The net interest margin (FTE), which is determined by dividing taxable equivalent net interest income by average earning assets, was 3.97% during the third quarter of 2005 as compared to 3.95% during the third quarter 2004. The net interest margin has benefited from increasing short-term interest

19

rates over the last twelve months. There was pressure on the net interest margin in the third quarter of 2005 due to competitive loan and deposit pricing and, to a lesser extent, the flat yield curve. This is evident in the comparison of the third quarter 2005 net interest margin of 3.97% as compared to the second quarter 2005 margin of 4.17%. This pressure is expected to continue.

     The net interest spread decreased 7 basis points in the current quarter, as the yield on interest-earning assets increased 65 basis points to 5.89% during the third quarter of 2005 from 5.24% during the same quarter in 2004. The cost of interest-bearing liabilities increased by 72 basis points to 2.26% during the third quarter of 2005 as compared to 1.54% during the third quarter of 2004.

     The rise in short-term interest rates resulted in a 200 basis point increase in the Corporation’s prime lending rate in the last twelve months. This produced an increase in both the yield on earning assets and the cost of interest-bearing liabilities. The yield earned on loans was 6.53% during the third quarter of 2005, or 67 basis points higher, as compared to 5.86% during the third quarter a year ago.

Average Balances

     Average earning assets increased $37.7 million, or 5.3%, to $751.3 million for the third quarter of 2005 as compared to $713.5 million for the third quarter 2004. Average loans increased $33.7 million, or 6.1%, to $589.7 million during the third quarter 2005 as compared to $556.0 million for the third quarter 2004. The increase of $33.7 million is due primarily to an increase in the commercial loan portfolio of $35.0 million, an increase in home equity loans of $4.9 million and an increase of $20.5 million in purchased installment loans. Partially offsetting this growth was runoff of residential real estate mortgages, direct and indirect installment loans. The runoff in these three loan types is expected to moderate in the fourth quarter. The Corporation has established several real estate loan products for the portfolio that are expected to reverse the runoff in the residential real estate portfolio. The runoff in direct and indirect lending has slowed with renewed sales efforts. This increase in average loans was primarily funded with deposit growth. Noninterest-bearing deposit growth was $3.3 million, or 3.7%, and interest-bearing deposits grew $62.2 million, or 12.5% as compared to the third quarter of 2004. The interest-bearing deposit growth was composed primarily of interest checking growth of $1.1 million, or 1.4%, retail time deposits growth of $17.8 million, or 10.9%, and broker and public time deposit growth of $50.8 million, or 94.0%. The growth in broker and public time deposits offset $23.7 million in repaid FHLB advances and was used to fund commercial loans.

     Net interest income (FTE) increased $439,000 for the three month period ended September 30, 2005 as compared to the same period last year. Total interest income (FTE) increased $1,754,000, with 70.9% of this increase due to increases in interest rates. Rising rates impact the commercial and home equity loan portfolios quickly since those loans are predominately prime rate based. The securities portfolio and the purchased loan portfolio also had positive rate variances. These portfolios have relatively short durations which means that they also react to rate changes quickly. Total interest expense increased $1,315,000, with 62.2% of this increase due to rate changes. Rate variances were relatively modest on interest-bearing demand and savings deposits. These are products that traditionally are not rate sensitive. The largest rate variances were in money market accounts, retail time deposits, public fund time deposits and short-term borrowings. In these cases the Corporation was either running rate promotions, or the product is by nature rate sensitive.

   Nine Months Ended September 30, 2005 as compared to the Nine Months Ended September 30, 2004

     Net interest income was $22,359,000 during the first nine months of 2005 as compared to $20,730,000 during the same period in 2004, an increase of $1,629,000, or 7.9%. With an adjustment for

20

tax-exempt income, our consolidated net interest income for the first nine months of 2005 was $22,512,000 as compared to $20,904,000 during the same period a year ago. Net interest income increased during the current fiscal period due to increases in short-term rates and earning asset growth.

     The net interest margin, which is determined by dividing tax equivalent net interest income by average earning assets, was 4.09% during the first nine months of 2005 as compared to 3.96% during the same period a year ago. Net interest margin has benefited from increasing market interest rates that began in 2004, as well as growth in average earnings assets. The net interest spread increased 4 basis points, as the yield on interest-earning assets increased 57 basis points to 5.78% during the first nine months of 2005 from 5.21% during the same period in 2004. The cost of interest-bearing liabilities increased by 53 basis points to 2.02% during the first nine months of 2005 as compared to 1.49% during the same period of 2004.

     The rise in short-term interest rates, triggering a 200 basis point increase in the Corporation’s prime lending rate in the last 12 months, produced an increase in both the yield on earning assets and the cost of interest-bearing liabilities. The yield earned on loans was 6.41% during the first nine months of 2005, or 57 basis points higher, as compared to 5.84% during the same period a year ago.

Average Balances

     Average earning assets increased $31.6 million, or 4.5%, to $736.3 million for the first nine months of 2005 as compared to $704.7 million for the same period of 2004. Average loans increased $35.4 million, or 6.5%, to $580.5 million during the first nine months of 2005 as compared to $545.1 million for the comparable period in 2004. The increase of $35.4 million is due to an increase in the commercial loan portfolio of $39.6 million, an increase in home equity loans of $4.1 million and an increase of $18.5 million in purchased installment loans. Partially offsetting this growth was runoff of residential real estate mortgages, direct and indirect installment loans. The runoff in these three loan types is expected to moderate in the fourth quarter. The Corporation has established several real estate loan products for the portfolio that are expected to reverse the runoff in the residential real estate portfolio. The runoff in direct and indirect lending has slowed with renewed sales efforts. This increase in average loans was primarily funded with runoff of $4.7 million in the Bank’s security portfolio and growth in deposits. Noninterest-bearing deposit growth was $5.5 million, or 6.1%, and interest-bearing deposits grew $43.8 million, or 8.9%. The interest-bearing deposit growth was composed primarily of interest checking growth of $2.6 million, or 3.2%, retail time deposits growth of $10.9 million, or 6.6%, and broker and public time deposit growth of $34.7 million, or 68.5%.

     Net interest income (FTE) increased $1,608,000 for the nine month period ended September 30, 2005 as compared to the same period last year. Total interest income (FTE) increased $4,349,000, with 75.6% of this increase due to rates. Rising rates impact the commercial and home equity loan portfolios quickly since they are predominately prime rate based. The securities portfolio and the purchased loan portfolio also had positive rate variances. These portfolios have relatively short durations which results in a rapid reaction when rates change. Mortgage loans experienced a negative rate variance. At September 30, 2005, this $89.4 million portfolio of primarily seasoned 5 year adjustable rate mortgages is declining and has been repricing into a rate environment lower than the last reset period. Total interest expense increased $2,741,000, with 76.1% of this increase due to rate. Rate variances were relatively modest on interest-bearing demand and savings. These products are not traditionally rate sensitive. The largest rate variances were in money market accounts, retail time deposits, public fund time deposits and short-term borrowings. In these cases the Corporation was either running rate promotions in 2005, or the product is by nature rate sensitive.

     The assets and liabilities on the Corporation’s balance sheet are rate sensitive. Currently more of the Corporation’s assets are expected to re-price before its liabilities in the next twelve month period.

21

This means that the Corporation’s balance sheet structure is positioned to experience improved net interest margin performance as interest rates rise. Conversely, the Corporation’s net interest margin will compress if interest rates drop. The Corporation’s interest rate risk is further discussed below in the section of the discussion and analysis entitled “Quantitative and Qualitative Disclosure About Market Risks”.

 Tax Equivalent Adjustments to Yields and Margins

     Management reviews and evaluates the components of the net interest income. As such, management attempts to manage balance sheet growth as well as the yields on interest earning assets and the cost of interest-bearing liabilities in order to enhance the growth of net interest margin. In doing so, management reviews net interest income on a fully taxable equivalent basis, which contains certain non-GAAP financial measures. The non-GAAP measures adjust the interest income components and adjust for tax-exempt interest income on an equivalent pre-tax basis assuming a 35% effective tax rate, which may differ from the Corporation’s actual effective tax rate. Management feels that reviewing the net interest income components on a fully taxable equivalent basis provides a more complete comparison for net interest income.

     Tables 1 and 2 reflect the detailed components of the Corporation’s net interest income for the three month periods ended September 30, 2005 and 2004 as well as the nine month periods ended September 30, 2005 and 2004. The rates are computed on a tax equivalent basis and non-accrual loans are included in the average loan balances. Also presented for the periods indicated is a summary of the changes in interest earned and interest paid resulting from changes in volume and rates for the major components of interest-earning assets and interest-bearing liabilities on a fully taxable equivalent basis. The impact of changes in the mix of interest-earning assets and interest-bearing liabilities that is not specifically attributable to changes in volume or rates is allocated proportionately to rate and volume in this presentation.

22

Table 1: Condensed Consolidated Average Balance Sheets — Interest, Rate, and Rate/ Volume differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

	For the Three Months Ended September 30,
	2005									2004
	Average									Average
(Dollars in thousands)	Balance			Interest			Rate			Balance			Interest			Rate
Assets:
Securities-taxable	$	145,451		$	1,238			3.38	%	$	147,269		$	1,039			2.81	%
Securities-tax exempt		11,521			156			5.37	%		9,351			148			6.30	%
Federal funds sold and short-term investments		4,598			38			3.28	%		902			6			2.65	%
Commercial loans		361,000			6,235			6.85	%		326,000			4,782			5.84	%
Real estate mortgage loans		84,359			1,309			6.16	%		103,442			1,689			6.50	%
Installment loans		37,167			621			6.63	%		44,763			870			7.73	%
Purchased installment loans		41,128			479			4.62	%		20,670			185			3.56	%
Home equity lines		66,030			1,068			6.42	%		61,151			671			4.37	%
Total Earning Assets	$	751,254		$	11,144			5.89	%	$	713,548		$	9,390			5.24	%
Allowance for loan loss		(7,928	)								(8,128	)
Cash and due from banks		24,287									24,797
Bank owned life insurance		13,721									12,953
Other assets		23,463									14,142
Total Assets	$	804,797								$	757,782
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	82,970		$	64			0.31	%	$	81,846		$	39			0.19	%
Savings deposits		100,680			87			0.34	%		106,241			79			0.30	%
Money market deposits		91,261			461			2.00	%		93,232			263			1.12	%
Retail certificates of deposit		181,242			1,467			3.21	%		163,459			1,086			2.64	%
Brokered certificates of deposit		42,108			378			3.56	%		3,175			33			4.13	%
Public fund certificates of deposit		62,777			568			3.59	%		50,890			213			1.67	%
Short-term borrowings		22,093			197			3.54	%		18,998			61			1.28	%
FHLB advances		53,590			403			2.98	%		77,331			536			2.76	%
Total Interest -Bearing Liabilities	$	636,721		$	3,625			2.26	%	$	595,172		$	2,310			1.54	%
Noninterest-bearing deposits		91,475									88,222
Other liabilities		5,797									4,889
Shareholders’ Equity		70,804									69,499
Total Liabilities and Shareholders’ equity	$	804,797								$	757,782
Net Interest Income and Margin (FTE)				$	7,519			3.97	%				$	7,080			3.95	%
Taxable equivalent adjustment					(49	)		-0.03	%					(47	)		-0.03	%
Net Interest Income Per Financial Statements				$	7,470								$	7,033
Net Interest Margin								3.94	%								3.92	%

Rate/Volume Analysis of Net Interest Income (FTE)

	For the Three Months Ended September 30,
	Increase (Decrease) in Interest Income/Expense
	2005 and 2004
(Dollars in thousands)	Volume			Rate			Total
Securities-taxable	$	(16	)	$	215		$	199
Securities-tax exempt		93			(85	)		8
Federal funds sold and short-term investments		26			6			32
Commercial loans		574			879			1,453
Real estate mortgage loans		(306	)		(74	)		(380	)
Installment loans		(137	)		(112	)		(249	)
Purchased installment loans		201			93			294
Home equity lines		75			322			397
Total Interest Income	$	510		$	1,244		$	1,754
Interest-bearing demand deposits	$	1		$	24		$	25
Savings deposit		(5	)		13			8
Money market deposits		(10	)		208			198
Retail certificates of deposit		136			245			381
Brokered certificates of deposit		418			(73	)		345
Public fund certificates of deposit		93			262			355
Short-term borrowings		24			112			136
FHLB advances		(160	)		27			(133	)
Total Interest Expense	$	497		$	818		$	1,315
Net Interest Income (FTE)	$	13		$	426		$	439

23

Table 2: Condensed Consolidated Average Balance Sheets — Interest, Rate, and Rate/ Volume
differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

	For the Nine Months Ended September 30,
	2005									2004
	Average									Average
(Dollars in thousands)	Balance			Interest			Rate			Balance			Interest			Rate
Assets:
Securities-taxable	$	139,250		$	3,461			3.32	%	$	144,095		$	3,074			2.85	%
Securities-tax exempt		11,535			486			5.63	%		11,416			549			6.42	%
Federal funds sold and short-term investments		5,100			61			1.60	%		4,180			35			1.12	%
Commercial loans		355,022			17,601			6.63	%		315,469			13,580			5.75	%
Real estate mortgage loans		89,373			4,150			6.21	%		106,890			5,337			6.67	%
Installment loans		38,318			2,115			7.38	%		47,514			2,636			7.41	%
Purchased installment loans		33,588			1,131			4.50	%		15,121			415			3.67	%
Home equity lines		64,160			2,850			5.94	%		60,063			1,880			4.18	%
Total Earning Assets	$	736,346		$	31,855			5.78	%	$	704,748		$	27,506			5.21	%
Allowance for loan loss		(7,722	)								(8,024	)
Cash and due from banks		24,909									24,593
Bank owned life insurance		13,585									12,953
Other assets		23,554									19,999
Total Assets	$	790,672								$	754,269
Liabilities and Shareholders’ Equity
Interest-bearing demand deposits	$	83,566		$	151			0.24	%	$	80,958		$	113			0.19	%
Savings deposits		103,305			246			0.32	%		106,194			241			0.30	%
Money market deposits		91,271			1,160			1.70	%		92,747			714			1.03	%
Retail certificates of deposit		174,777			3,986			3.05	%		163,891			3,273			2.67	%
Brokered certificates of deposit		35,543			880			3.31	%		3,176			63			2.65	%
Public fund certificates of deposit		49,723			1,151			3.09	%		47,440			529			1.49	%
Short-term borrowings		17,437			382			2.93	%		18,980			154			1.08	%
FHLB advances		63,593			1,387			2.92	%		77,485			1,515			2.61	%
Total Interest - Bearing Liabilities	$	619,215		$	9,343			2.02	%	$	590,871		$	6,602			1.49	%
Noninterest-bearing deposits		94,969									89,476
Other liabilities		5,764									4,927
Shareholders’ Equity		70,724									68,995
Total Liabilities and Shareholders’ equity	$	790,672								$	754,269
Net Interest Income and Margin (FTE)				$	22,512			4.09	%				$	20,904			3.96	%
Taxable equivalent adjustment					(153	)		-0.03	%					(174	)		-0.03	%
Net Interest Income Per Financial Statements				$	22,359								$	20,730
Net Interest Margin								4.06	%								3.93	%

Rate/Volume Analysis of Net Interest Income (FTE)

	For the Nine Months Ended September 30,
	Increase (Decrease) in Interest Income/Expense 2005 and
(Dollars in thousands)	2004
	Volume			Rate			Total
Securities-taxable	$	(125	)	$	512		$	387
Securities-tax exempt		5			(68	)		(63	)
Federal funds sold and short-term investments		10			16			26
Commercial loans		1,837			2,184			4,021
Real estate mortgage loans		(861	)		(326	)		(1,187	)
Installment loans		(512	)		(9	)		(521	)
Purchased installment loans		535			181			716
Home equity lines		172			798			970
Total Interest Income	$	1,061		$	3,288		$	4,349
Interest-bearing demand deposits	$	5		$	33		$	38
Savings deposit		(7	)		12			5
Money market deposits		(19	)		465			446
Retail certificates of deposit		236			477			713
Brokered certificates of deposit		670			147			817
Public fund certificates of deposit		51			571			622
Short-term borrowings		(37	)		265			228
FHLB advances		(245	)		117			(128	)
Total Interest Expense	$	654		$	2,087		$	2,741
Net Interest Income (FTE)	$	407		$	1,201		$	1,608

24

Noninterest Income

Table 3: Details on Noninterest Income

	Three Months Ended					For the Nine Months
	September 30,					Ended September 30,
(Dollars in thousands)	2005			2004		2005			2004
Deposit service charges	$	1,152		$	1,131	$	3,112		$	3,146
Trust and investment management services		555			539		1,627			1,611
Mortgage banking revenue		242			108		967			108
Income from investment in life insurance		117			157		426			477
Securities gains, net		—			158		174			381
Gains on sales of loans		—			17		132			100
Gains (losses) on sales of other assets, net		(31	)		285		(32	)		285
Other noninterest income		573			716		1,768			2,494
Total noninterest income	$	2,608		$	3,111	$	8,174		$	8,602

   Three Months Ended September 30, 2005 as compared to the Three Months Ended September 30, 2004

     Noninterest income was $2,608,000 for the third quarter of 2005, a decrease of $503,000 as compared to $3,111,000 for the same period in 2004. In the third quarter of 2004, there was $460,000 of gains on the sale of assets. This was primarily the gain on the sale of the Bank’s old Avon Lake Office, supplemented with gains on the sale of securities and loans. Excluding these items, noninterest income was down $12,000 in the third quarter of 2005 as compared to the same quarter last year. Notwithstanding this decrease, revenue derived from deposit service charges, trust and investment management services and mortgage banking revenue all improved in the quarter as compared to the third quarter of 2004. Deposit service charges improved in the third quarter and were $1,152,000 for the period as compared to $1,131,000 in the same period last year. The growth in these fees is attributable to the growth in the number of noninterest-bearing and interest-bearing checking accounts in recent months. Trust and investment management services were $555,000 for the third quarter 2005 as compared to $539,000 in the same period in 2004. Electronic banking fees such as ATM and debit cards were up 2.4% in the third quarter of 2005 as compared to the same period in 2004. Mortgage banking revenue was up $134,000, to $242,000 in the third quarter of 2005 as compared to the same period in 2004. This increase was the result of three months of revenue from LNB Mortgage, LLC in the third quarter of 2005 as compared to one month of revenue in the same period in 2004. LNB Mortgage, LLC was opened in September 2004. Offsetting these trends were lower merchant fees, which were down $221,000 between the current quarter and the same period last year. Merchant fees are a component of other noninterest income. Merchant services is a line of business that was substantially redesigned by the Corporation in late 2004 resulting in lower risk but also lower merchant fees and related expenses. Also contributing to this result was lower income from investment in life insurance, which was $117,000 in the third quarter of 2005, down from $157,000 or 25.5% from the same period in 2004. This was primarily due to lower crediting rates on the policies which are tied to long-term interest rates. Although short-term interest rates began to increase more than a year ago, these crediting rates have only recently begun to increase.

25

   Nine Months Ended September 30, 2005 as compared to the Nine Months Ended September 30, 2004

     On a year-to-date basis, noninterest income was $8,174,000 in 2005 as compared to $8,602,000 in 2004. Included in the 2004 results was $766,000 of gains on the sale of assets. This included the sale of the Bank’s old Avon Lake office and gains on the sale of securities and loans. Excluding these items, noninterest income for the first three quarters of 2005 increased $64,000 or ..8% over the same period in 2004. Contributing to this improvement was mortgage banking revenue which increased to $967,000 in the first three quarters of 2005, an increase of $859,000 as compared to the same period in 2004. This increase was the result of nine months of revenue from LNB Mortgage, LLC in 2005 as compared to one month of revenue in 2004. LNB Mortgage, LLC was opened in September 2004. Also contributing were modest improvements in trust and investment management fees and ATM and debit card fees. Trust and investment management services were up $16,000 for the first nine months of 2005 to $1,627,000 as compared to $1,611,000 for the same period in 2004. ATM and debit card fees were $556,000, an increase of 6.7% for the first nine months of 2005, as compared to $521,000 in the same period last year. Offsetting much of this improvement was weakness early in the year of deposit service charges and the impact of the changes in merchant processing and the related fees. Deposit service charges for the first nine months of 2005 were $3,112,000 as compared to $3,146,000 for the same period in 2004. This trend began to improve in the third quarter with an increase in the number of new checking accounts. For the nine month period ended September 30, 2005, the largest negative factor was a much lower level of merchant service fees. This is a component of other noninterest income which in the first nine months of 2005 was $598,000, decreasing $757,000 or 55.9% from the same period in 2004. The Bank’s totally free checking account is also impacting other noninterest income negatively. Some of the services previously provided to customers for a fee are now free as part of this product.

Noninterest Expense

Table 4: Details on Noninterest Expense

	For the Three Months				For the Nine Months
	Ended September 30,				Ended September 30,
(Dollars in thousands)	2005		2004		2005		2004
Salaries and employee benefits	$	3,414	$	3,223	$	11,653	$	9,168
Net occupancy		402		407		1,368		1,190
Furniture and equipment		746		717		2,281		2,046
Electronic banking expenses		136		350		400		1,075
Supplies, postage, and delivery		290		421		934		930
Outside services		394		306		1,224		840
Marketing and public relations		258		264		863		757
Ohio franchise tax		179		181		561		549
Goodwill impairment		—		—		311		—
Other noninterest expense		945		891		3,312		2,443
Total noninterest expense	$	6,764	$	6,760	$	22,907	$	18,998

   Three Months Ended September 30, 2005 as compared to the Three Months Ended September 30, 2004

     Noninterest expense was $6,764,000 in the third quarter 2005, which is relatively unchanged as compared to the third quarter last year. Net occupancy, furniture and equipment, marketing and public relations and Ohio franchise tax expenses were nearly unchanged from the same period last year. Salary and benefit expense was $3,414,000 in the third quarter, up $191,000 or 5.9% over the same period in 2004. This reflects normal increases and a substantial increase in healthcare insurance in 2005 as compared to 2004. Outside services were $394,000 in the third quarter, an increase of $88,000 or 28.8% over the same quarter last year. This increase is substantially due to the expense related to the outsourcing of the Corporation’s internal audit in 2005. The decision to outsource internal audit was due

26

to the increasing demands of compliance with new regulations, but there is also a partial offset of this expense in reduced salaries and benefits. Supplies, postage and delivery were $290,000 for the third quarter, down $131,000 from the same period in 2004. This change represents better expense control over supplies and forms, but it is also due to the timing of postage expense. In the third quarter of 2004, LNB Mortgage LLC was created and there was additional postage in the third quarter of last year for a variety of mass mailings. Other noninterest expense was $945,000 in the third quarter as compared to $891,000 in the same period last year. This $54,000 increase was due primarily to higher telecommunications expense.

   Nine Months Ended September 30, 2005 as compared to the Nine Months Ended September 30, 2004

Noninterest expense was $22,907,000 in the first nine months of 2005, up $3,909,000, or 20.6% over the same period last year. As detailed in the Corporation’s Form 10-Q for the second quarter of 2005, these results were influenced by several large expenses in the second quarter. During the first nine months of 2005, $1,507,000 of noninterest expenses were recorded in the salary and benefit and other noninterest expense categories that were specifically attributable to the changes in management, job eliminations and activities related to building the new business plan. Also impacting this nine month comparison was an increase of $1.6 million of operating costs related to LNB Mortgage LLC. LNB Mortgage LLC was in the earnings stream for only the month of September in 2004. Excluding these two items, noninterest expense for the first nine months of 2005 was $19,843,000, which is a $845,000 or 4.4% increase. On a year-to-date basis, salary and benefit expense was $11,653,000, up $2,485,000 or 27.1%, as compared to the same period in 2004. Included in this amount was $1,009,000 of severance and recruitment expense. LNB Mortgage LLC added a net $923,000 to salary and benefit expense in the first nine months of 2005 as compared to the same period last year. In the absence of these factors, salary and benefit expense was $9.7 million, an increase of $553,000 or 6.0% in the year-to-year comparison. The year-to-year comparison for most other categories is also impacted by the LNB Mortgage LLC expenses. The exceptions are electronic banking fees, outside services and other noninterest expense. Electronic banking fees were $400,000 for the first nine months of 2005, a decline of $675,000 or 62.8%. This was related to the changes in merchant processing noted in the discussion of noninterest income. Outside services were $1,224,000 for the first nine months of 2005, an increase of $384,000 or 45.7%. The outsourcing of internal audit accounts for 54% of this increase. The remaining portion represents additional SOX 404 costs and targeted consulting engagements to address various initiatives. These initiatives included a third party review of some portions of the commercial loan portfolio and a review of certain transaction processing methods. Other noninterest expense was $3,312,000 for the first nine months of 2005 as compared to $2,443,000 for the same period last year. This is an $869,000 increase or 35.6%. Approximately half of this increase is related to the Corporation’s IP telephony telecommunications upgrade and its write-off of legacy T-1 circuit contracts. Also contributing to this result was the impairment of the goodwill associated with the acquisition of LNB Mortgage LLC. In the second quarter of 2005, management determined that due to several factors, the goodwill from the acquisition of LNB Mortgage, LLC was impaired and as a consequence incurred an impairment loss of $311,000 during the second quarter of 2005. These factors included an accumulation of losses since the purchase of LNB Mortgage, significant and unexpected operating expenses, changes in the business environment, changes in management and volume significantly below that at which LNB Mortgage, LLC would breakeven from operations.

Income taxes

     The Corporation recognized tax expense of $857,000 during the third quarter of 2005 and $1,948,000 for the nine months ended 2005. Income taxes decreased $54,000, or 5.9%, for the three months ended September 30, 2005 versus the three months ended September 30, 2004. The effective tax

27

rate for the three months ended 2005 was 28.4% as compared to 30.5% for the same period in 2004, The decline in the three month effective tax rate was due primarily to the recognition of additional new markets tax credits in the third quarter that resulted from an additional $1,020,000 qualified investment in the Bank’s subsidiary, North Coast Community Development Corporation. Income tax expense decreased by $727,000, or 27.2% for the nine months ended September 30, 2005 compared to the same period in 2004. This was primarily the result of a decline of 27.3% in pretax income. The effective tax rate for the nine months ended 2005 remained at 29.8%.

Balance Sheet Analysis

Overview

     The Corporation’s assets increased to $812.4 million at September 30, 2005 as compared to $781.6 million at December 31, 2004. This represents an increase of $30.8 million, or 3.9%, and resulted primarily from increases of $22.9 million in loans and $7.0 million in securities. Total deposits increased to $655.7 million at September 30, 2005 versus $605.5 million at December 31, 2004. This is an increase of $50.1 million, or 8.3%.

Securities

     The maturity distribution of the Corporation’s securities portfolio for the three months ended September 30, 2005 is presented in Note 4 to the Consolidated Financial Statements contained in this Form 10-Q. The Corporation continues to employ the securities portfolio to manage interest rate risk and manage its liquidity needs. Currently, the portfolio is comprised of 44.8% U.S. Government agencies, 44.2% U.S. agency mortgage backed securities, 7.2% municipals, and 3.8% in other securities. Other securities are Federal Home Loan Bank stock and Federal Reserve Bank stock. At September 30, 2005 the securities portfolio had a net temporary $2.8 million unrealized loss, representing 1.8% of the total amortized cost of the Bank’s securities. During the first nine months of 2005, portfolio activity consisted of maturities of U.S. Government agency securities and principal cashflow from mortgage backed securities of $18.9 million, sales of equity securities of $4.6 million, and purchases of U.S. Government agency securities of $30.8 million. There were no security sales during the third quarter of 2005.

Loans

     Total portfolio loans at September 30, 2005 were $594.5 million, an increase of 3.9%, as compared to $572.2 at December 31, 2004. At September 30, 2005, commercial loans comprised 61.6% of total portfolio loans with a balance of $366.0 million. This represents an increase of $26.6 million, or 7.8%, as compared to $339.4 million at December 31, 2004. The growth in the commercial portfolio is a function of new business development in emerging markets and expanded lending efforts in the Cuyahoga County market.

     Consumer loans, consisting of installment loans and home equity loans, comprise 17.5% of total portfolio loans, an increase of $8.1 million, or 8.5%, from December 31, 2004. Consumer loans are made to borrowers on both secured and unsecured terms dependent on the maturity and nature of the loan. The Corporation also purchases consumer loans from another institution in the Cleveland area. At September 30, 2005, these loans totaled $42.1 million as compared to $27.2 million at December 31, 2004. These represented 7.1% of total loans at September 30, 2005. These are primarily car loans of high quality. The delinquency history for this purchased loan portfolio has been good and the charge-off history has been low.

     Real estate mortgages comprise 13.8% of total portfolio loans. These loans decreased $30.4 million, or 26.9%, for the period ended September 30, 2005 as compared to December 31, 2004. The Corporation has begun to originate new real estate mortgage loans for the portfolio, and the portfolio is expected to grow in future quarters.

28

Deposits

     Total deposits at September 30, 2005 were $655.7 million, an increase of $50.2 million, or 8.3%, from December 31, 2004. Increases in demand deposits and certificates of deposit represented the largest changes in total deposits.

     Deposit accounts and the generation of deposit accounts continue to be the primary source of funds within our market area. The Corporation offers various deposit products to both retail and business customers. While this is not the only source of funding for the Corporation, it remains a primary source. The Corporation also utilizes its business sweep accounts to generate funds as well as the brokered CD market to provide funding comparable to other national market borrowings, which include the Federal Home Loan Bank of Cincinnati and the Federal Reserve Bank of Cleveland.

     Low cost funding is comprised of noninterest-bearing deposits, interest-bearing checking accounts and savings accounts. These sources comprised 42.0% of total deposits at September 30, 2005. In 2005, as rates have risen, there has been renewed interest in time deposits. At September 30, 2005, retail time deposits totaled $187.9 million and comprised 28.6% of total deposits as compared to $167.2 million and 27.6% at December 31, 2004. The Corporation is increasingly using brokered CDs and public fund CDs as funding sources. These funds are used as alternatives to other types of funding such as FHLB advances. Note 8 to the Consolidated Financial Statements included in this Form 10-Q, presents the detail on these balances.

     Table 5 represents average deposit account balances and average cost of funds for each category of deposits for the indicated periods:

Table 5: Deposits

Average Balances Outstanding
For the Nine Month Period Ended September 30,
			Percent of								Percent of
(Dollars in thousands)	2005		Deposits			Rate			2004		Deposits			Rate
Demand deposits	$	94,969		15.00	%		0.00	%	$	89,476		15.32	%		0.00	%
Interest-bearing demand		83,566		13.20	%		0.24	%		80,958		13.87	%		0.19	%
Savings		103,305		16.32	%		0.32	%		106,194		18.19	%		0.30	%
Money market deposits		91,271		14.42	%		1.70	%		92,747		15.88	%		1.03	%
Retail certificates of deposit		174,777		27.60	%		3.05	%		163,891		28.07	%		2.67	%
Brokered certificates of deposit		35,543		5.61	%		3.31	%		3,175		0.54	%		2.65	%
Public fund certificates of deposit		49,723		7.85	%		3.09	%		47,440		8.13	%		1.49	%
Total Deposits	$	633,154		100.00	%		1.60	%	$	583,882		100.00	%		1.13	%

Borrowings

     The Corporation utilizes both short-term and long-term borrowings to assist in the growth of earning assets. For the Corporation, short-term borrowings include federal funds purchased and repurchase agreements. As of September 30, 2005 the Corporation had $20.3 million of short-term borrowings. This was a decrease of $11.3 million, or 35.8%, from December 31, 2004. Long-term borrowings for the Corporation were at $61.1 million at September 30, 2005, a decrease of $8.2 million, or 11.8%, from December 31, 2004. During the nine months ended September 30, 2005, the Corporation did not renew maturing advances totaling $28.2 million. It did however take-down two short-term advances totaling $20 million which mature on October 20, 2005.

Regulatory Capital

     The Corporation continues to maintain a strong capital position. Total shareholders’ equity was $69.5 million, at September 30, 2005, a decrease of $1.1 million, or 1.6%, from December 31, 2004. The period factors increasing total shareholders’ equity were net income of $4.6 million and common stock issued of $96,000. The period factors decreasing total shareholders’ equity were cash dividends payable to shareholders of $3.6 million, a $972,000 increase in accumulated other comprehensive loss resulting from a decrease in the fair value of available for sale securities as interest rates have increased, and the repurchase of 70,000 shares of Corporation common stock at a cost of $1.2 million. The Corporation currently holds 195,694 shares of common stock as treasury stock at a cost of $3.7 million.

29

     The Corporation and the Bank continue to monitor growth to stay within the guidelines established by applicable regulatory authorities. Under Federal banking regulations, at September 30, 2005 and December 31, 2004, the Corporation and Bank maintained capital ratios consistent with guidelines to be deemed well-capitalized. These capital positions for the Bank and LNB Bancorp, Inc. are presented in Table 6.

Table 6: Capital Ratios

	September 30,			December 31,			Well-Capitalized
	2005			2004			Ratio
Lorain National Bank
Tier 1 Capital (average assets)		7.62	%		7.86	%		5.00	%
Tier 1 Capital (risk weighted)		9.20	%		9.36	%		6.00	%
Total Capital (risk weighted)		10.97	%		11.13	%		10.00	%
LNB Bancorp, Inc.
Tier 1 Capital (average assets)		8.53	%		9.05	%		5.00	%
Tier 1 Capital (risk weighted)		10.22	%		10.58	%		6.00	%
Total Capital (risk weighted)		11.40	%		11.72	%		10.00	%

     On July 28, 2005 the Corporation announced a share repurchase program of up to 5 percent, or about 332,000, of the common shares outstanding. Repurchased shares can be used for a number of corporate purposes, including the company’s stock option and employee benefit plans. Under the share repurchase program, share repurchases are expected to be made primarily on the open market from time-to-time until the 5 percent maximum is repurchased or the earlier termination of the repurchase program by the Board of Directors. Repurchases under the program will be made at the discretion of management based upon market, business, legal and other factors. At September 30, 2005, the Corporation had repurchased 70,000 shares under this program.

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

RISK ELEMENTS

     Risk management is an essential aspect in operating a financial services company successfully and effectively. The most prominent risk exposures, for a financial services company, are credit, operational, interest rate, market, and liquidity risk. Credit risk involves the risk of uncollectible interest and principal balance on a loan when it is due. Fraud, legal and compliance issues, processing errors, technology and the related disaster recovery, and breaches in business continuation and internal controls are types of operational risks. Changes in interest rates affecting net interest income are considered interest rate risks. Market risk is the risk that a financial institution’s earnings and capital or its ability to meet its business objectives are adversely affected by movements in market rates or prices. Such movements include fluctuations in interest rates, foreign exchange rates, equity prices that affect the changes in value of available-for-sale securities, credit spreads, and commodity prices. The inability to fund obligations due to investors, borrowers, or depositors is liquidity risk. For the Corporation, the dominant risks are market risk and credit risk.

Credit Risk Management

     Uniform underwriting criteria, ongoing risk monitoring and review processes, and well-defined, centralized credit policies dictate the management of credit risk for the Corporation. As such, credit risk is managed through the Bank’s allowance for loan loss policy which requires the loan officer, lending officers, and the loan review committee to manage loan quality. The Corporation’s credit policies are reviewed and modified on an ongoing basis in order to remain suitable for the management of credit risks within the loan portfolio as conditions change. The Corporation uses a loan rating system to properly classify and assess the credit quality of individual commercial loan transactions. The loan

30

rating system is used to determine the adequacy of the allowance for loan losses for regulatory reporting purposes and to assist in the determination of the frequency of review for credit exposures.

     Credit quality was stable for the three and nine months ended September 30, 2005 as compared to the same periods in 2004. General economic conditions have contributed to improved credit quality, but a more stringent and defined credit review policy has been the driving force for the stable credit quality.

Nonperforming Assets

     Total nonperforming assets consist of nonperforming loans, loans which have been restructured, and other foreclosed assets. As such, any loan that is 90 days past due and/or for which, in management’s estimation, the collection of interest is doubtful is considered nonperforming. These loans no longer accrue interest and are accounted for on a cash basis. The classification of restructured loans involves the deterioration of a borrower’s financial ability leading to original terms being favorably modified or either principal or interest being forgiven.

     Nonperforming loans at September 30, 2005 were $7.5 million, an increase of $2.5 million, or 51.4%, from December 31, 2004, but are consistent with the June 30, 2005 level of $7.2 million. Of the $2.5 million increase from December 31, 2004, approximately $1.0 million is net new increases in nonperforming loans in addition to $1.5 million in increases in current loans to commercial customers with loans already classified as nonperforming. While these loans are current, in management’s opinion the likelihood of this continuing is not probable. Approximately 53% of the $6.4 million of commercial loans on nonperforming status are comprised of five credits. Management believes that these nonperforming commercial loans are adequately secured by commercial real estate. Nonperforming trends in all other loan portfolios during the quarter were stable. There were no particular industry or geographic concentrations in nonperforming loans, delinquent loans or net charge-offs.

     Nonperforming assets at September 30, 2005 compared to December, 31, 2004 increased by $2.5 million or 47.0%, due to an increase in nonperforming loans of $2.5 million and a decrease in other foreclosed assets of $21,000. Nonperforming loans at September 30, 2005 are substantially secured by commercial real estate and did not have a material impact on interest income during the three and nine month periods ended September 30, 2005. The overall quality of the portfolio remains stable despite an increase in the ratio of nonperforming loans to total loans. This ratio increased to 1.25% at September 30, 2005 as compared to .85% at December 31, 2004, but is consistent with the June 30, 2005 ratio of 1.24%. The Corporation’s credit policies are reviewed and modified on an ongoing basis to remain suitable for the management of credit risks within the loan portfolio as conditions change. At September 30, 2005 there were no significant concentrations of credit risk in the loan portfolio.

     Table 7 sets forth nonperforming assets for the periods ended September 30, 2005 and December 31, 2004.

31

Table 7: Nonperforming Assets

	September 30,			December 31,
(Dollars in thousands)	2005			2004
Commercial	$	6,364		$	3,255
Real estate mortgage		919			1,116
Installment		148			150
Purchased installment		—			—
Home equity lines		21			400
Total nonperforming loans		7,452			4,921
Other foreclosed assets		399			420
Total nonperforming assets	$	7,851		$	5,341
Allowance for loan losses to nonperforming loans		105.9	%		150.1	%
Nonperforming loans to total loans		1.25	%		0.85	%
Nonperforming assets to total assets		0.97	%		0.68	%

Provision and Allowance for Loan Losses

     The allowance for loan losses is maintained by the Corporation at a level considered by management to be adequate to cover probable credit losses inherent in the loan portfolio. The amount of the provision for loan losses charged to operating expenses is the amount necessary, in the estimation of management, to maintain the allowance for loan losses at an adequate level. Management determines the adequacy of the allowance based upon past experience, changes in portfolio size and mix, relative quality of the loan portfolio and the rate of loan growth, assessments of current and future economic conditions, and information about specific borrower situations, including their financial position and collateral values, and other factors, which are subject to change over time. While management’s periodic analysis of the allowance for loan losses may dictate portions of the allowance be allocated to specific problem loans, the entire amount is available for any loan charge-offs that may occur. Table 8 presents the detailed activity in the allowance for loan losses and related charge-off activity for the three months ended September 30, 2005 and September 30, 2004, respectively, as well as for the nine months ended September 30, 2005 and September 30, 2004, respectively.

Table 8: Analysis of Allowance for Loan Losses

							For the Nine			For the Nine
	For the Three Months			For the Three Months			Months Ended			Months Ended
	Ended September 30,			Ended September 30,			September 30,			September 30,
(Dollars in thousands)	2005			2004			2005			2004
Balance at beginning of period	$	7,793		$	7,989		$	7,386		$	7,730
Charge-offs:
Commercial		104			886			387			1,309
Real estate mortgage		—			9			—			21
Installment		105			191			307			556
Purchased installment		32			—			33			—
Home equity lines		35			—			60			—
Total charge-offs		276			1,086			787			1,886
Recoveries:
Commercial		20			16			51			44
Real Estate Mortgage		—			—			—			—
Installment		53			33			141			114
Purchased installment		—			—			—			—
Home equity lines		—			—			1			—
Total recoveries		73			49			193			158
Net charge-offs		(203	)		(1,037	)		(594	)		(1,728	)
Provision for loan losses		300			399			1,098			1,349
Balance at end of period	$	7,890		$	7,351		$	7,890		$	7,351

32

     The allowance for loan losses at September 30, 2005 was $7.9 million, or 1.32%, of outstanding loans, compared to $7.4 million, or 1.30% of outstanding loans at September 30, 2004. The provision charged to expense was $300,000 for the three months ended September 30, 2005, and $399,000 for the three months ended September 30, 2004. The provision charged to expense was $1.1 million for the nine months ended September 30, 2005 and $1.3 million for the nine months ended September 30, 2004. Net charge-offs for the three months ended September 30, 2005 were $203,000, as compared to $1.0 million for the three months ended September 30, 2004. Net charge-offs for the nine months ended September 30, 2005 were $594,000, as compared to $1.7 million for the nine months ended September 30, 2004. Annualized net charge-offs as a percent of average loans for the third quarter and first nine months of 2005 were .14% and .14% respectively, as compared to .74% and .42% respectively, for the same periods in 2004. Charge-offs in the third quarter of 2005, as well as for the nine months ended September 30, 2005, were in-line with expectations, and reflect better charge-off experience in all portfolios as compared to the same periods in 2004. The provision for loan losses for the three months ended September 30, 2005 and for the nine months ended September 30, 2005 was, in the opinion of management, adequate when balancing the improving charge-off trends with the current level of nonperforming loans at September 30, 2005. The resulting allowance for loan losses is, in the opinion of management, sufficient given its analysis of the information available about the portfolio at September 30, 2005. The Corporation continues to aggressively address potential problem loans, and underwriting standards continue to be adjusted in response to trends and asset review findings.

Market Risk Management

     The Corporation manages market risk through its Asset/Liability Management Committee (“ALCO”) at the Bank level governed by policies set forth and established by the Board of Directors. This committee assesses interest rate risk exposure through two primary measures: rate sensitive assets divided by rate sensitive liabilities and earnings-at-risk simulation of net interest income over the one year planning cycle and the longer term strategic horizon in order to provide a stable and steadily increasing flow of net interest income.

     The difference between a financial institution’s interest rate sensitive assets and interest rate sensitive liabilities is referred to as the interest rate gap. An institution that has more interest rate sensitive assets than interest rate sensitive liabilities in a given period is said to be asset sensitive or has a positive gap. This means that if interest rates rise a corporation’s net interest income may rise and if interest rates fall its net interest income may decline. If interest sensitive liabilities exceed interest sensitive assets then the opposite impact on net interest income may occur. The usefulness of the gap measure is limited. It is important to know the gross dollars of assets and liabilities that may re-price in various time horizons, but without knowing the frequency and basis of the potential rate changes its predictive power is limited.

     Two more useful tools in managing market risk are earnings-at-risk simulation and economic value of equity simulation. An earnings-at-risk analysis is a modeling approach that combines the repricing information from gap analysis, with forecasts of balance sheet growth and changes in future interest rates. The result of this simulation provides management with a range of possible net interest margin outcomes. Trends that are identified in earnings-at-risk simulation can help identify product and pricing decisions that can be made currently to assure stable net interest income performance in the future. At September 30, 2005, a “shock” treatment of the balance sheet, in which a parallel shift in the yield curve occurs and all rates increase immediately, indicates that in a +200 basis point shock, net interest income would increase $3.0 million, or 9.2%, and in a -200 basis point shock, net interest income would decrease $4.2 million, or 13.1%. The reason for the lack of symmetry in these results is the implied floors in many of the Corporation’s core funding which limits their downward adjustment from current offering rates. This analysis is done to describe a best or worst case scenario. Factors such

33

as non-parallel yield curve shifts, management pricing changes, customer preferences and other factors are likely to produce different results.

     The economic value of equity approach measures the change in the value of the Corporation’s equity as the value of assets and liabilities on the balance sheet change with interest rates. At September 30, 2005, this analysis indicated that a +200 basis point change in rates would reduce the value of the Corporation’s equity by 6.1%, while a -200 basis point change in rates would increase the value of the Corporation’s equity by 3.2%.

ITEM 4. Controls and Procedures

     The Corporation’s management carried out an evaluation, under the supervision and with the participation of the chief executive officer and the chief financial officer, of the effectiveness of the design and operation of the Corporation’s disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) promulgated under the Securities Exchange Act of 1934, (the “Exchange Act”)) as of September 30, 2005. Based upon that evaluation, the chief executive officer along with the chief financial officer concluded that the Corporation’s disclosure controls and procedures as of September 30, 2005 were: (1) designed to ensure that material information relating to the Corporation and its subsidiaries is made known to the chief executive officer and the chief financial officer by others within the entities, and (2) effective, in that they provide reasonable assurance that information required to be disclosed by the Company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. No change in the Corporation’s internal control over financial reporting (as defined by 13a-15(f) and 15(d)-15(f) under the Exchange Act) occurred during the fiscal quarter ended September 30, 2005 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II. OTHER INFORMATION

34

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

	(a) Total		(b)		(c) Total Number of		(d) Maximum Number
	Number of		Average		Shares (or Units)		of Shares (or
	Shares (or		Price Paid		Purchased as Part of		Units) that May Yet Be
	Units)		per Share		Publicly Announced		Purchased Under the
Period	Purchased		(or Unit)		Plans or Programs		Plans or Programs
July 1, 2005 – July 31, 2005		0		N/A		0		332,000
August 1, 2005 – August 31, 2005		40,000	$	17.56		40,000		292,000
September 1, 2005 – September 30, 2005		30,000	$	17.40		30,000		262,000
Total		70,000	$	17.49		70,000		262,000

     On July 28, 2005 the Corporation announced a share repurchase program of up to 5 percent, or about 332,000, of the common shares outstanding. Repurchased shares can be used for a number of corporate purposes, including the company’s stock option and employee benefit plans. Under the share repurchase program, share repurchases are expected to be made primarily on the open market from time-to-time until the 5 percent maximum is repurchased or the earlier termination of the repurchase program by the Board of Directors. Repurchases under the program will be made at the discretion of management based upon market, business, legal and other factors. At September 30, 2005, the Corporation had repurchased 70,000 shares under this program.

Item 5. Other Information

     Not Applicable

35

Item 6. Exhibits

(a) The exhibits to this Form 10-Q are referenced in the Exhibit Index attached hereto.

36

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	LNB BANCORP, INC. (Registrant)
Date: November 8, 2005	/s/ Terry M. White
	Terry M. White Chief Financial Officer
	(Duly Authorized Officer, Principal Financial
	Financial Officer, and Chief Accounting Officer)

37

LNB Bancorp, Inc.
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K

Exhibit
10.1	Employment agreement between the Corporation and Mr. Richard E. Lucas
10.2	Stock option agreement between the Corporation and Mr. Frank A. Soltis
31.1	Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification.
31.2	Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification.
32.1	Certification pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

38

EX-10.1

Exhibit 10.1

RICHARD E. LUCAS

EMPLOYMENT AGREEMENT

     This Employment Agreement (the “Agreement”), made at Lorain, Ohio, as of the 20th day of June, 2005, by and among RICHARD E. LUCAS, herein referenced as “Employee”, and LNB BANCORP, INC. (an Ohio corporation) and THE LORAIN NATIONAL BANK (a banking organization organized and existing under the laws of the United States of America), which together with their respective successors and assigns are collectively herein referenced as “Employer”, is to EVIDENCE THAT:

     WHEREAS Employer desires to secure and retain the employment services of Employee as its Executive Vice President/Director of Retail Banking, and Employee desires to accept employment as Employer’s Executive Vice President/Director of Retail Banking; and

     WHEREAS, but for Employee’s promises made in this Agreement, especially in Section 8, Employer would not employ Employee under the terms and conditions of this Agreement and, therefore, expressly to induce Employer to execute this Agreement, Employee represents that Employee fully understands and accepts the restrictive covenants in Section 8 and agrees to be bound thereby;

     NOW, THEREFORE, in consideration of the mutual covenants and promises herein, Employer and Employee (collectively the “Parties” and individually a “Party”) hereby agree as follows:

     1. Employment and Term.

          1.1 Employee will render management services to Employer in the capacity as Employer’s Executive Vice President/Director of Retail Banking for the term of this Agreement (herein called the “Agreement Term”) commencing June 20, 2005, and continuing thereafter until terminated pursuant to the termination provisions of this Agreement, including the provisions of Section 7.

          1.2 Employee will devote Employee’s full business-time and best efforts to performing conscientiously, faithfully and loyally all duties: (i) required of Employee by virtue of Employee’s position as Employer’s Executive Vice President/Director of Retail Banking, (ii) set forth in Employer’s Code of Regulations, Bylaws and policies as adopted by Employer’s Board of Directors, and (iii) assigned or delegated to Employee by Employer’s President and Chief Executive Officer and/or the Chairman of the Board of Directors.

          1.3 Except as otherwise expressly provided herein, this Agreement represents the entire agreement between Employee and Employer regarding Employee’s employment by Employer.

          1.4 Except as otherwise expressly provided herein, this Agreement may be changed or amended only by a written document which is clearly designated as an amendment to this specific Agreement and only if such document is signed by all Parties.

          1.5 No action by any Party and no refusal or neglect of any Party to exercise a right granted under this Agreement or to enforce compliance with any provision of this Agreement shall constitute a waiver of any provision of or any right under this Agreement, unless such waiver is expressed in a written document which is clearly designated as a waiver to a specific provision(s) of this Agreement and unless such document is signed by all Parties.

39

     2. Compensation.

          2.1 In consideration for the services rendered by Employee as Executive Vice President/Director of Retail Banking, Employer agrees to pay Employee a basic salary (herein called the “Basic Salary”) equal to the sum of One Hundred Seventy Thousand Dollars ($170,000.00) for each twelve (12) consecutive monthly period (a “Contract Year”) of the Agreement Term. The Basic Salary shall be payable in twenty-six (26) equal bi-weekly payments and prorated if the Agreement Term is terminated prior to the completion of any Contract Year.

          2.2 As additional consideration for Employee’s services performed hereunder, Employee may (but shall not be entitled to) receive a discretionary bonus from time to time. Such bonus (and Employee’s eligibility therefor) shall be determined by Employer’s Board of Directors in its sole discretion.

          2.3 There shall be an annual review of Employee’s performance and compensation by Employer’s Board of Directors (or a committee thereof). The annual review shall occur not less than sixty (60) days prior to the end of Employer’s fiscal year for the express purpose of reviewing the current fiscal year’s performance of Employee. Any change in compensation as a result of the annual review shall immediately act as an amendment of Section 2.1 above, effective as of the date of the compensation change.

          2.4 The obligations of Employer to pay Employee’s Basic Salary, bonuses (if any), and other benefits under this Agreement are expressly conditioned upon Employee’s continued and faithful performance of and adherence to each and every material promise, duty and obligation assigned to or made by Employee under this Agreement.

     3. Vacations and Time-Off.

          3.1 Employee shall be entitled to twenty-seven (27) working days of compensated vacation for each Contract Year, pursuant to the terms and conditions of Employer’s vacation time-off policy (as may be periodically changed in Employer’s sole discretion), to be taken at times as mutually agreed in advance between Employee and Employer’s President and Chief Executive Officer or Chairman of the Board of Directors.

          3.2 Except as may be periodically changed in Employer’s sole discretion, all vacation time-off shall be non-cumulative if not taken within the Contract Year or within the first quarter of the succeeding Contract Year; provided, however, that unused vacation time may be redeemed as compensation pursuant to the terms and conditions of Employer’s vacation time-off policy.

          3.3 Employee’s vacation time-off may be increased by Employer in its sole discretion.

          3.4 Employee shall be permitted additional time-off to attend professional meetings, seminars, and conventions and to satisfy professional educational and licensure requirements as have been mutually agreed upon between Employee and Employer’s President and Chief Executive Officer or Chairman of the Board of Directors. Attendance at such approved meetings, seminars, and conventions and accomplishment of approved professional educational and licensure requirements shall be fully compensated and shall not be considered vacation. Employer shall reimburse Employee for all reasonable expenses incurred by Employee incident to attendance at approved professional meetings, seminars and conventions and such reasonable entertainment expenses incurred by Employee in furtherance of Employer’s interest.

40

          3.5 Employee shall also be entitled to additional days of time-off with full compensation for holidays in accordance with Employer’s holiday time-off policy (which may be periodically changed in Employer’s sole discretion).

          3.6 Employee shall further be entitled to additional days of time-off with full compensation for personal matters in accordance with Employer’s personal time-off policy (which may be periodically changed in Employer’s sole discretion).

     4. Fringe Benefits.

          4.1 Employee shall be entitled to all fringe benefits to which other employees of Employer in Employee’s classification are entitled.

          4.2 As additional consideration for Employee’s performance of Employee’s duties and responsibilities as Executive Vice President/Director of Retail Banking of Employer, Employer agrees:

               (A) To provide Employee with (i) short-term disability benefits pursuant to Employer’s short-term disability program (which may be periodically changed or terminated in Employer’s sole discretion), and (ii) long-term disability insurance benefits commencing one hundred eighty (180) days after Employee incurs a Disability, as defined in Section 11.1(E) of this Agreement, and continuing pursuant to the terms of Employer’s long-term disability program (which may be periodically changed or terminated in Employer’s sole discretion); and

               (B) To include Employee in Employer’s stock option plan (if any), stock ownership plan and flexible benefit plan, as such plans may be periodically changed or terminated in Employer’s sole discretion; and

               (C) To provide Employee with such plan of hospitalization insurance as maintained by Employer and as may be periodically changed or terminated in Employer’s sole discretion; and

               (D) To provide (i) a term life insurance policy on the life of Employee (provided that Employee is insurable under the standard rate criteria of a commercial life insurance company) in an amount equal to 2.75 times the Basic Salary of Employee, but not to exceed Three Hundred Thousand Dollars ($300,000.00), as may be periodically increased in Employer’s sole discretion, and payable to the beneficiary or beneficiaries of Employee’s choice, and (ii) an accidental death and dismemberment insurance policy upon Employee in an amount equal to 2.75 times the Basic Salary, but not to exceed One Hundred Fifty Thousand Dollars ($150,000.00), as may be increased in Employer’s sole discretion, and payable to the beneficiary or beneficiaries of Employer’s choice; and

               (E) To provide Employee with such sick leave as presently in force by Employer and as may be periodically changed or terminated in Employer’s sole discretion; and

               (F) To reimburse Employee for all reasonable and approved expenses related to the performance of Employee’s duties as Executive Vice President/Director of Retail Banking, including (but not limited to): entertainment and promotional expenses; educational expenses incurred for the purpose of maintaining or improving Employee’s skills directly related to the performance of Employee’s duties and obligations hereunder (including, but not limited to, professional continuing educational requirements); expenses of membership in civic groups, clubs and fraternal organizations; and all other items of reasonable and necessary expenses incurred by Employee in the performance of Employee’s duties as Employer’s Executive Vice President/Director of Retail Banking.

41

     5. Stock Options. If determined by Employer’s Board of Directors, Employee shall participate in any and all incentive stock option plans and programs currently in existence or adopted by Employer after commencement of the Agreement Term in accordance with all applicable eligibility requirements, terms and conditions of such plans and programs (as may be periodically changed or terminated in Employer’s sole discretion).

     6. Prohibition Against Transfer. Employee’s duties, obligations and services rendered under this Agreement are personal in nature and are unique to Employer. Therefore, without Employer’s prior written consent, Employee shall not assign or otherwise transfer any of Employee’s duties, obligations or responsibilities hereunder.

7. Termination of the Agreement Term.

          7.1 If either Employer or Employee materially violates the terms and conditions of this Agreement, the other Party shall give the breaching Party notice of said violation and, if the breaching Party does not cure such violation within sixty (60) days after notice, then the other Party shall have the continuing right to terminate the Agreement Term without further notice; provided, however, that Employer may immediately terminate the Agreement Term if Employee violates or fails to adhere to any provision of Section 8 (pertaining to non-disclosure and non-competition).

          7.2 Through its Board of Directors, Employer may terminate the Agreement Term without cause at any time upon ninety (90) days prior written notice to Employee.

          7.3 Subject to the terms and conditions of Section 11, Employee may terminate the Agreement Term upon the occurrence of a “Change in Control” as defined in Section 11.1(C) for “Good Reason” as defined in Section 11.1(F).

          7.4 The Agreement Term shall automatically and immediately terminate upon the death of Employee.

          7.5 In the event of the Disability of Employee as defined in Section 11.1(E) of this Agreement, the Agreement Term shall terminate and Employee shall be entitled to benefits provided by Employer under Employer’s long-term disability program as designated in Section 4.2(A)(ii) of this Agreement.

          7.6 In Employee’s sole discretion, Employee may terminate the Agreement Term by giving the Board of Directors of Employer at least ninety (90) days written notice of Employee’s decision to terminate the Agreement Term.

          7.7 Employer shall have the sole discretion to determine whether Employee shall continue to render services hereunder during such notice periods as provided for in this Section 7.

          7.8 Upon the termination of the Agreement Term pursuant to Section 7.1 (but only if Employee terminates the Agreement Term due to the Employer’s breach) or Section 7.2, Employer shall continue to pay Employee’s total compensation (as reflected on Employee’s W-2 Federal Income Tax Statement from Employer for the prior calendar year) for a period of one (1) year from the date of termination of the Agreement Term; provided, however, that if Employer chooses a two (2)-year Restricted Period under Section 8.1(G), then Employer shall continue to pay such compensation for a period of two (2) years from the date of termination of the Agreement Term. Any termination payments payable to

42

Employee shall survive Employee’s death if Employee dies during the period Employee is receiving termination payments as provided in this Section 7.8.

8. Employee’s Non-Disclosure and Non-Competition Promises.

          8.1 For purposes of this Section 8, the Parties agree to and understand the following definitions:

               (A) “Competitive Act” means any of the following: (i) Employee’s rendering services (whether or not for compensation) to, for or on behalf of a Competitor (as defined herein) as an employee, independent contractor, consultant, advisor, representative, agent or in any other capacity, and (ii) Employee’s investment in or ownership (partial or total) of a Competitor, unless the Competitor’s stock is publicly traded on a national exchange and Employee owns less than two percent (2%) of such stock.

               (B) “Competitive Activity” means the performance or rendering of any banking services; trust services and investment services; portfolio management; retirement planning; administration of employee benefit plans; administration of decedents’ estates and court-supervised accounts, guardianships, and custodial arrangements; personal tax and estate tax planning; financial consulting services; investment advising services; and any other business activity, service or product which competes with any existing or future business activity, service or product of Employer.

               (C) “Competitor” means any of the following: (i) any person, sole proprietorship, partnership, association (other than Employer), organization, corporation, limited liability company or other entity (governmental or otherwise) who or which provides, renders or performs a Competitive Activity (as defined herein) within the Service Area (as defined herein), even if the Competitor has no office or other facilities located within the Service Area, and (ii) any parent, subsidiary or other person or entity affiliated with, or related by ownership to, any of the foregoing designated in Subitem (i) of this Section 8.1(C).

               (D) “Confidential Information” means all of the following (whether written or verbal) pertaining to Employer: (i) trade secrets (as defined by Ohio law); Client or Customer lists, records and other information regarding Employer’s Clients or Customers (whether or not evidenced in writing); Client or Customer fee or price schedules and fee or price policies; financial books, plans, records, ledgers and information; business development plans; sales and marketing plans; research and development plans; employment and personnel manuals, records, data and policies; business manuals, methods and operations; business forms, correspondence, memoranda and other records; computer records and related data; and any other confidential or proprietary data and information of Employer or its Clients or Customers which Employee encounters during the Employment Term (as defined in Section 8.1(E)), and (ii) all products, technology, ideas, inventions, discoveries, developments, devices, processes, business notes, forms and documents, business products, computer programs, and other creations (and improvements of any of the foregoing), whether patentable or copyrightable, which Employee has acquired, developed, conceived or made (whether directly or indirectly, whether solicited or unsolicited, or whether during normal work hours or during off-time) during the Employment Term or during the Restricted Period and which relate to any business activity of Employer or are derived from the Confidential Information designated in Subsection (i) of this Section 8.1(D).

               (E) “Client” or “Customer” means a person, sole proprietorship, partnership, association, organization, corporation, limited liability company, or other entity (governmental or otherwise), wherever located: (i) to or for which Employer sells any products or renders or performs services either during the one hundred eighty (180)-day period immediately preceding commencement of the Restricted Period or during the Restricted Period, or (ii) which Employer solicits or (as demonstrated by

43

plans, strategies or other tangible preparation) intends to solicit to purchase products or services from Employer either during the one hundred eighty (180)-day period immediately preceding commencement of the Restricted Period or during the Restricted Period.

               (F) “Employment Term” means the period of time starting on the date Employee’s employment with Employer commences and terminating at the close of business on the date Employee’s employment with Employer terminates.

               (G) “Restricted Period” means a time-period, as chosen by Employer (in its sole discretion) by written notice to Employee within thirty (30) days after termination of the Employment Term, equal to either one (1) year or two (2) years commencing on the date the Employment Term is terminated by either Party (for any reason, with or without cause); provided, however, that such period shall be extended to include any period of time during which Employee engages in any activity constituting a breach of this Agreement and any period of time during which litigation transpires wherein Employee is held to have breached this Agreement.

               (H) “Service Area” means: (i) Lorain County, Ohio and all counties immediately contiguous to Lorain County, constituting those geographic areas in which Employer presently conducts substantial business activities, and (ii) those counties located in the State of Ohio in which Employer conducts or transacts substantial business activities on the date the Employment Term terminates, and (iii) those counties in the State of Ohio in which, on the date the Employment Term terminates, Employer intends to conduct or transact substantial business activities as demonstrated by plans, strategies or other tangible preparation for such business activities.

               (I) “Employer” means, for purposes of this Section 8, LNB Bancorp, Inc. and The Lorain National Bank (a national bank association), all direct and indirect parent and subsidiary entities thereof, and all entities related to LNB Bancorp, Inc., to The Lorain National Bank or to such parent and subsidiary entities by common ownership.

          8.2 Expressly in consideration for Employer’s promises made in this Agreement and to induce Employer to sign this Agreement, Employee promises and agrees that:

               (A) Confidentiality. The Confidential Information is and, at all times, shall remain the exclusive property of Employer, and Employee: (i) shall hold the Confidential Information in strictest confidence and in a position of trust for Employer and its Clients and Customers, and (ii) except as may be necessary to perform Employee’s employment duties with Employer but only in compliance with Employer’s confidentiality policies and all applicable laws, shall not (directly or indirectly) use for any purpose, copy, duplicate, disclose, convey to any third-party or convert any Confidential Information, either during the Employment Term or at any time following termination of the Employment Term (by any Party, for any reason, with or without cause), and (iii) upon the request of Employer at any time during or after the Employment Term, shall immediately deliver to Employer all the Confidential Information in Employee’s possession and shall neither convey to any third-party nor retain any copies or duplicates thereof; and

               (B) Competitive Acts. During the Employment Term and during the Restricted Period, Employee (or any entity owned or controlled by Employee) shall not directly or indirectly, without the prior written approval of the President and Chief Executive Officer of Employer (or any person expressly designated by the President and Chief Executive Officer), perform a Competitive Act; and

44

               (C) Clients and Customers. During the Restricted Period, Employee (or any entity owned or controlled by Employee) shall not directly or indirectly: (i) solicit from or perform for any Client or Customer a Competitive Activity, wherever such Client or Customer is located, or (ii) influence (or attempt to influence) any Client or Customer to transfer such Client’s or Customer’s patronage or business from Employer, or (iii) otherwise interfere with any business relationship of Employer with any Client or Customer; and

               (D) Employees. During the Restricted Period, Employee (or any entity owned or controlled by Employee) shall not directly or indirectly: (i) employ, engage, contract for the services of, or solicit or otherwise induce the services of any person who, during the one hundred eighty (180)-day period immediately preceding commencement of the Restricted Period or during the Restricted Period, is or was an employee of Employer, or (ii) otherwise interfere with (or attempt to interfere with) any employment relationship of Employer with any employee.

               (E) Other Employment. During the Employment Term, Employee shall not perform services (whether or not for compensation) as an employee, independent contractor, consultant, representative or agent of any person, sole proprietorship, partnership, limited liability company, corporation, association (other than Employer), organization, or other entity (governmental or otherwise) without the prior, written consent of the President and Chief Executive Officer of Employer (or any person expressly designated by the President).

               (F) Costs of Enforcement. Employee shall pay all reasonable legal fees, court costs, expert fees, investigation costs, and other expenses incurred by Employer in any litigation under which Employee is adjudicated to have violated this Section 8.

          8.3 Employee understands and agrees that:

               (A) during the Employment Term, Employee will materially assist Employer in the generation, development or enhancement of certain Confidential Information, Clients and Customers and certain other business assets and activities for Employer; and

               (B) Employee’s promises in this Section 8: (i) were negotiated at arm’s-length and with ample time for Employee to seek the advice of legal counsel, (ii) are required for the fair and reasonable protection of Employer and the Confidential Information, and (iii) do not constitute an unreasonable hardship to Employee in working for Employer or in subsequently earning a livelihood in Employee’s field of expertise outside the Service Area; and

               (C) if Employee breaches (or threatens to breach) any or all of the promises in this Section 8: the privacy and thereby the value of the Confidential Information will be significantly jeopardized; Employer will be subject to the immediate risk of material, immeasurable, and irreparable damage and harm; the remedies at law for Employee’s breach shall be inadequate; and Employer shall therefore be entitled to injunctive relief against Employee in addition to any and all other legal or equitable remedies; and

               (D) if Employee had not agreed to the restrictive promises in this Agreement, Employer would not have signed this Agreement.

          8.4 Employee’s promises, duties and obligations made in this Section 8 shall apply to Employee irrespective of whether a Change in Control (as defined in Section 11.1) occurs and shall survive the voluntary or involuntary cessation or termination of the Employment Term by either Party (for any reason, with or without cause). If any of the restrictions contained in this Section 8 are ever judicially held

45

to exceed the geographic or time limitations permitted by law, then such restrictions shall be deemed to be reformed to comply with the maximum geographic and time limitations permitted by law. The existence of any claim or cause of action by Employee against Employer (whether or not derived from or based upon Employee’s employment with Employer) shall not constitute a defense to Employer’s enforcement of any covenant, duty or obligation of Employee in this Section 8.

     9. Indemnification.

          9.1 Employer hereby indemnifies and saves Employee harmless from and against all claims, liabilities, judgments, decrees, fines, penalties, fees, amounts paid in settlement or any other costs, losses, expenses (including, but not limited to, attorneys’ fees and court costs) directly or indirectly arising or resulting from or in connection or association with any threatened or pending action, suit or proceeding (whether civil, criminal, administrative, investigatory or otherwise) and any appeals related thereto under which Employee is a party or participant because of Employee’s good faith actions or omissions arising from the performance of Employee’s duties and obligations under this Agreement, except for such claims (including court proceedings) brought by the respective Parties against each other.

          9.2 As a condition precedent to the indemnification and other obligations of Employer under this Section 9, Employee must:

               (A) Notify Employer of any actual or potential claim under this Section 9; and

               (B) Authorize and permit Employer, in its sole discretion, to choose any legal counsel to defend or otherwise handle the claim and all proceedings and matters relating thereto; and

               (C) Permit Employer to assume total, complete and exclusive control of the claim and all proceedings and matters relating thereto; and

               (D) Cooperate in all reasonable respects with Employer in handling the claims and all proceedings and matters related thereto.

     10. Miscellaneous.

          10.1 This Agreement constitutes the entire agreement among the Parties with respect to the subject matter hereof and supersedes any and all other prior or contemporaneous agreements or contracts (either oral or written) between the Parties with respect to the subject matter hereof.

          10.2 The invalidity or unenforceability of any particular provision of this Agreement shall not affect its other provisions and this Agreement shall be construed in all respects as if such invalid or unenforceable provision had been omitted.

          10.3 Except as otherwise expressly provided herein, this Agreement shall be binding upon and inure to the benefit of Employer, its successors and assigns and upon Employee, Employee’s administrators, executors, legatees, heirs and assigns. At any time, Employer may assign this Agreement and Employer’s rights, duties, obligations and benefits thereunder to any Subsidiary as defined in Section 11.1(I) of this Agreement.

          10.4 This Agreement shall be construed and enforced under and in accordance with the laws of the State of Ohio; for all litigation arising hereunder, the State Courts of Lorain County, Ohio shall have exclusive venue; and each Party (separately and collectively) hereby submits to the personal jurisdiction of the State Courts of Lorain County, Ohio for all litigation arising under this Agreement.

46

          10.5 All promises, representations, warranties and covenants of the Parties shall survive termination of the Agreement Term, unless otherwise expressly provided herein.

     11. Change in Control.

          11.1 For purposes solely of this Section 11, the following terms shall have the respective meanings set forth below:

               (A) “Bonus Amount” means the highest annual incentive bonus earned by Employee from Employer (or its Subsidiaries) during the last three (3) completed fiscal years of Employer immediately preceding Employee’s Date of Termination (annualized in the event Employee was not employed by Employer or its Subsidiaries for the whole of any such fiscal year).

               (B) “Cause” means any one or more of the following: (i) the willful and continued failure of Employee to perform substantially Employee’s duties with Employer (other than any such failure resulting from Employee’s Disability as defined in Section 11.1(E) of this Agreement or any such failure subsequent to Employee’s being delivered a Notice of Termination without Cause by Employer or after Employee’s delivering a Notice of Termination for Good Reason to Employer) after a written demand for substantial performance is delivered to Employee by Employer’s Board of Directors which specifically identifies the manner in which the Board of Directors believes that Employee has not substantially performed Employee’s duties and provides Employee with ten (10) days to correct such failure, or (ii) the willful engaging by Employee in illegal conduct or gross misconduct which is injurious to Employer or any Subsidiary, or (iii) the conviction of Employee of, or a plea by Employee of nolo contendere to, a felony, or (iv) Employee’s breach of or failure to perform any of the non-competition and non-disclosure covenants contained in Section 8 of this Agreement or contained in any other document signed by Employee and by Employer. For purpose of this paragraph (B), no act or failure to act by Employee shall be considered “willful” unless done or omitted to be done by Employee in bad faith and without reasonable belief that Employee’s action or omission was in the best interests of Employer. Any act or failure to act based upon authority given pursuant to a resolution duly adopted by Employer’s Board of Directors, based upon the advice of counsel for Employer, or based upon the instructions of Employer’s Chief Executive Officer or another senior officer of Employer shall be conclusively presumed to be done, or omitted to be done, by Employee in good faith and in the best interests of Employer.

               (C) “Change in Control” means the occurrence on or before June 20, 2008 of any one of the following events:

(i) if individuals who, on the date of this Agreement, constitute the Board of Directors (the “Incumbent Directors”) of LNB Bancorp, Inc. (herein called “Company”) cease for any reason to constitute at least a majority of Company’s Board of Directors; provided, however, that: (A) any person becoming a director subsequent to the date of this Agreement, whose election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Incumbent Directors then on Company’s Board of Directors (either by a specific vote or by approval of the proxy statement of Company in which such person is named as a nominee for director, without written objection by such Incumbent Directors to such nomination), shall be deemed to be an Incumbent Director, and (B) no individual elected or nominated as a director of Company initially as a result of an actual or threatened election

47

	contest with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of any person other than Company’s Board of Directors shall be deemed to be an Incumbent Director;
(ii)	if any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing twenty percent (20%) or more of the combined voting power of Company’s then-outstanding securities eligible to vote for the election of Company’s Board of Directors (the “Company Voting Securities”); provided, however, that the events described in this clause (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions: (A) by Company or any Subsidiary, (B) by any employee benefit plan sponsored or maintained by Employer or any Subsidiary or by any employee stock benefit trust created by Employer or any Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in clause (iii) of this paragraph (C), below), (E) pursuant to any acquisition by Employee or any group of persons including Employee (or any entity controlled by Employee or by any group of persons including Employee), or (F) a transaction (other than one described in clause (iii) of this paragraph (C), below) in which Company Voting Securities are acquired from Company, if a majority of the Incumbent Directors approves a resolution providing expressly that the acquisition pursuant to this subparagraph (F) does not constitute a Change in Control under this clause (ii);
(iii)	upon the consummation of a merger, consolidation, share exchange or similar form of corporate transaction involving Company or any of its Subsidiaries that requires the approval of Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination: (A) more than fifty percent (50%) of the total voting power of either (x) the corporation resulting from the consummation of such Business Combination (the “Surviving Corporation”) or, if applicable, (y) the ultimate parent corporation that directly or indirectly has beneficial ownership of one hundred percent (100%) of the voting securities eligible to elect directors of the Surviving Corporation (the “Parent Corporation”) is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof

48

is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination, (B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation or any employee stock benefit trust created by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and (C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were Incumbent Directors at the time of the Board of Director’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) of this Section 11.1(C)(iii) shall be deemed to be a “Non-Qualifying Transaction”); or

(iv)

if the shareholders of Company approve a plan of complete liquidation or dissolution of Company or a sale of all or substantially all of Company’s assets but only if, pursuant to such liquidation or sale, the assets of Company are transferred to an entity not owned (directly or indirectly) by Company’s shareholders.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than twenty percent (20%) of Company Voting Securities as a result of the acquisition of Company Voting Securities by Company which reduces the number of Company Voting Securities outstanding; provided, however, that if (after such acquisition by Company) such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control shall then occur. Notwithstanding anything in this Agreement to the contrary, if (1) Employee’s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control, (2) Employee reasonably demonstrates that such termination was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control, and (3) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then (for purposes of this Agreement) the date immediately prior to the date of such termination of employment (or event constituting Good Reason) shall be treated as a Change in Control.

               (D) “Date of Termination” means (1) the effective date on which Employee’s employment by Employer terminates as specified in a prior written notice by Employer or Employee (as the case may be) to the other, or (2) if Employee’s employment by Employer terminates by reason of death, the date of death of Employee, or (3) if the Employee incurs a Disability, the date of such Disability as determined by a physician chosen by Employer. For purposes of determining the timing of payments and benefits to Employee under Section 11.2, the date of the actual Change in Control shall be treated as Employee’s Date of Termination.

49

               (E)     “Disability” means Employee’s inability to perform Employee’s then-existing duties with Employer on a full-time basis for at least one hundred eighty (180) consecutive days as a result of Employee’s incapacity due to physical or mental illness.

               (F)     “Good Reason” means, without Employee’s express written consent, the occurrence of any of the following events after a Change in Control:

(i)	(a) any change in the duties or responsibilities (including reporting responsibilities) of Employee that is inconsistent in any material and adverse respect with Employee’s positions, duties, responsibilities or status with Employer immediately prior to such Change in Control (including any material and adverse diminution of such duties or responsibilities), or (b) a material and adverse change in Employee’s titles or offices with Employer (including, if applicable, membership on Employer’s Board of Directors) from those existing immediately prior to such Change in Control;
(ii)	(a) a reduction by Employer in Employee’s Basic Salary as in effect immediately prior to such Change in Control (or as such Basic Salary may be increased from time to time thereafter), or (b) the failure by Employer to pay Employee an annual bonus in respect of the year in which such Change in Control occurs or any subsequent year in an amount greater than or equal to the annual bonus earned for the year ended prior to the year in which such Change in Control occurs;
(iii)	any requirement of Employer that Employee: (a) be based anywhere more than fifty (50) miles from the office where Employee is located at the time of the Change in Control, or (b) travel on Employer business to an extent substantially greater than the travel obligations of Employee immediately prior to such Change in Control;
(iv)	the failure of Employer to: (a) continue in effect any material employee benefit plan, compensation plan, welfare benefit plan or other material fringe benefit plan in which Employee is participating immediately prior to such Change in Control or the taking of any action by Employer which would materially and adversely affect Employee’s participation in or reduce Employee’s benefits under any such plan, unless Employee is permitted to participate in other plans providing Employee with substantially equivalent benefits in the aggregate, or (b) provide Employee with paid vacation in accordance with the most favorable vacation policies of Employer as in effect for Employee immediately prior to such Change in Control, including the crediting of all service for which Employee had been credited under such vacation policies prior to the Change in Control; or
(v)	the failure of Employer to obtain the assumption (and, if applicable, guarantee) agreement from any successor (and Parent Corporation) as contemplated in Section 11.4(B).

50

Notwithstanding any contrary provision in this Agreement: (1) an isolated, insubstantial and inadvertent action taken in good faith and which is remedied by Employer within ten (10) days after receipt of notice thereof given by Employee shall not constitute Good Reason, and (2) Employee’s right to terminate employment for Good Reason shall not be affected by Employee’s incapacities due to mental or physical illness; and (3) Employee’s continued employment shall not constitute a consent to, or a waiver of rights with respect to, any event or condition constituting Good Reason (provided, however, that Employee must provide notice of termination of employment within thirty (30) days following Employee’s knowledge of an event constituting Good Reason or such event shall not constitute Good Reason under this Agreement).

               (G)  “Qualifying Termination” means a termination of Employee’s employment with Employer after a Change in Control (i) by Employer other than for Cause, or (ii) by Employee for Good Reason. Termination of Employee’s employment on account of death, Disability or Retirement shall not constitute a Qualifying Termination.

               (H) “Retirement ” means the termination of Employee’s employment with Employer: (i) on or after the first of the month coincident with or next following Employee’s attainment of age sixty-five (65), or (ii) on such later date as may be provided in a written agreement between Employer and Employee.

               (I) “Subsidiary” means any corporation or other entity in which Company: (i) has a direct or indirect ownership interest of fifty percent (50%) or more of the total combined voting power of the then-outstanding securities or interests of such corporation or other entity entitled to vote generally in the election of directors, or (ii) has the right to receive fifty percent (50%) or more of the distribution of profits or fifty percent (50%) of the assets upon liquidation or dissolution of such corporation or other entity.

               (J) “Termination Period” means the period of time beginning with a Change in Control and ending two (2) years following such Change in Control.

               (K) “Highest Base Salary” means Employee’s then-current annual base salary (excluding any bonuses) paid to Employee immediately prior to the Date of Termination.

               (L) “Company” means LNB Bancorp, Inc. and its successors.

          11.2 Notwithstanding any contrary provision in Section 7 or in any other Section of this Agreement, if (during the Termination Period) Employee’s employment with Employer terminates pursuant to a Qualifying Termination:

               (A) Employer shall pay to Employee, within twenty (20) days following the Date of Termination, a lump sum cash amount equal to the sum of (i) one hundred fifty percent (150%) of Employee’s Highest Base Salary, as defined in Section 11.1(K), through the Date of Termination, plus (ii) any base salary and bonuses which have been earned through the Date of Termination and are payable, to the extent not theretofore paid or deferred, plus (iii) a pro rata portion of Employee’s annual bonus for the fiscal year in which Employee’s Date of Termination occurs in an amount at least equal to (1) Employee’s Bonus Amount multiplied by (2) a fraction, the numerator of which is the number of days in the fiscal year in which the Date of Termination occurs through the Date of Termination and the denominator of which is three hundred sixty-five (365), and reduced by (3) any amounts paid to Employee by Employer as an executive bonus (pursuant to approval of the Board of Directors) for the fiscal year in which Employee’s Date of Termination occurs, plus (iv) any accrued and unpaid vacation pay.

51

               (B) Notwithstanding any contrary provision in this Section 11.2, Employer’s payments to Employee under this Section 11.2 shall be reduced to the extent that such payments (together with all other payments by Employer to Employee under all other written or verbal agreements between Employer and Employee) constitute an “excess parachute payment” under Section 280G of the Internal Revenue Code (as may be periodically amended).

          11.3 Employer shall withhold from all payments due to Employee (or Employee’s beneficiaries or estate) hereunder all taxes which, by applicable federal, state, local or other law, Employer is required to withhold therefrom.

     11.4   (A) This Section 11 shall not be terminated by any Business Combination. In the event of any Business Combination, the provisions of this Section 11 shall be binding upon the Surviving Corporation and such Surviving Corporation shall be treated as Employer hereunder.

               (B) Employer agrees that, in connection with any Business Combination, Employer will cause any successor entity to Employer unconditionally to assume (and, for any Parent Corporation in such Business Combination, to guarantee), by written instrument delivered to Employee (or Employee’s beneficiaries or estate), all of the obligations of Employer under this Section 11. Failure of Employer to obtain such assumption or guarantee prior to the effectiveness of any such Business Combination that constitutes a Change in Control shall be a breach of this Agreement and shall constitute Good Reason hereunder and, further, shall entitle Employee to compensation and other benefits from Employer in the same amount and on the same terms as Employee would be entitled hereunder as if Employee’s employment were terminated following a Change in Control by reason of a Qualifying Termination. For purposes of implementing this Section 11.4(B), the date on which any such Business Combination becomes effective shall be deemed the date Good Reason occurs and shall be the Date of Termination, if so requested by Employee.

               (C) This Section 11 shall inure to the benefit of and be enforceable by Employee’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If Employee dies while any amounts would have been payable to Employee under this Section 11 if Employee had continued to live, all such amounts (unless otherwise provided herein) shall be paid in accordance with the terms of this Section 11 to such person or persons appointed in writing by Employee to receive such amounts or, if no person is so appointed, to Employee’s estate.

          11.5 In the event of a tender or exchange offer, proxy contest, or the execution of any agreement which, if consummated, would constitute a Change in Control, Employee agrees (as a condition to receiving any payments and benefits under Section 11.2 of this Agreement) not to leave voluntarily the employ of the Employer (other than as a result of Disability, Retirement or an event which would constitute Good Reason if a Change in Control had occurred) until the Change in Control occurs or, if earlier, such tender or exchange offer, proxy contest or agreement is terminated or abandoned.

52

     IN WITNESS WHEREOF, the Parties have set their hands as of the day and year first above written.

In the Presence of:

(Signature of First Witness)	Richard	E. Lucas
		“Employee”
(Signature of Second Witness)
	LNB BANCORP, INC.
	By:
(Signature of First Witness)		Daniel E. Klimas, President
(Signature of Second Witness)
	THE LORAIN NATIONAL BANK
	By:
(Signature of First Witness)		Daniel E. Klimas, President
(Signature of Second Witness)		“Employer”

53

EX-10.2

Exhibit 10.2
STOCK OPTION AGREEMENT
(Non-Qualified Stock Option)

          THIS STOCK OPTION AGREEMENT (this “Agreement”) is made to be effective as of June 27, 2005, by and between LNB Bancorp, Inc., an Ohio corporation (the “Company”) and Frank A. Soltis (the “Optionee”).

WITNESSETH:

               WHEREAS, pursuant to agreed upon initial terms of employment, the Company has agreed to issue to Optionee options to purchase 2,500 of the common shares, $1.00 par value, of the Company (the “Common Shares”); and

               WHEREAS, the Company and the Employee desire to evidence the terms and conditions relating to the initial grant of the options;

          NOW, THEREFORE, in consideration of the premises, the parties hereto make the following agreement, intending to be legally bound thereby:

          1. Defined Terms. When used in this Agreement, the following capitalized terms have the respective meanings set forth in this Section:

(a)	Act: The Securities Exchange Act of 1934, as amended, or any successor thereto.
(b)	Administrator: The Company’s Board of Directors or the Compensation Committee of the Company’s Board of Directors if the Board of Directors has delegated to the Compensation Committee such responsibility.
(c)	Applicable Laws: The requirements relating to the administration of stock options under U.S. state corporate laws, U.S. federal and state securities laws, the Code and any stock exchange, market or quotation system on which the Common Shares are listed or quoted.
(d)	Change in Control: “Change in Control” means the occurrence of any one of the following events:

(i) if individuals who, on the date of this Agreement, constitute the Board of Directors (the “Incumbent Directors”) of LNB Bancorp, Inc. (herein called “Company”) cease for any reason to constitute at least a majority of Company’s Board of Directors; provided, however, that:

(A) any person becoming a director subsequent to the date of this Agreement, whose election or nomination for election was approved by a vote of at least two-thirds (2/3) of the Incumbent Directors then on Company’s Board of Directors (either by a specific vote or by approval of the proxy statement of Company in which such person is named as a nominee for director, without written objection by such Incumbent

54

Directors to such nomination), shall be deemed to be an Incumbent Director, and

(B) no individual elected or nominated as a director of Company initially as a result of an actual or threatened election contest with respect to directors or any other actual or threatened solicitation of proxies by or on behalf of any person other than Company’s Board of Directors shall be deemed to be an Incumbent Director;

(ii) if any “person” (as such term is defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and as used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of Company representing twenty percent (20%) or more of the combined voting power of Company’s then-outstanding securities eligible to vote for the election of Company’s Board of Directors (the “Company Voting Securities”); provided, however, that the events described in this clause (ii) shall not be deemed to be a Change in Control by virtue of any of the following acquisitions:

(A) by Company or any Subsidiary,

(B) by any employee benefit plan sponsored or maintained by Employer or any Subsidiary or by any employee stock benefit trust created by Employer or any Subsidiary,

(C) by any underwriter temporarily holding securities pursuant to an offering of such securities,

(D) pursuant to a Non-Qualifying Transaction (as defined in clause (iii) of this paragraph (C), below),

(E) pursuant to any acquisition by Employee or any group of persons including Employee (or any entity controlled by Employee or by any group of persons including Employee), or

(F) a transaction (other than one described in clause (iii) of this paragraph (C), below) in which Company Voting Securities are acquired from Company, if a majority of the Incumbent Directors approves a resolution providing expressly that the acquisition pursuant to this subparagraph (F) does not constitute a Change in Control under this clause (ii);

(iii) upon the consummation of a merger, consolidation, share exchange or similar form of corporate transaction involving Company or any of its Subsidiaries that requires the approval of Company’s shareholders, whether for such transaction or the issuance of securities in the transaction (a “Business Combination”), unless immediately following such Business Combination:

(A) more than fifty percent (50%) of the total voting power of either (x) the corporation resulting from the consummation of such Business Combination (the “Surviving Corporation”) or, if applicable, (y) the ultimate parent corporation that directly or indirectly has beneficial ownership of one hundred percent (100%) of the voting securities eligible

55

to elect directors of the Surviving Corporation (the “Parent Corporation”) is represented by Company Voting Securities that were outstanding immediately prior to such Business Combination (or, if applicable, represented by shares into which such Company Voting Securities were converted pursuant to such Business Combination), and such voting power among the holders thereof is in substantially the same proportion as the voting power of such Company Voting Securities among the holders thereof immediately prior to the Business Combination,

(B) no person (other than any employee benefit plan sponsored or maintained by the Surviving Corporation or the Parent Corporation or any employee stock benefit trust created by the Surviving Corporation or the Parent Corporation) is or becomes the beneficial owner, directly or indirectly, of twenty percent (20%) or more of the total voting power of the outstanding voting securities eligible to elect directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation), and

(C) at least a majority of the members of the board of directors of the Parent Corporation (or, if there is no Parent Corporation, the Surviving Corporation) were Incumbent Directors at the time of the Board of Director’s approval of the execution of the initial agreement providing for such Business Combination (any Business Combination which satisfies all of the criteria specified in (A), (B) and (C) of this Section 10.1(C)(iii) shall be deemed to be a “Non-Qualifying Transaction”); or

(iv) if the shareholders of Company approve a plan of complete liquidation or dissolution of Company or a sale of all or substantially all of Company’s assets but only if, pursuant to such liquidation or sale, the assets of Company are transferred to an entity not owned (directly or indirectly) by Company’s shareholders. Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any person acquires beneficial ownership of more than twenty percent (20%) of Company Voting Securities as a result of the acquisition of Company Voting Securities by Company which reduces the number of Company Voting Securities outstanding; provided, however, that if (after such acquisition by Company) such person becomes the beneficial owner of additional Company Voting Securities that increases the percentage of outstanding Company Voting Securities beneficially owned by such person, a Change in Control shall then occur.

Notwithstanding anything in this Agreement to the contrary, if

(1) Employee’s employment is terminated prior to a Change in Control for reasons that would have constituted a Qualifying Termination if they had occurred following a Change in Control,

(2) Employee reasonably demonstrates that such termination was at the request of a third party who had indicated an intention or taken steps reasonably calculated to effect a Change in Control, and

(3) a Change in Control involving such third party (or a party competing with such third party to effectuate a Change in Control) does occur, then (for purposes of this Agreement) the date immediately prior to the date of

56

such termination of employment (or event constituting Good Reason) shall be treated as a Change in Control.

(e)

Code: The Internal Revenue Code of 1986, as amended, or any successor thereto.

(f)

Fair Market Value: On a given date, the closing sale price for the Common Shares as reported on any securities exchange, market or quotation system on which the Shares may be listed or quoted on such date or, if no such sale occurred on that date, then for the next preceding date on which a sale was made. If the Shares should be no longer listed or quoted on a securities exchange, market or quotation system, the fair market value shall be determined by an arbitrator mutually acceptable to the Company and the Optionee.

          2. Grant of Option. Subject to adjustment pursuant to Section 4 of this Agreement, the Company hereby grants to the Optionee an option (the “Option”) to purchase 2,500 Common Shares (the “Shares”). The Option is not intended to qualify as an incentive stock option under Section 422 of the Code.

          3. Terms and Conditions of the Option.

               (a) Option Price. The purchase price (the “Option Price”) to be paid by the Optionee to the Company upon the exercise of the Option shall be $16.50 per Share, subject to adjustment as provided in Section 4 of this Agreement.

               (b) Exercise of the Option. Except as otherwise provided in this Agreement, the Option may be exercised by the Optionee as follows:

                    (i) The Option shall vest and become exercisable with respect to 2,500 Shares on the first anniversary of the date hereof. The Option which has become vested and exercisable pursuant to this Section 3 is hereinafter referred to as the “Vested Portion.”

                    (ii) In the event of a Change of Control, any portion of the Option that is not then exercisable shall vest and become exercisable immediately prior to such Change in Control.

                    (iii) Upon the termination of employment of the Optionee other than for cause, any portion of the Option that is not then exercisable shall vest and become exercisable upon the effective date of termination.

          The grant of the Option shall not confer upon the Optionee any right to continue in the employment of the Company or the Bank nor, subject to the provisions of the Employment Agreement, limit in any way the right of the Company or the Bank to terminate the employment of the Optionee at any time.

57

               (c) Method of Exercise of Option. At any time prior to the Expiration Date (as defined in Section 6), the Optionee may exercise all or a portion of the Option by delivering written notice of exercise to the Company, together with payment in full for the Shares in an amount equal to the product of the Option Price multiplied by the number of Shares to be acquired. Such payment may be made in cash or its equivalent (e.g., by check) or in previously issued Common Shares, which Common Shares have been owned by the Optionee for more than six months prior to the date of exercise and shall be valued at Fair Market Value on the date of exercise.

               (d) Tax Withholding. The Company shall be entitled to withhold (or secure payment from the Optionee in lieu of withholding) the amount of any withholding or other payment required under the tax withholding provisions of the Code, any state’s income tax act or any other applicable law with respect to any Shares issuable under the exercised Option.

          4. Adjustments and Changes in the Shares.

          The following provisions shall apply to the Option:

               (a) Generally. If the Company shall at any time after the date hereof (i) declare a dividend on its common shares payable in shares of its capital stock (of any class), (ii) subdivide its outstanding common shares, (iii) combine its outstanding common shares into a smaller number of shares, or (iv) issue any shares of its capital stock in connection with a consolidation or merger in which it is the continuing corporation, the Option Price in effect on the record date for that dividend, or the effective date of that subdivision, combination or merger, and/or the number and kind of shares of capital stock on that date subject to the Option shall be proportionately adjusted so that the Optionee shall be entitled to receive the aggregate number and kind of shares of capital stock which, if the Option had been exercised immediately prior to that date, the Optionee would have owned and been entitled to receive by virtue of that subdivision, combination or merger. The foregoing adjustment shall be made successively whenever any event listed above shall occur.

               (b) Change in Control. In the event of a Change in Control, the Administrator may, but shall not be obligated to, make provision for a cash payment to the Optionee in consideration for the cancellation of the Option which shall equal the excess, if any, of the Fair Market Value of the Shares as of the effective date of such Change in Control over the aggregate Option Price.

               (c) No Restrictions on Company. The grant of the Option alone shall not affect in any way the right of the Company to adjust, reclassify, reorganize, or otherwise change its capital or business structure or to merge, consolidate, dissolve, liquidate or sell or transfer all or any part of its business or assets.

58

          5. Non-Assignability of Option. Unless otherwise permitted by the Administrator, the Option shall not be assignable or otherwise transferable by the Optionee except by will or by the laws of descent and distribution. The Option may not be exercised during the lifetime of the Optionee except by him, his guardian or legal representative.

          6. Exercise After Termination of Employment. Subject to the provisions of this Agreement, the Optionee may exercise all or any part of the Vested Portion of this Option at any time prior to the earliest to occur of:

               (a) the tenth anniversary of the applicable vesting date; or

               (b) one (1) year following the date of the Optionee’s death or Disability (as defined in the Employment Agreement); or

               (c) sixty (60) days following the date of termination of the Optionee’s employment with the Company or the Bank, (i) if the Optionee terminates his employment with the Company or the Bank upon the occurrence of a Change in Control; or

               (d) sixty (60) days following the date of termination of the Optionee’s employment with the Company or the Bank, (i) if the Company or the Bank terminates the Optionee’s employment with the Company or the Bank for Good Reason or Good Cause; or

          Upon the earliest to occur of any of the events described in clauses (a), (b), (c) or (d) above (the “Expiration Date”), the Option shall terminate, and the Optionee shall have no further rights pursuant to this Agreement.

          7. Restrictions on Transfers of Common Shares. The Company may postpone the issuance and delivery of any Shares upon any exercise of the Option until completion of any stock exchange or market listing or registration or other qualification of such Shares under any state or federal law, rule or regulation as the Company may consider appropriate; and may require the Optionee when exercising the Option to make such representations and furnish such information as the Company may consider appropriate in connection with the issuance of the Shares in compliance with applicable legal requirements.

          Shares issued and delivered upon exercise of the Option shall be subject to such restrictions on trading, including appropriate legending of certificates to that effect, as the Company, in its discretion, shall determine are necessary to satisfy applicable legal requirements and obligations.

          8. Conditions Upon Issuance of Shares.

               (a) Legal Compliance. Shares shall not be issued pursuant to the exercise of the Option unless the exercise of such Option and the issuance and delivery of such Shares shall comply with Applicable Laws and shall be further subject to the approval of counsel for the Company with respect to such compliance.

59

               (b) Investment Representations. As a condition to the exercise of the Option, the Administrator may require the person exercising the Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is necessary.

          9. Rights of Optionee. The Optionee shall have no rights as a shareholder of the Company with respect to any of the Shares until (a) the Optionee has given written notice of exercise of the Option, (b) the Optionee has paid the aggregate Option Price in full for such Shares and, if applicable, satisfied any other conditions imposed by the Administrator and (c) the date of issuance of a certificate to the Optionee evidencing such Shares.

          10. Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Ohio without regard to conflict of law provisions.

          11. Rights and Remedies Cumulative. All rights and remedies of the Company and of the Optionee enumerated in this Agreement shall be cumulative and, except as expressly provided otherwise in this Agreement, none shall exclude any other rights or remedies allowed by law or in equity, and each of said rights or remedies may be exercised and enforced concurrently.

          12. Captions. The captions contained in this Agreement are included only for convenience of reference and do not define, limit, explain or modify this Agreement or its interpretation, construction or meaning and are in no way to be construed as a part of this Agreement.

          13. Severability. If any provision of this Agreement or the application of any provision hereof to any person or any circumstance shall be determined to be invalid or unenforceable, then such determination shall not affect any other provision of this Agreement or the application of said provision to any other person or circumstance, all of which other provisions shall remain in full force and effect, and it is the intention of each party to this Agreement that if any provision of this Agreement is susceptible of two or more constructions, one of which would render the provision enforceable and the other or others of which would render the provision unenforceable, then the provision shall have the meaning which renders it enforceable.

          14. Entire Agreement. This Agreement constitutes the entire agreement between the Company and the Optionee in respect of the subject matter of this Agreement. No officer, employee or other servant or agent of the Company, and no servant or agent of the Optionee is authorized to make any representation, warranty or other promise not contained in this Agreement. No change, termination or attempted waiver of any of the provisions of this Agreement shall be binding upon any party hereto unless contained in a writing signed by the party to be charged.

60

          15. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors and assigns (including successive, as well as immediate, successors and assigns) of the Company.

          The Optionee has reviewed this Agreement in its entirety, has had an opportunity to obtain the advice of counsel prior to executing this Agreement and fully understands all provisions of this Agreement. The Optionee hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Administrator upon any questions arising under this Agreement.

          IN WITNESS WHEREOF, the parties hereto have caused this Stock Option Agreement to be executed on the date first above written.

COMPANY:

LNB BANCORP, INC.

By:

Terry M. White, Chief Financial Officer and Corporate Secretary

OPTIONEE:

Frank A. Soltis

61

EX-31.1

Exhibit 31.1

Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification

     I, Daniel K. Klimas, President and Chief Executive Officer of LNB Bancorp, Inc. (the “registrant”) certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of LNB Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

62

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2005

/s/ Daniel E. Klimas

Daniel E. Klimas

President and Chief Executive Officer

63

EX-31.2

Exhibit 31.2

Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification

     I, Terry M. White, Chief Financial Officer of LNB Bancorp, Inc. (the “registrant”) certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of LNB Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation;

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

64

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: November 8, 2005

/s/ Terry M. White

Terry M. White

Chief Financial Officer

65

EX-32.1

Exhibit 32.1

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report, on Form 10-Q of LNB Bancorp, Inc. (the “Corporation”) for the period ending September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Daniel E. Klimas, President and Chief Executive Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Daniel E. Klimas

Daniel E. Klimas

President and Chief Executive Officer

November 8, 2005

66

EX-32.2

Exhibit 32.2

CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ENACTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

          In connection with the Quarterly Report on Form 10-Q of LNB Bancorp, Inc. (the “Corporation”) for the period ending September 30, 2005 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Terry M. White, Chief Financial Officer of the Corporation, certify, pursuant to 18 U.S.C. Section 1350, as enacted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

     (1) The Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

     (2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

/s/ Terry M. White

Terry M. White

Chief Financial Officer

November 8, 2005

67