10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

For the quarterly period ended June 30, 2012

OR

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

For the transition period from             to            

Commission file number: 0-13203

LNB Bancorp, Inc.

(Exact name of the registrant as specified on its charter)

Ohio	34-1406303
(State of Incorporation)	(I.R.S. Employer Identification No.)
457 Broadway, Lorain, Ohio	44052-1769
(Address of principal executive offices)	(Zip Code)

(440) 244-6000

(Registrant’s telephone number, including area code)

Not Applicable

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer	¨	Accelerated filer	¨
Non-accelerated filer	x  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by checkmark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

The number of common shares of the registrant outstanding on August 13, 2012 was 7,944,354.

LNB Bancorp, Inc.

Table of Contents

Part I — Financial Information
Item 1. Financial Statements
Consolidated Balance Sheets June 30, 2012 (unaudited) and December 31, 2011	3
Consolidated Statements of Income (unaudited) for the three and six months ended June  30, 2012 and June 30, 2011	4
Consolidated Statements of Shareholders’ Equity (unaudited) for the six months ended June  30, 2012 and June 30, 2011	5
Consolidated Statements of Cash Flows (unaudited) for the six months ended June  30, 2012 and June 30, 2011	6
Notes to the Consolidated Financial Statements (unaudited)	7
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	28
Item 3. Quantitative and Qualitative Disclosures about Market Risk	46
Item 4. Controls and Procedures	48
Part II — Other Information	48
Item 1. Legal Proceedings	48
Item 1A. Risk Factors	49
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	49
Item 6. Exhibits	49

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Part I — FINANCIAL INFORMATION

Item 1. Financial Statements.

CONSOLIDATED BALANCE SHEETS

	June 30, 2012			December 31, 2011
	(unaudited)
	(Dollars in thousands except share amounts)
ASSETS
Cash and due from banks (Note 3)	$	37,449		$	34,323
Federal funds sold and interest bearing deposits in banks		19,170			6,324
Cash and cash equivalents		56,619			40,647
Securities available for sale, at fair value (Note 5)		228,788			226,012
Restricted stock		5,741			5,741
Loans held for sale		1,207			3,448
Loans:
Portfolio loans (Note 6)		867,459			843,088
Allowance for loan losses (Note 6)		(17,300	)		(17,063	)
Net loans		850,159			826,025
Bank premises and equipment, net		9,308			8,968
Other real estate owned		1,506			1,687
Bank owned life insurance		18,202			17,868
Goodwill, net (Note 4)		21,582			21,582
Intangible assets, net (Note 4)		664			731
Accrued interest receivable		3,604			3,550
Other assets		10,565			12,163
Total Assets	$	1,207,945		$	1,168,422
LIABILITIES AND SHAREHOLDERS’ EQUITY
Deposits: (Note 7)
Demand and other noninterest-bearing	$	143,778		$	126,713
Savings, money market and interest-bearing demand		383,685			359,977
Time deposits		496,090			504,390
Total deposits		1,023,553			991,080
Short-term borrowings (Note 8)		827			227
Federal Home Loan Bank advances (Note 9)		47,495			42,497
Junior subordinated debentures (Note 10)		16,238			16,238
Accrued interest payable		1,007			1,118
Accrued expenses and other liabilities		3,288			3,988
Total Liabilities		1,092,408			1,055,148
Shareholders’ Equity
Preferred stock, Series A Voting, no par value, authorized 150,000 shares, none issued at June 30, 2012 and December 31, 2011.		—			—
Preferred stock, Series B, no par value, $1,000 liquidation value, 25,223 shares authorized and issued at June 30, 2012 and December 31, 2011.		25,223			25,223
Discount on Series B preferred stock		(94	)		(101	)
Warrant to purchase common stock		146			146
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 8,272,548 shares at June 30, 2012 and 8,210,443 at December 31, 2011.		8,272			8,210
Additional paid-in capital		39,689			39,607
Retained earnings		46,227			44,080
Accumulated other comprehensive income		2,166			2,201
Treasury shares at cost, 328,194 shares at June 30, 2012 and at December 31, 2011.		(6,092	)		(6,092	)
Total Shareholders’ Equity		115,537			113,274
Total Liabilities and Shareholders’ Equity	$	1,207,945		$	1,168,422

See accompanying notes to consolidated financial statements.

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Consolidated Statements of Income (unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(Dollars in thousands except share and per share amounts)
Interest and Dividend Income
Loans	$	10,194		$	10,523		$	20,243		$	21,039
Securities:
U.S. Government agencies and corporations		1,281			1,612			2,541			3,089
State and political subdivisions		291			257			578			513
Other debt and equity securities		69			71			141			143
Federal funds sold and interest on deposits in banks		10			9			19			23
Total interest and dividend income		11,845			12,472		$	23,522			24,807
Interest Expense
Deposits		1,527			2,204			3,158			4,487
Federal Home Loan Bank advances		212			261			427			527
Short-term borrowings		—			1			—			2
Junior subordinated debentures		173			170			349			341
Total interest expense		1,912			2,636			3,934			5,357
Net Interest Income		9,933			9,836			19,588			19,450
Provision for Loan Losses (Note 6)		1,667			3,345			3,567			5,445
Net interest income after provision for loan losses		8,266			6,491			16,021			14,005
Noninterest Income
Investment and trust services		425			470			815			873
Deposit service charges		929			1,000			1,864			1,916
Other service charges and fees		804			819			1,552			1,725
Income from bank owned life insurance		169			175			334			349
Other income		58			41			400			120
Total fees and other income		2,385			2,505			4,965			4,983
Securities gains, net		—			88			—			500
Gains on sale of loans		205			238			552			417
Loss on sale of other assets, net		(47	)		(27	)		(99	)		(25	)
Total noninterest income		2,543			2,804			5,418			5,875
Noninterest Expense
Salaries and employee benefits		3,894			4,072			8,005			8,163
Furniture and equipment		877			798			1,709			1,478
Net occupancy		554			588			1,133			1,200
Professional fees		564			445			1,059			931
Marketing and public relations		395			275			642			546
Supplies, postage and freight		265			289			508			561
Telecommunications		172			169			345			384
Ohio franchise tax		307			298			623			596
FDIC assessments		394			399			786			973
Other real estate owned		175			207			307			797
Electronic banking expenses		323			223			561			432
Loan and collection expense		308			310			657			752
Other expense		819			449			1,256			898
Total noninterest expense		9,047			8,522			17,591			17,711
Income before income tax expense		1,762			773			3,848			2,169
Income tax expense		324			61			905			327
Net Income	$	1,438		$	712		$	2,943		$	1,842
Other comprehensive income (loss), net of taxes:
Changes in unrealized securities’ holding gain (loss) net of taxes		357			751			(35	)		1,221
Minimum pension liability adjustment, net of taxes during the period		—			—			—			—
Less: reclassification adjustments for securities’ gains realized in net income, net of taxes	$	—		$	59		$	—		$	333
Total other comprehensive loss, net of taxes		357			692			(35	)		888
Comprehensive income	$	1,795		$	2,730		$	2,908		$	2,730
Dividends and accretion on preferred stock		318			318			637			637
Net Income Available to Common Shareholders	$	1,120		$	394		$	2,306		$	1,205
Net Income Per Common Share (Note 2)
Basic	$	0.14		$	0.05		$	0.29		$	0.15
Diluted		0.14			0.05			0.29			0.15
Dividends declared		0.01			0.01			0.02			0.02
Average Common Shares Outstanding
Basic		7,944,354			7,884,749			7,934,458			7,878,119
Diluted		7,950,528			7,884,934			7,938,383			7,878,224

See accompanying notes to consolidated financial statements

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY (Unaudited)

	Preferred Stock (net of discount)		Warrant  to Purchase Common Stock		Common Stock		Additional Paid-In Capital			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Treasury Stock			Total
	(Dollars in thousands except share and per share amounts)
Balance, January 1, 2011	$	25,107	$	146	$	8,173	$	39,455		$	40,668		$	2,007		$	(6,092	)	$	109,464
Net Income											1,842									1,842
Common dividends declared, $.02 per share											(159	)								(159	)
Preferred dividends and accretion of discount		7									(637	)								(630	)
Net unrealized gains and losses on securities														888						888
Share-based compensation								92												92
Restricted shares granted (40,000 shares)		—		—		40		(40	)		—			—			—			—
Balance, June 30, 2011	$	25,114	$	146	$	8,213	$	39,507		$	41,714		$	2,895		$	(6,092	)	$	111,497
Balance, January 1, 2012	$	25,122	$	146	$	8,210	$	39,607		$	44,080		$	2,201		$	(6,092	)	$	113,274
Net Income											2,943									2,943
Common dividends declared, $.02 per share											(159	)								(159	)
Preferred dividends and accretion of discount		7									(637	)								(630	)
Net unrealized gains and losses on securities														(35	)					(35	)
Share-based compensation								144												144
Restricted shares granted (62,105 shares)		—		—		62		(62	)		—			—			—			—
Balance, June 30, 2012	$	25,129	$	146	$	8,272	$	39,689		$	46,227		$	2,166		$	(6,092	)	$	115,537

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

	Six Months Ended
	June 30, 2012			June 30, 2011
	(Dollars in thousands)
Operating Activities
Net income	$	2,943		$	1,842
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses		3,567			5,445
Depreciation and amortization		559			636
Amortization of premiums and discounts		805			675
Amortization of intangibles		29			67
Amortization of loan servicing rights		181			26
Amortization of deferred loan fees		(501	)		(140	)
Federal deferred income tax expense		197			637
Securities gains, net		—			(500	)
Share-based compensation expense		144			92
Loans originated for sale		(34,330	)		(35,116	)
Proceeds from sales of loan originations		37,123			39,330
Net gain from loan sales		(552	)		(417	)
Net (gain) or loss on sale of other assets		99			25
Net (increase) decrease in accrued interest receivable and other assets		863			(1,339	)
Net decrease in accrued interest payable, taxes and other liabilities		(610	)		(560	)
Net cash provided by operating activities		10,517			10,703
Investing Activities
Proceeds from sales of available-for-sale securities		—			24,664
Proceeds from maturities of available-for-sale securities		75,498			23,826
Purchase of available-for-sale securities		(79,132	)		(56,621	)
Net (increase) decrease in loans made to customers		(27,688	)		(23,843	)
Proceeds from the sale of other real estate owned		594			2,837
Purchase of bank premises and equipment		(1,099	)		(197	)
Net cash used in investing activities		(31,827	)		(29,334	)
Financing Activities
Net increase in demand and other noninterest-bearing		17,065			14,734
Net increase in savings, money market and interest-bearing demand		23,708			19,135
Net decrease in certificates of deposit		(8,300	)		(30,358	)
Net increase (decrease) in short-term borrowings		600			(175	)
Proceeds from Federal Home Loan Bank advances		20,000			15,000
Payment of Federal Home Loan Bank advances		(15,002	)		(15,003	)
Dividends paid		(789	)		(789	)
Net cash provided by financing activities		37,282			2,544
Net increase (decrease) in cash and cash equivalents		15,972			(16,087	)
Cash and cash equivalents, January 1		40,647			48,568
Cash and cash equivalents, June 30	$	56,619		$	32,481
Supplemental cash flow information
Interest paid	$	5,992		$	5,412
Income taxes paid		770			610
Transfer of loans to other real estate owned		677			2,295

See accompanying notes to consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Dollars in thousands except per share amounts)

(1) Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its primary wholly-owned subsidiary, The Lorain National Bank (the “Bank”). The consolidated financial statements also include the accounts of North Coast Community Development Corporation, which is a wholly-owned subsidiary of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnote disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of the Corporation’s management (“Management”), are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the six month period ended June 30, 2012, are not necessarily indicative of the results which may be expected for a full year.

Use of Estimates

LNB Bancorp Inc. prepares its financial statements in conformity with generally accepted accounting principles (GAAP), which 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 valuation of goodwill, the realization of deferred tax assets, fair values of certain securities, mortgage servicing rights, net periodic pension expense, and accrued pension costs recognized in the Corporation’s consolidated 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 assets and liabilities.

Segment Information

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

Statement of Cash Flows

For purposes of reporting in 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 resale agreements are for one day periods.

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 June 30, 2012 and December 31, 2011, the Corporation did not hold any trading securities. Securities that the Corporation has a positive intent and ability to hold to maturity are classified as held to maturity. As of June 30, 2012 and December 31, 2011, the Corporation did not hold any securities classified as held to maturity. Securities that are not classified as trading or held to maturity are classified as available for sale. Securities classified as available for sale are carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. 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.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. When evaluating investment securities,

7

consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to Management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether the Corporation intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If the Corporation decides to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but the Corporation does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Restricted Stock

The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. The Corporation also owns stock in Bankers Bancshares Inc., an institution that provides correspondent banking services to community banks. Stock in these institutions is classified as restricted stock and is recorded at redemption value which approximates fair value. The Corporation periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held For Sale

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. Net unrealized losses are recognized by charges to income. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in the noninterest income section of the consolidated statement of income.

Loans

Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Loans acquired through business combinations are valued at fair market value on or near the date of acquisition. The difference between the principal amount outstanding and the fair market valuation is amortized over the aggregate average life of each class of loan. Unearned income includes deferred 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. Deferred direct loan origination fees and costs are amortized to interest income, over the contractual life of the loan, using the interest method.

Loans are generally placed on nonaccrual status when they are 90 days past due for interest or principal or when the full and timely collection of interest or principal becomes uncertain. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed against interest income. Placement of an account on nonaccrual status includes a reversal of all previously accrued but uncollected interest against interest income. When doubt exists as to the collectability of the principal portion of the loan, payments received must be applied to principal to the extent necessary to eliminate such doubt.

While in nonaccrual status, some or all of the cash interest payments may be treated as interest income on a cash basis as long as the remaining principal (after charge-off of identified losses, if any) is deemed to be fully collectible. The determination as to the ultimate collectability must be supported by a current, well-documented credit evaluation of the borrower’s financial condition and prospects for repayment, including consideration of the borrower’s historical repayment performance and other relevant factors. Generally, a loan is returned to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement and when the collectability is no longer doubtful.

A loan is impaired when full payment of principal and interest under the original loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and

8

installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by Management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

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 general economic conditions, loan portfolio composition, loan loss experience, Management’s evaluation of credit risk relating to pools of loans and individual borrowers, sensitivity analysis and expected loss models, value of underlying collateral, and 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 for loan losses under current economic conditions and such other factors which, in Management’s judgment, deserve current recognition. Additional information can be found in Note 6 (Loans and Allowance for Loan Losses).

Servicing

Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment on a quarterly basis based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

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. Goodwill is tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Corporation tests for goodwill impairment annually as of November 30^th of each year. Core deposit intangible assets are amortized using the straight-line method over ten years and are subject to annual impairment testing.

Other Real Estate Owned

Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Other real estate owned also includes bank premises formerly but no longer used for banking. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs.

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Split-Dollar Life Insurance

The Corporation recognizes a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to certain employees extending to post-retirement periods. Based on the present value of expected future cash flows, the liability is recognized based on the substantive agreement with the employee.

Investment and Trust Services Assets and Income

Property held by the Corporation in fiduciary or agency capacity for its customers is not included in the Corporation’s financial statements as such items are not assets of the Corporation. Income from the Investment and Trust Services Division is reported on an accrual basis.

Income Taxes

The Corporation and its wholly-owned subsidiary file an annual 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. A valuation allowance is recorded when necessary to reduce deferred tax assets to amounts which are deemed more likely than not to be realized.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the pension plan, which are also recognized as separate components of shareholders’ equity.

Unrealized gains on the Corporation’s available-for-sale securities (after applicable income tax expense) totaling $3,984 and $4,019 at June 30, 2012 and December 31, 2011, respectively, and the minimum pension liability adjustment (after applicable income tax benefit) totaling $1,818 for both June 30, 2012 and December 31, 2011 are included in accumulated other comprehensive income.

Preferred Stock

The Corporation is authorized to issue up to 1,000,000 shares of Voting Preferred Stock, no par value. As of June 30, 2011, the Corporation had authorized 150,000 Series A Voting Preferred Shares. No Series A Voting Preferred Shares have been issued.

As of June 30, 2012 and December 31, 2011, 25,223 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) were issued and outstanding. The Board of Directors of the Corporation is authorized to provide for the issuance of one or more series of Voting Preferred Stock and establish the dividend rate, dividend dates, whether dividends are cumulative, liquidation prices, redemption rights and prices, sinking fund requirements, conversion rights, and restrictions on the issuance of any series of Voting Preferred Stock. The Voting Preferred Stock may be issued with conversion rights to common stock and may rank prior to the common stock in dividends, liquidation preferences, or both. In connection with the Corporation’s sale of $25.2 million of its Series B Preferred Stock to United States Department of Treasury (Treasury) in conjunction with the Capital Purchase Program on December 12, 2008. The Corporation also issued a warrant to purchase 561,343 of its common shares at an exercise price of $6.74.

As part of the Treasury’s strategy for winding down its remaining investment in the Troubled Asset Relief Program (TARP), particularly in community banks, the Treasury conducted various public auctions of TARP preferred stock in 2012.

On June 13, 2012, the Corporation and the bank entered into an underwriting agreement (the “Underwriting Agreement”) with the Treasury and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler O’Neill & Partners, L.P. as representatives of the several underwriters named therein (the “Underwriters”) providing for the offer and sale by Treasury of 25,223 shares of the Company’s Series B preferred stock. Under the terms of the Underwriting Agreement, the Underwriters agreed to purchase the Series B preferred stock from Treasury at a price of $856.1325 per share, and to sell the Series B Preferred Stock to the public through a modified dutch auction at an initial public offering price of $869.17 per share. The Corporation did not receive any of the proceeds from the offering. The offering closed on June 19, 2012.

10

Subsequent Event

On July 2, 2012, the Corporation entered into a Warrant Repurchase Agreement to purchase 561,343 shares of common stock of the Corporation that was issued to the United States Department of the Treasury in connection with the Corporation’s participation in the Troubled Asset Relief Program Capital Purchase Program. The Warrant was repurchased at a mutually agreed upon price of $860. Settlement of the repurchase of the Warrant occurred on July 18, 2012. Following settlement of the TARP Warrant, the Treasury has no remaining investment in the Corporation.

New Accounting Pronouncements

ASC Topic 220: Comprehensive Income: Presentation of Comprehensive Income. On June 16, 2011, the FASB issued Accounting Standards Update (ASU) 2011-05. This ASU is intended to increase the prominence of other comprehensive income in financial statements. The new guidance does not change whether items are reported in net income or in other comprehensive income or whether and when items of other comprehensive income are reclassified to net income. ASU 2011-05 eliminates the option in current U.S. generally accepted accounting principles that permits the presentation of other comprehensive income in the statement of changes in equity. The new guidance in the ASU requires that an entity report comprehensive income in either a single continuous statement that presents the components of net income or a separate but consecutive statement. The new guidance is to be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this pronouncement did not have a material impact on the Corporation’s financial statements.

Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. On September 15, 2011 the FASB issued an accounting standards update (ASU) to simplify testing of goodwill for impairment. The changes will reduce complexity and costs by allowing an entity (public or nonpublic) to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. Specifically, an entity will have the option of first assessing qualitative factors (events and circumstances) to determine whether it is more likely than not (meaning a likelihood of more than fifty percent) that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment testing performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Corporation early adopted the ASU for the year ended December 31, 2011 and concluded that a full impairment test was not required. Refer to Note 4, Goodwill and Intangible Assets, for additional information.

FASB ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This amendment was issued as result of an effort to develop common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). While ASU 2011-04 is largely consistent with existing fair value measurement principles under U.S. GAAP, it expands the disclosure requirements for fair value measurements and clarifies the existing guidance or wording changes to align with IRFS No. 13. Many of the requirements for the amendments in ASU 2011-04 do not result in a change in the application of the requirements in ASC 820. ASU 2011-04 was effective for the Corporation on a prospective basis beginning in the quarter ended March 31, 2012. The adoption of this pronouncement did not have a material impact on the Corporation’s financial statements

Reclassification

Certain amounts appearing in the prior year’s financial statements have been reclassified to conform to the current period’s financial statements.

11

(2) Earnings Per Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share is computed based on the weighted average number of shares outstanding plus the effects of dilutive stock options and warrants outstanding during the year. Basic and diluted earnings per share are calculated as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands except per share amounts)
Weighted average shares outstanding used in Basic Earnings per Common Share		7,944,354		7,884,749		7,934,458		7,878,119
Dilutive effect of incentive stock options and warrants		6,174		185		3,925		105
Weighted average shares outstanding used in Diluted Earnings Per Common Share		7,950,528		7,884,934		7,938,383		7,878,224
Net Income	$	1,438	$	712	$	2,943	$	1,842
Dividends and accretion on preferred stock		318		318		637		637
Income Available to Common Shareholders	$	1,120	$	394	$	2,306	$	1,205
Basic Earnings Per Common Share	$	0.14	$	0.05	$	0.29	$	0.15
Diluted Earnings Per Common Share	$	0.14	$	0.05	$	0.29	$	0.15

Options to purchase 232,000 common shares and common stock warrants for 561,343 shares were considered in computing diluted earnings per common share for the three and six month periods ended June 30, 2012. Stock options for 6,174 and 3,925 common shares were considered dilutive and the remaining stock options and the stock warrants were antidilutive for the three and six month periods ended June 30, 2012. Stock options to purchase 197,000 common shares and common stock warrants of 561,343 were considered in computing diluted earnings per common share for the three and six month periods ended June 30, 2011. Stock options to purchase 2,500 common shares were considered dilutive and the remaining stock options and stock warrants were antidilutive for the three and six month periods ended June 30, 2011.

(3) Cash and Due from Banks

Federal Reserve Board regulations require the Bank to maintain reserve balances on deposits with the Federal Reserve Bank of Cleveland. The required ending reserve balance was $1,099 on June 30, 2012 and $690 on December 31, 2011.

(4) Goodwill and Intangible Assets

The Corporation has goodwill of $21,582 primarily from an acquisition completed in 2007. The Corporation assesses goodwill for impairment annually and more frequently in certain circumstances. Goodwill is assessed using the Bank as the reporting unit. The Corporation considers several methodologies in determining the fair value of the reporting unit, including the discounted estimated future net cash flows, price to tangible book value, and core deposit premium values. Primary reliance is placed on the discounted estimated future net cash flow approach. The key assumptions used to determine the fair value of the Corporation subsidiary include: (a) cash flow period of 5 years; (b) capitalization rate of 10.0%; and (c) a discount rate of 13.0%, which is based on the Corporation’s average cost of capital adjusted for the risk associated with its operations. A variance in these assumptions could have a significant effect on the determination of goodwill impairment. The Corporation cannot predict the occurrences of certain future events that might adversely affect the reported value of goodwill. Such events include, but are not limited to, strategic decisions in response to economic and competitive conditions, the effect of the economic environment on the Corporation’s customer base or a material negative change in the relationship with significant customers.

Core deposit intangibles are amortized over their estimated useful life of 10 years. A summary of core deposit intangible assets follows:

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Core deposit intangibles	$	1,367	$	1,367
Less: accumulated amortization		703		636
Carrying value of core deposit intangibles	$	664	$	731

12

(5) Securities

The amortized cost, gross unrealized gains and losses and fair values of securities available for sale at June 30, 2012 and December 31, 2011 is as follows:

	At June 30, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	52,908	$	215	$	(1	)	$	53,122
Mortgage backed securities		114,294		3,355		(278	)		117,371
Collateralized mortgage obligations		25,959		582		—			26,541
State and political subdivisions		29,591		2,164		(1	)		31,754
Total Securities	$	222,752	$	6,316	$	(280	)	$	228,788
	At December 31, 2011
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	56,762	$	120	$	(1	)	$	56,881
Mortgage backed securities		103,624		3,705		(292	)		107,037
Collateralized mortgage obligations		29,537		700		—			30,237
State and political subdivisions		30,000		1,901		(44	)		31,857
Total Securities	$	219,923	$	6,426	$	(337	)	$	226,012

The carrying value of securities pledged to secure trust deposits, public deposits, line of credit, and for other purposes required by law amounted to $173,757 and $137,388 at June 30, 2012 and December 31, 2011 respectively.

The amortized cost and fair value of the debt securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. U.S. Government agencies and corporations include callable and bullet agency issues and agency-backed mortgage backed securities. Mortgage backed securities and collateralized mortgage obligations are not due at a single maturity date and are shown separately.

	At June 30, 2012
	(Dollars in thousands)
	Amortized Cost		Fair Value
Securities available for sale:
Due in one year or less	$	34,404	$	34,523
Due from one year to five years		30,229		30,959
Due from five years to ten years		10,087		11,084
Due after ten years		7,779		8,310
Mortgage backed securities and collateralized mortgage obligations		140,253		143,912
	$	222,752	$	228,788

Realized gains and losses related to securities available-for-sale at June 30, 2012 and 2011 is as follows:

	2012		2011
	(Dollars in thousands)
Gross realized gains	$	—	$	500
Gross realized losses		—		—
Net Securities Gains	$	—	$	500
Proceeds from the sale of available for sale securities	$	—	$	24,664

The following is a summary of securities that had unrealized losses at June 30, 2012 and December 31, 2011. The information is presented for securities that have been in an unrealized loss position for less than 12 months and for more than 12 months. At June 30, 2012 there were 7 securities with unrealized losses totaling $280 and at December 31,

13

2011, the Corporation held 10 securities with unrealized losses totaling $337. Factors that are temporary in nature may result in securities being valued at less than amortized cost. For example, when the current levels of interest rates offered on securities are higher compared to the coupon interest rates on the securities held by the Corporation or when impairment is not due to credit deterioration, securities will be valued at less than amortized cost. The Corporation has the ability and the intent to hold these securities until their value recovers.

	At June 30, 2012
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	9,999	$	(1	)	$	—	$	—	$	9,999	$	(1	)
Mortgage backed securities		25,827		(278	)		—		—		25,827		(278	)
State and political subdivisions		403		(1	)		—		—		403		(1	)
Total	$	36,229	$	(280	)	$	—	$	—	$	36,229	$	(280	)

	At December 31, 2011
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	9,999	$	(1	)	$	—	$	—	$	9,999	$	(1	)
Mortgage backed securities		25,606		(292	)		—		—		25,606		(292	)
State and political subdivisions		3,669		(44	)		—		—		3,669		(44	)
Total	$	39,274	$	(337	)	$	—	$	—	$	39,274	$	(337	)

(6) Loans 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. 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. 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.

The allowance is comprised of a general allowance for unidentified problem loans and a specific allowance for identified problem loans. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. The methodology applies to the Corporation’s total loan portfolio including the performing portion of commercial and commercial real estate loans, real estate, and all types of other loans. The loss factors are applied accordingly 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 collectability of the loan portfolio. These other factors include but are not limited to: changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; changes in national and local economic and business conditions, including the condition of various market segments; changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past due and classified loans, the volume of nonaccrual loans, troubled debt restructurings and other loan modifications; the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and the effect of external factors, such as legal and regulatory requirements, on the level of estimated credit losses in the Corporation’s current portfolio. Specific allowances are established for all impaired loans when Management has determined that, due to identified significant conditions, it is probable that a loss will be incurred.

14

Activity in the loan balances and the allowance for loan losses by segment at June 30, 2012 and June 30, 2011 are summarized as follows:

Six Months Ended June 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,714		$	1,409		$	1,331		$	2,289		$	891		$	429		$	17,063
Losses charged off		(1,319	)		(165	)		(975	)		(555	)		(577	)		(106	)		(3,697	)
Recoveries		30			20			83			15			190			29			367
Provision charged to expense		1,971			(424	)		1,277			397			481			(135	)		3,567
Balance, end of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Three Months Ended June 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,651		$	585		$	1,574		$	2,298		$	807		$	200		$	17,115
Losses charged off		(340	)		(165	)		(508	)		(152	)		(399	)		(57	)		(1,621	)
Recoveries		10			3			16			11			87			12			139
Provision charged to expense		75			417			634			(11	)		490			62			1,667
Balance, end of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
As of June 30, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,181		$	80		$	37		$	—		$	—		$	—		$	3,298
Collectively evaluated for impairment		8,215			760			1,679			2,146			985			217			14,002
Total ending allowance balance	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Loans:
Individually evaluated for impairment	$	28,102		$	306		$	1,161		$	—		$	—		$	—		$	29,569
Collectively evaluated for impairment		370,149			79,155			63,673			126,568			184,892			13,453			837,890
Total ending loans balance	$	398,251		$	79,461		$	64,834		$	126,568		$	184,892		$	13,453		$	867,459
Six Months Ended June 30, 2011
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,127		$	1,317		$	805		$	1,512		$	904		$	471		$	16,136
Losses charged off		(2,092	)		(224	)		(1,026	)		(686	)		(338	)		(245	)		(4,611	)
Recoveries		216			35			10			2			72			46			381
Provision charged to expense		2,430			54			1,460			1,063			283			155			5,445
Balance, end of period	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
Three Months Ended June 30, 2011
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	12,003		$	1,151		$	926		$	1,940		$	902		$	393		$	17,315
Losses charged off		(1,862	)		(224	)		(753	)		(341	)		(143	)		(176	)		(3,499	)
Recoveries		114			4			6			1			47			18			190
Provision charged to expense		1,426			251			1,070			291			115			192			3,345
Balance, end of period	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
As of June 30, 2011
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	5,602		$	166		$	302		$	—		$	—		$	—		$	6,070
Collectively evaluated for impairment		6,079			1,016			947			1,891			921			427			11,281
Total ending allowance balance	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
Loans:
Individually evaluated for impairment	$	35,349		$	771		$	2,126		$	—		$	—		$	—		$	38,246
Collectively evaluated for impairment		351,542			71,908			66,711			130,143			158,885			12,877			792,066
Total ending loans balance	$	386,891		$	72,679		$	68,837		$	130,143		$	158,885		$	12,877		$	830,312

15

Delinquencies

Delinquencies are a sign of weakness in credit quality. Lending staff at the Corporation monitor the financial performance and delinquency of borrowers in its portfolios. Lenders are responsible for managing delinquencies by following up with borrowers and arranging for payments. The Corporation determines if a commercial or commercial real estate loan is delinquent based on the number of days past due according to the contractual terms of the loan. For residential, home equity and consumer loans, the Corporation considers the borrower delinquent if the borrower is in arrears by two or more monthly payments. The following procedure is followed in managing delinquent accounts:

• 15-30 days past due- a collection notice is sent reminding the borrower of past due status and the urgency of bringing the account current.

• 45 days past due- a default letter is sent declaring the loan in default and advising the borrower that legal action will be necessary if the account is not brought current immediately.

• 60 days past due- an “attorney letter” accelerating the loan is sent advising the borrower that legal proceeding to collect the debt will begin immediately.

Management monitors delinquencies and potential problem loans on a recurring basis. At June 30, 2012 there was $27,158 in total past due loans or 3.13% of total loans compared to $31,315 or 3.71% of total loans at December 31, 2011. A table showing total loan delinquencies as of June 30, 2012 and December 31, 2011 by loan segment is as follows:

Age Analysis of Past Due Loans as of June 30, 2012
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90  Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	701	$	425	$	16,435	$	17,561	$	380,690	$	398,251	$	—
Commercial		404		123		491		1,018		78,443		79,461		—
Residential real estate		506		608		3,579		4,693		60,141		64,834		—
Home equity loans		1,342		272		1,386		3,000		123,568		126,568		—
Indirect		518		96		5		619		184,273		184,892
Consumer		60		163		44		267		13,186		13,453		—
Total	$	3,531	$	1,687	$	21,940	$	27,158	$	840,301	$	867,459	$	—

Age Analysis of Past Due Loans as of December 31, 2011
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90  Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	290	$	804	$	19,023	$	20,117	$	361,735	$	381,852	$	—
Commercial		54		249		805		1,108		75,462		76,570		—
Residential real estate		545		1,172		3,554		5,271		59,253		64,524		—
Home equity loans		1,942		181		1,666		3,789		123,169		126,958		—
Indirect		664		71		124		859		179,230		180,089
Consumer		131		12		28		171		12,924		13,095		—
Total	$	3,626	$	2,489	$	25,200	$	31,315	$	811,773	$	843,088	$	—

16

Impaired Loans

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 are evaluated for impairment. Impaired loans are written down by the establishment of a specific allowance where necessary. Interest income recognized on impaired loans while considered impaired was immaterial for the periods reported. Information regarding impaired loans as of June 30, 2012 and June 30, 2011 is as follows:

	At June 30, 2012						Three Months Ended June 30, 2012		Six Months Ended June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	8,241	$	12,981	$	—	$	9,121	$	9,758
Commercial		171		171		—		208		177
Residential real estate		1,089		2,138		—		1,353		1,184
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
With allowance recorded:
Commercial real estate		19,861		21,465		3,181		19,600		19,511
Commercial		135		135		80		313		269
Residential real estate		72		72		37		72		72
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	29,569	$	36,962	$	3,298	$	30,667	$	30,971

	At December 31, 2011						Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	12,585	$	20,138	$	—	$	10,575	$	9,609
Commercial		386		386		—		368		484
Residential real estate		1,069		1,897		—		1,771		2,491
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
With allowance recorded:
Commercial real estate		19,161		19,823		3,747		26,667		28,307
Commercial		319		794		148		531		837
Residential real estate		72		72		37		662		1,041
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	33,592	$	43,110	$	3,932	$	40,574	$	42,769

Nonaccrual loans at June 30, 2012 were $34,993 compared to $34,471 at December 31, 2011.

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Commercial real estate	$	22,456		$	21,512
Commercial		644			1,072
Residential real estate		6,724			6,551
Home equity loans		4,252			4,365
Indirect		530			711
Consumer		387			260
Total Nonaccrual Loans	$	34,993		$	34,471
Percentage of nonaccrual loans to portfolio loans		4.03	%		4.09	%
Percentage of nonaccrual loans to total assets		2.90	%		2.95	%

Troubled Debt Restructuring

A restructuring of a debt constitutes a troubled debt restructuring if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. That concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court. The Corporation adheres to ASC 310-40, Troubled Debt Restructurings by Creditors, to determine whether a troubled debt structuring applies in a particular instance. As of June 30, 2012, the Corporation had five loans that were classified as troubled debt restructurings which totaled $2,972. As of December 31, 2011, the Corporation had

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five loans that were classified as a troubled debt restructuring in the amount of $3,099. The Corporation has allocated $455 and $307 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2012 and December 31, 2011, respectively. There are no commitments to lend additional amounts to borrowers with loans that are classified as troubled debt restructurings at June 30, 2012 and December 31, 2011.

Information regarding TDR loans for the three and six months end June 30, 2012 is as follows:

	For the Six Months Ended June 30, 2012				For the Three Months Ended June 30, 2012
	(Dollars in thousands)				(Dollars in thousands)
	Number of Contracts		Post-Modification Outstanding Recorded Investment		Number of Contracts		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial Real Estate		5	$	2,972		—	$	—

Credit Risk Grading

Sound credit systems, practices and procedures such as credit risk grading systems; effective credit review and examination processes; effective loan monitoring, problem identification, and resolution processes; and a conservative loss recognition process and charge-off policy are integral to Management’s proper assessment of the adequacy of the allowance. Many factors are considered when grades are assigned to individual loans such as current and historic delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. Commercial, commercial real estate and residential construction loans are assigned internal credit risk grades. The loan’s internal credit risk grade is reviewed on at least an annual basis and more frequently if needed based on specific borrower circumstances. Credit quality indicators used in Management’s periodic analysis of the adequacy of the allowance include the Corporation’s internal credit risk grades which are described below and are included in the table below for June 30, 2012 and December 31, 2011:

• Grades 1 -5: defined as “Pass” credits — loans which are protected by the borrower’s current net worth and paying capacity or by the value of the underlying collateral. Pass credits are current or have not displayed a significant past due history.

• Grade 6: defined as “Special Mention” credits — loans where a potential weakness or risk exists, which could cause a more serious problem if not monitored. Loans listed for special mention generally demonstrate a history of repeated delinquencies, which may indicate a deterioration of the repayment abilities of the borrower.

• Grade 7: defined as “Substandard” credits — loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

• Grade 8: defined as “Doubtful” credits — loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable.

• Grade 9: defined as “Loss” credits — loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

For residential, home equity, indirect and consumer loan segments, the Corporation monitors credit quality using a combination of the delinquency status of the loan and/or the Corporation’s internal credit risk grades as indicated above.

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The following table presents the recorded investment of commercial, commercial real estate and residential construction loans by internal credit risk grade and the recorded investment in residential, home equity, indirect and consumer loans based on delinquency status as of June 30, 2012 and December 31, 2011:

	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
Commercial Credit Exposure	June 30, 2012
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1-Minimal	$	—	$	110	$	—	$	—	$	—	$	—	$	110
Grade 2-Modest		—		—		—		—		—		—		—
Grade 3-Better than average		1,566		13		—		—		—		—		1,579
Grade 4-Average		38,195		4,837		232		—		—		—		43,264
Grade 5-Acceptable		319,260		70,231		4,681		—		—		—		394,172
Total Pass Credits		359,021		75,191		4,913		—		—		—		439,125
Grade 6-Special mention		5,789		3,642		46		—		—		—		9,477
Grade 7-Substandard		32,676		628		1,533		—		—		—		34,837
Grade 8-Doubtful		765		—		—		—		—		—		765
Grade 9-Loss		—		—		—		—		—		—		—
Total loans internally credit risk graded		398,251		79,461		6,492		—		—		—		484,204
Loans not monitored by internal risk grade:
Current loans not internally risk graded		—		—		55,181		123,568		184,273		13,186		376,208
30-59 days past due loans not internally risk graded		—		—		506		1,342		518		60		2,426
60-89 days past due loans not internally risk graded		—		—		608		272		96		163		1,139
90+ days past due loans not internally risk graded		—		—		2,047		1,386		5		44		3,482
Total loans not internally credit risk graded		—		—		58,342		126,568		184,892		13,453		383,255
Total loans internally and not internally credit risk graded	$	398,251	$	79,461	$	64,834	$	126,568	$	184,892	$	13,453	$	867,459

	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
Commercial Credit Exposure	December 31, 2011
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1-Minimal	$	—	$	3,157	$	—	$	—	$	—	$	—	$	3,157
Grade 2-Modest		—		—		—		—		—		—		—
Grade 3-Better than average		1,602		19		—		—		—		—		1,621
Grade 4-Average		44,527		5,322		237		—		—		—		50,086
Grade 5-Acceptable		278,458		63,880		4,835		—		—		—		347,173
Total Pass Credits		324,587		72,378		5,072		—		—		—		402,037
Grade 6-Special mention		16,390		2,947		157		—		—		—		19,494
Grade 7-Substandard		40,875		1,245		1,830		—		—		—		43,950
Grade 8-Doubtful		—		—		—		—		—		—		—
Grade 9-Loss		—		—		—		—		—		—		—
Total loans internally credit risk graded		381,852		76,570		7,059		—		—		—		465,481
Loans not monitored by internal risk grade:
Current loans not internally risk graded		—		—		53,276		123,169		179,230		12,924		368,599
30-59 days past due loans not internally risk graded		—		—		545		1,942		664		131		3,282
60-89 days past due loans not internally risk graded		—		—		1,172		181		71		12		1,436
90+ days past due loans not internally risk graded		—		—		2,472		1,666		124		28		4,290
Total loans not internally credit risk graded		—		—		57,465		126,958		180,089		13,095		377,607
Total loans internally and not internally credit risk graded	$	381,852	$	76,570	$	64,524	$	126,958	$	180,089	$	13,095	$	843,088

* Residential loans include conventional 1-4 family residential property loans and conventional 1-4 family residential property loans used to finance the cost of construction when upon completion of construction the loan converts into a permanent mortgage.

The Corporation adheres to underwriting standards consistent with its Loan Policy for indirect and consumer loans. Final approval of a consumer credit depends on the repayment ability of the borrower. Repayment ability generally requires the determination of the borrower’s capacity to meet current and proposed debt service requirements. A borrower’s repayment ability is monitored based on delinquency, generally for time periods of 30 to 59 days past due, 60 to 89 days past due and greater than 90 days past due. This information is provided in the above delinquent loan table. Additionally, a good indicator of repayment ability is a borrower’s credit history. A borrower’s credit history is evaluated though the use of credit reports and/or an automated underwriting system. A borrower’s credit score is an indication of a person’s creditworthiness that is used to access the likelihood that a borrower will repay their debts. A credit score is generally based upon a person’s past credit history and is a number between 300 and 850—the higher the number, the more creditworthy the person is deemed to be.

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(7) Deposits

Deposit balances at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Demand and other noninterest-bearing	$	143,778	$	126,713
Interest checking		165,176		151,894
Savings		111,742		102,440
Money market accounts		106,767		105,643
Consumer time deposits		411,265		424,870
Public time deposits		84,825		79,520
Total deposits	$	1,023,553	$	991,080

The aggregate amount of certificates of deposit in denominations of $100,000 or more amounted to $252,197 and $241,217 at June 30, 2012 and December 31, 2011, respectively.

The maturity distribution of certificates of deposit as of June 30, 2012 follows:

June 30, 2012
(Dollars in thousands)
2013	$	236,598
2014		187,672
2015		34,411
2016		23,157
2017		14,252
Total	$	496,090

(8) Short-Term Borrowings

The Corporation has a line of credit for advances and discounts with the Federal Reserve Bank of Cleveland. The amount of this line of credit varies on a monthly basis. The line is equal to 50% of the balances of qualified home equity lines of credit that are pledged as collateral. At June 30, 2012, the Bank had pledged approximately $100,863 in qualifying home equity lines of credit, resulting in an available line of credit of approximately $50,432. No amounts were outstanding at June 30, 2012 or December 31, 2011. The Corporation also has a $4,000 line of credit with an unaffiliated financial institution. The balance of this line of credit was $0 as of June 30, 2012 and December 31, 2011.

Short-term borrowings include securities sold under repurchase agreements and Federal funds purchased from correspondent banks. Securities sold under repurchase agreements at June 30, 2012 and December 31, 2011 were $827 and $227, respectively. The interest rate paid on these borrowings was 0.25% at June 30, 2012 and December 31, 2011. No Federal Funds were purchased as of June 30, 2012 and December 31, 2011.

(9) Federal Home Loan Bank Advances

Federal Home Loan Bank advances amounted to $47,521 and $42,497 at June 30, 2012 and December 31, 2011, respectively. All advances are bullet maturities with no call features. At June 30, 2012, collateral pledged for FHLB advances consisted of qualified multi-family and residential real estate mortgage loans and investment securities of $78,529 and 27,152, respectively. The maximum borrowing capacity of the Bank at June 30, 2012 was $66,755 with unused collateral borrowing capacity of $17,734. The Bank maintains a $40,000 cash management line of credit (CMA) with the FHLB. The amount outstanding was $0 for the CMA line of credit as of June 30, 2012 and December 31, 2011.

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Maturities of FHLB advances outstanding at June 30, 2012 and December 31, 2011 are as follows.

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Maturity January 2012, fixed rate 2.37%	$	—	$	15,000
Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55%		14,995		15,027
Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76%		32,500		12,470
Total FHLB advances	$	47,495	$	42,497

(10) Trust Preferred Securities

In May 2007, LNB Trust I (“Trust I”) and LNB Trust II (“Trust II”) each sold $10,000 of preferred securities to outside investors and invested the proceeds in junior subordinated debentures issued by the Corporation. The Corporation used the proceeds from the debentures to fund the cash portion of its acquisition of Morgan Bancorp, Inc. Trust I and Trust II are wholly-owned unconsolidated subsidiaries of the Corporation. The Corporation’s obligations under the transaction documents, taken together, have the effect of providing a full guarantee by the Corporation, on a subordinated basis, of the payment obligation of the Trusts.

The subordinated notes mature in 2037. Trust I bears a floating interest rate (current three-month LIBOR plus 148 basis points). Trust II bears a fixed rate of 6.64% through June 15, 2017, and then becomes a floating interest rate (current three-month LIBOR plus 148 basis points). Interest on the notes is payable quarterly. The interest rates in effect as of the last determination date in 2012 were 1.95% and 6.64% for Trust I and Trust II, respectively. At June 30, 2012 and December 31, 2011, accrued interest payable for Trust I was $7 and $7 and for Trust II was $22 and $24, respectively.

The subordinated notes are redeemable in whole or in part, without penalty, at the Corporation’s option on or after June 15, 2012 and mature on June 15, 2037. The notes are junior in right of payment to the prior payment in full of all Senior Indebtedness of the Corporation, whether outstanding at the date of the indenture governing the notes or thereafter incurred. At June 30, 2012, the balance of the subordinated notes payable to Trust I and Trust II were each $8,116.

(11) Commitments, Credit Risk, and Contingencies

In the normal course of business, the Bank enters into commitments that involve 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 evaluation of the applicant’s credit. Collateral held is generally single-family residential real estate and commercial real estate. Substantially all of the obligations to extend credit are variable rate. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Payments under 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.

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A summary of the contractual amount of commitments at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Commitments to extend credit	$	78,859	$	92,128
Home equity lines of credit		75,279		78,410
Standby letters of credit		8,335		8,145
Total	$	162,473	$	178,683

(12) Estimated Fair Value of Financial Instruments

The Corporation discloses estimated fair values for its financial instruments. Fair value estimates, methods and assumptions are set forth below for the Corporation’s financial instruments.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

• The carrying value of cash and due from banks, Federal funds sold, short-term investments, interest-bearing deposits in other banks and accrued interest receivable and other financial assets is a reasonable estimate of fair value due to the short-term nature of the asset.

• The fair value of investment securities is based on quoted market prices, where available. If quoted market prices are not available, fair value is estimated using the quoted market prices of comparable instruments.

• For variable rate loans with interest rates that may be adjusted on a quarterly, or more frequent basis, the carrying amount is a reasonable estimate of fair value. The fair value of other types of loans is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

• The carrying value approximates the fair value for bank owned life insurance.

• The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market, checking and interest-bearing checking, is equal to the amount payable on demand as of the balance sheet date, for each year presented. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. For variable rate certificates of deposit, the carrying amount is a reasonable estimate of fair value.

• Securities sold under repurchase agreements, other short-term borrowings, accrued interest payable and other financial liabilities approximate fair value due to the short-term nature of the liability.

• The fair value of Federal Home Loan Bank advances is estimated by discounting future cash flows using current FHLB rates for the remaining term to maturity.

• The fair value of junior subordinated debentures is based on the discounted value of contractual cash flows using rates currently offered for similar maturities.

• The fair value of commitments to extend credit approximates the fees charged to make these commitments; since rates and fees of the commitment contracts approximates those currently charged to originate similar commitments. The carrying amount and fair value of off-balance sheet instruments is not significant as of June 30, 2012 and December 31, 2011.

Limitations

Estimates of fair value are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Estimates of fair value are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Corporation has a substantial Investment and Trust Services Division that

22

contributes net fee income annually. The Investment and Trust Services Division is not considered a financial instrument and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities that are not considered financial instruments include property, plant and equipment, goodwill and deferred tax liabilities. In addition, it is not practicable for the Corporation to estimate the tax ramifications related to the realization of the unrealized gains and losses and they have not been reflected in any of the estimates of fair value. The impact of these tax ramifications can have a significant effect on estimates of fair value.

The estimated fair values of the Corporation’s financial instruments at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012				December 31, 2011
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
			(Dollars in thousands)
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$	56,619	$	56,619	$	40,647	$	40,647
Securities		228,788		228,788		226,012		226,012
Portfolio loans, net		850,159		848,393		826,025		825,662
Loans held for sale		1,207		1,207		3,448		3,448
Accrued interest receivable		3,604		3,604		3,550		3,550
Financial liabilities
Deposits:
Demand, savings and money market	$	527,463		527,463		486,690		486,690
Certificates of deposit		496,090		500,265		504,390		509,449
Total deposits		1,023,553		1,027,728		991,080		996,139
Short-term borrowings		827		827		227		227
Federal Home Loan Bank advances		47,495		48,671		42,497		43,824
Junior subordinated debentures		16,238		16,645		16,238		16,130
Accrued interest payable		1,007		1,007		1,118		1,118

The fair value of financial assets and liabilities is categorized in three levels. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. These levels are:

• Level 1 —Valuations based on quoted prices in active markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

• Level 2 —Valuations of assets and liabilities traded in less active dealer or broker markets. Valuations include quoted prices for similar assets and liabilities traded in the same market; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

• Level 3 —Assets and liabilities with valuations that include methodologies and assumptions that may not be readily observable, including option pricing models, discounted cash flow models, yield curves and similar techniques. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities, but in all cases are corroborated by external data, which may include third-party pricing services.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporation’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

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The following information pertains to assets measured by fair value on a recurring basis (in thousands):

Description	Fair Value as of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	53,122	$	—	$	53,122	$	—
Mortgage backed securities		117,371		—		117,371		—
Collateralized mortgage obligations		26,541		—		26,541		—
State and political subdivisions		31,754		—		31,754		—
Total	$	228,788	$	—	$	228,788	$	—

Description	Fair Value as of December 31, 2011		Quoted Prices in  Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	56,881	$	—	$	56,881	$	—
Mortgage backed securities		107,037		—		107,037		—
Collateralized mortgage obligations		30,237		—		30,237		—
State and political subdivisions		31,857		—		31,857		—
Total	$	226,012	$	—	$	226,012	$	—

There were no transfers between Levels 1 and 2 of the fair value hierarchy during the three and six months ended June 30, 2012. For the available for sale securities, the Corporation obtains fair value measurements from an independent third party service and or from independent brokers.

The following tables present the balances of assets and liabilities measured at fair value on a nonrecurring basis at June 30, 2012 and December 31, 2011:

June 30, 2012	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	29,569	$	29,569
Other real estate		—		—		1,506		1,506
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	31,075	$	31,075
December 31, 2011	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	33,592	$	33,592
Other real estate		—		—		1,687		1,687
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	35,279	$	35,279

The Corporation has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. The fair value of collateral-dependent impaired loans and other real estate owned is determined through the use of an independent third-party appraisal (Level 3 input), once a loan is identified as impaired or the Corporation takes ownership of a property. The Corporation maintains a disciplined approach of obtaining updated independent third-party appraisals relating to such loans or property on at least an annual basis, at which time the determination of fair value is updated as necessary to reflect the appraisal. In addition, Management reviews the fair value of those collateral-dependent impaired loans in amounts that it considers to be material ($250,000 or greater) on a monthly basis and makes necessary adjustments to the fair value based on individual facts and circumstances, which review may include obtaining new third-party appraisals.

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Mortgage Servicing Rights (MSR). The Corporation carries its mortgage servicing rights at lower of cost or fair value, and therefore, can be subject to fair value measurements on a nonrecurring basis. Since sales of mortgage servicing rights occur in private transactions and the precise terms and conditions of the sales are typically not readily available (Level 3), there is a limited market to refer to in determining the fair value of mortgage servicing rights. As such the Corporation utilizes a third party vendor to perform a valuation on the mortgage servicing rights to estimate the fair value. The Corporation reviews the estimated fair values and assumptions used by the third party vendor on a quarterly basis.

Impaired Loans. Impaired loans valued using Level 3 inputs consist of non-homogeneous loans that are considered impaired. The Corporation estimates the fair value of these loans based on the estimated realizable values of available collateral, which is typically based on current independent third-party appraisals.

Other Real Estate Owned. Other real estate owned (“OREO”) is measured and reported at fair value when the current book value exceeds the estimated fair value of the property. Management’s determination of the fair value for these loans uses a market approach representing the estimated net proceeds to be received from the sale of the property based on observable market prices and market value provided by independent, licensed or certified appraisers (Level 3 Inputs).

(13) Share-Based Compensation

A broad-based stock option incentive plan, the 2006 Stock Incentive Plan, was originally adopted by the Corporation’s shareholders on April 18, 2006 and an amended and restated version of the plan was adopted by shareholders effective May 2, 2012. As of June 30, 2012, outstanding awards granted under this Plan consisted of stock options granted in 2007, 2008 and 2009 and long-term restricted shares issued in 2010, 2011 and 2012 In addition, the Corporation has nonqualified stock option agreements outside of the 2006 Stock Incentive Plan. Grants under the nonqualified stock option agreements have been made from 2005 to 2007.

Stock Options

The expense recorded for stock options was $1 and $0 for the first six months of June 30, 2012 and June 30, 2011, respectively. The maximum option term is ten years and the options generally vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years.

The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	2012
Risk free interest rate		1.27	%
Dividend yield		3.38	%
Volatility		33.00	%

The weighted-average fair value of options granted in 2012 was $5.39.

Options outstanding at June 30, 2012 were as follows:

	Outstanding				Exercisable
	Number		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39		37,500		9.41		2,500	$	5.34
$14.47-$15.34		82,000		5.60		82,000		14.47
$15.35-$16.50		52,500		4.71		52,500		15.78
$16.51-$19.10		30,000		3.59		30,000		19.10
$19.11-$19.17		30,000		2.59		30,000		19.17
Outstanding at end of period		232,000		5.37		197,000	$	16.12

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A summary of the status of stock options at June 30, 2012 and June 30, 2011 and changes during the six months then ended is presented in the table below:

	2012				2011
	Options		Weighted Average Exercise Price per Share		Options		Weighted Average Exercise Price per Share
Outstanding at beginning of period		197,000	$	16.12		197,000	$	16.12
Granted		35,000		5.39		—		—
Forfeited or expired		—		—		—		—
Exercised		—		—		—		—
Stock dividend or split		—		—		—		—
Outstanding at end of period		232,000	$	14.50		197,000	$	16.12
Exercisable at end of period		197,000	$	16.12		196,167	$	16.17

There were no options exercised during the first six months of 2012, therefore the total intrinsic value of options exercised was $0. The total intrinsic value of all options outstanding for the first six months of 2012 was $0.

A summary of the status of nonvested stock options at June 30, 2012 is presented in the table below:

	Nonvested Shares		Weighted Average Exercise Price per share
Nonvested at January 1, 2012		833	$	5.34
Granted		35,000		5.39
Vested		833		5.34
Forfeited or expired		—		—
Nonvested at March 31, 2012		35,000	$	5.39

Restricted Shares

In the first quarter of 2012, the Corporation issued 62,105 shares of long-term restricted stock. The market price of the Corporation’s common shares on the date of grant of the long-term restricted stock was $5.39 per share. In 2011, the Corporation issued 40,000 shares of long-term restricted stock, 2,500 of which were forfeited by the recipients due to employee terminations. The market price of the Corporation’s common shares on the date of grant of the long-term restricted shares was $5.28 per share. Shares of long-term restricted stock generally vest in two equal installments on the second and third anniversaries of the date of grant, or upon the earlier death or disability of the recipient or a qualified change of control of the Corporation. The expense recorded for long-term restricted stock for the six months ended June 30, 2012 and 2011 was $144 and $92, respectively.

The market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of restricted stock awards. A summary of the status of restricted shares at June 30, 2012 is presented in the table below:

	2012
	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2012		124,352		$	4.68
Granted		62,105			5.39
Forfeited or expired		—			—
Vested		(33,749	)		4.35
Nonvested at March 31, 2012		152,708		$	5.04

26

Stock Appreciation Rights (“SAR”)

In 2006, the Corporation issued an aggregate of 30,000 stock appreciation rights (“SAR”) at $19.00 per share, 15,500 of which have expired due to employee terminations. The SAR vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years. Any unexercised portion of the SAR shall expire at the end of the stated term which is decided at the date of grant and shall not exceed ten years. The SAR issued in 2006 will expire in January 2016. The expense recorded for SAR for the first half of 2012 and 2011 was $2 and $0.

27

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

The following commentary presents a discussion and analysis of the Corporation’s financial condition and results of operations by its management (“Management”). This Management’s Discussion and Analysis (“MD&A”) section discusses the financial condition and results of operations of the Corporation for the three and six month periods ended June 30, 2012. This MD&A should be read in conjunction with the financial information contained in the Corporation’s Form 10-K for the fiscal year ended December 31, 2011 and in the accompanying consolidated financial statements and notes contained in this Form 10-Q. The objective of this financial review is to enhance the reader’s understanding of the accompanying tables and charts, the consolidated financial statements, notes to the financial statements and financial statistics appearing elsewhere in the report. Where applicable, this discussion also reflects Management’s insights as to known events and trends that have or may reasonably be expected to have a material effect on the Corporation’s operations and financial condition.

Summary

The Corporation is a bank holding company headquartered in Lorain, Ohio, deriving substantially all of its revenue from 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, Erie, Cuyahoga and Summit counties in Ohio.

Net income was $1,438 for the second quarter of 2012 as compared to second quarter 2011. Net income available to common shareholders was $1,120 or $0.14 per diluted common share. This compares to net income available to common shareholders of $394 or $0.05 per diluted common share for the second quarter of 2011.

Net interest income on a fully taxable equivalent (FTE) basis for the second quarter of 2012 was $10,093 a 1.2% increase, compared to $9,969 for the second quarter of 2011. A favorable change in the mix of average earning assets was partially offset by the effect of record lower market interest rates and as a result, the net interest margin was 3.61% compared to 3.64% for the second quarter of 2011. Net interest income FTE for the six months ended June 30, 2012 was $19,903, an increase of $195 compared to one year ago.

The provision for loan losses was $1,667 for the quarter ended June 30, 2012 compared to $3,345 for the quarter ended June 30, 2011.

Noninterest income in the second quarter totaled $2,543 compared to $2,804 for the second quarter of 2011. Deposit service charges for the quarter were $929, a decrease of $71, or 7.1%, from prior year largely due to new regulations implemented as a part of the Dodd-Frank Act. Other service charges and fees were also down due to regulations affecting debit card and merchant interchange fees. Gains on the sale of loans decreased $33 for the second quarter of 2012 compared to the same period a year ago as the Corporation elected to book more indirect consumer loans into its portfolio. Trust income decreased by $45, or 9.6%, from a year ago primarily as a result of lower account balances in trust accounts under management.

Noninterest expense was $9,047 for the second quarter of 2012, compared to $8,522 for the second quarter of 2011, an increase of $525, or 6.2%. The increase is primarily a result of two completed initiatives during the quarter. The first of these initiatives was the Treasury’s sale of the Corporation’s TARP preferred stock to private investors through an auction process, which resulted in a $200 charge for legal and administrative expenses. The second initiative was the conversion of our bank operating system which resulted in over $300 of related costs. Other real estate owned expenses were $175, a decrease $32 of 15.5% from the second quarter in 2011. The efficiency ratio, which is a measure of the cost to generate revenue, increased from 66.72% in the second quarter of 2011 to 71.6% in the second quarter of 2012 namely due to the two completed projects during the quarter.

During the second quarter of 2012, loan demand continued to be strong as total portfolio loans ended the quarter at $867,459, a 2.9% increase compared to $843,088 at December 31, 2011. Total assets for the second quarter ended at $1,207,945 compared to $1,168,422 at the end of 2011. Total deposits grew to $1,023,553 at the end of the second quarter of 2012, up from $991,080 at December 31, 2011. The growth in deposits primarily came in the form of core deposits, resulting in lower funding costs which helped to mitigate downward pressure on the net interest margin during the quarter. However, due to the persistently low interest rate environment a decline in net interest margin was realized.

28

As the economic recovery remains soft with a high level of unemployment, a significant factor impacting asset quality has been the continued lower market valuation of the underlying real estate collateral. Given the current economic conditions, the Corporation continues to work through asset quality challenges. The level of the Corporation’s criticized and classified loans continued to improve and the non-performing loans totaled $34,993 at June 30, 2012, or 4.0% of total loans, a slight increase from $34,471, or 4.1%, at December 31, 2011.

The allowance for possible loan losses was $17,300 at June 30, 2012 compared to $17,063 at December 31, 2011, equaling 1.99% of total loans at June 30, 2012 compared to 2.02% at December 31, 2011. Annualized net charge-offs to average loans for the six months ended June 30, 2012 was 0.77% compared to 1.71% for December 31, 2011.

29

Table 1: Condensed Consolidated Average Balance Sheets

Interest, Rate, and Rate/ Volume differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

Table 1 presents the condensed average balance sheets for the three months ended June 30, 2012 and 2011. Rates are computed on a tax equivalent basis and nonaccrual loans are included in the average loan balances.

	Three Months Ended June 30,
	2012									2011
	Average Balance			Interest			Rate			Average Balance			Interest			Rate
	(Dollars in thousands)
Assets:
U.S. Govt agencies and corporations	$	194,781		$	1,281			2.64	%	$	219,146		$	1,612			2.95	%
State and political subdivisions		31,695			417			5.29			25,282			370			5.89
Federal funds sold and short-term investments		20,821			10			0.18			29,183			9			0.11
Restricted stock		5,741			69			4.85			5,741			71			4.96
Commercial loans		486,061			6,001			4.97			453,346			5,970			5.28
Residential real estate loans		53,945			721			5.38			61,962			852			5.51
Home equity lines of credit		108,071			1,111			4.13			109,228			1,062			3.90
Installment loans		221,803			2,397			4.35			195,167			2,659			5.46
Total Earning Assets	$	1,122,918		$	12,007			4.30	%	$	1,099,055		$	12,605			4.60	%
Allowance for loan loss		(17,491	)								(17,995	)
Cash and due from banks		35,062									23,423
Bank owned life insurance		18,092									17,380
Other assets		47,716									53,112
Total Assets	$	1,206,297								$	1,174,975
Liabilities and Shareholders’ Equity
Consumer time deposits	$	427,491		$	1,298			1.22	%	$	464,623		$	1,947			1.68	%
Public time deposits		72,387			100			0.55			59,782			64			0.43
Money market accounts		108,104			49			0.18			100,383			82			0.33
Savings deposits		110,654			29			0.11			96,978			40			0.17
Interest-bearing demand		167,287			51			0.12			155,806			74			0.19
Short-term borrowings		903			—			0.22			855			—			0.22
FHLB advances		47,494			212			1.79			42,499			260			2.45
Trust preferred securities		16,327			173			4.27			16,324			169			4.16
Total Interest-Bearing Liabilities	$	950,647		$	1,912			0.81	%	$	937,250		$	2,636			1.13	%
Noninterest-bearing deposits		136,506									120,731
Other liabilities		3,863									5,499
Shareholders’ Equity		115,281									111,495
Total Liabilities and Shareholders’ Equity	$	1,206,297								$	1,174,975
Net Interest Income (FTE)				$	10,095			3.61	%				$	9,969			3.64	%
Taxable Equivalent Adjustment					(161	)		(0.06	)					(132	)		(0.05	)
Net Interest Income Per Financial Statements				$	9,933								$	9,836
Net Yield on Earning Assets								3.55	%								3.59	%

30

Results of Operations

Three Months Ended June 30, 2012 versus Three Months Ended June 30, 2011 Net Interest Income Comparison

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 79.62% of the Corporation’s revenues for the three months ended June 30, 2012. 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. The Corporation reviews net interest income on a fully taxable equivalent (FTE) basis, which presents interest income with an adjustment for tax-exempt interest income on an equivalent pre-tax basis assuming a 34% statutory Federal tax rate. These rates may differ from the Corporation’s actual effective tax rate. The net interest margin is net interest income as a percentage of average earning assets.

Net interest income, before provision for loan losses, was $9,933 for the second quarter of 2012 compared to $9,836 during the same quarter of 2011. Adjusting for tax-exempt income, net interest income FTE, before provision for loan losses, for the second quarter of 2012 and 2011 was $10,093 and $9,969, respectively. The net interest margin FTE, determined by dividing tax equivalent net interest income by average earning assets, was 3.61% for the three months ended June 30, 2012 compared to 3.64% for the three months ended June 30, 2011.

Average earning assets for the second quarter of 2012 were $1,122,918. This was an increase of $23,863, or 2.2%, compared to the same quarter last year. The current prolonged period of lower market interest rates has impacted the yield on average earning assets, which totaled 4.30% in the second quarter of 2012 compared to 4.60% for the same period a year ago. The yield on average loans during the second quarter of 2012 was 4.73%, which was 44 basis points lower than the yield on average loans during the second quarter of 2011 of 5.16%. Interest income from securities was $1,697 (FTE) for the three months ended June 30, 2012, compared to $1,982 during the second quarter of 2011. The yield on average securities was 3.0% and 3.3% for these periods, respectively.

The cost of interest-bearing liabilities was 0.81% during the second quarter of 2012 compared to 1.11% during the same period in 2011. This decrease is primarily due to an improved deposit mix with noninterest bearing accounts of $136,506, an increase of 13.07% when compared to the same period a year ago. Total average interest-bearing liabilities for the quarter ended June 30, 2012 increased $13,397, or 1.4%, compared to June 30, 2011. Average core deposits for the quarter ended June 30, 2011 increased $24,126, or 2.42%, compared to the same period of 2011. The average cost of trust preferred securities was 4.27% for the second quarter of 2012, compared to 4.16% for the second quarter of 2011. One half of the Corporation’s outstanding trust preferred securities accrues dividends at a fixed rate of 6.64% and the other half accrues dividends at LIBOR plus 1.48%.

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. Table 2 is an analysis of the changes in interest income and expense between the quarters ended June 30, 2012 and June 30, 2011. The table is presented on a fully tax-equivalent basis.

31

Table 2: Rate/Volume Analysis of Net Interest Income (FTE)

	Three Months Ended June 30,
	Increase (Decrease) in Interest Income/Expense in 2012 over 2011
	Volume			Rate			Total
	(Dollars in thousands)
U.S. Govt agencies and corporations	$	(160	)	$	(172	)	$	(332	)
State and political subdivisions		84			(37	)		47
Federal funds sold and interest-bearing deposits in banks		(4	)		4			—
Restricted stock		—			(2	)		(2	)
Commercial loans		404			(373	)		31
Residential real estate loans		(107	)		(23	)		(130	)
Home equity lines of credit		(12	)		61			49
Installment loans		288			(550	)		(262	)
Total Interest Income		493			(1,092	)		(599	)
Consumer time deposits		(113	)		(536	)		(649	)
Public time deposits		24			12			36
Money market accounts		4			(37	)		(33	)
Savings deposits		4			(15	)		(11	)
Interest bearing demand		3			(26	)		(23	)
Short-term borrowings		—			—			—
FHLB advances		22			(70	)		(48	)
Trust preferred securities		—			5			5
Total Interest Expense		(56	)		(667	)		(723	)
Net Interest Income (FTE)	$	549		$	(425	)	$	124

Net interest income (FTE) for the second quarter 2012 and 2011 was $10,093 and $9,969, respectively. Interest income (FTE) for the second quarter of 2012 decreased $599 in comparison to the same period in 2011. This decrease is primarily attributable to a $1,092 decrease due to rate and an increase of $493 due to volume. Interest income on securities of U.S. Government agencies and corporations decreased $332, mainly as a result of the continued low interest rate environment and lower volume due to funding a portion of the loan growth. Interest income on commercial loans increased $31, primarily due to increasing loan demand offsetting lower interest rates. The $130 decrease in interest income on real estate mortgage loans was primarily attributable to the refinancing in the existing seasoned mortgage portfolio given the low interest rate environment and the Corporation’s practice of selling new mortgage production into the secondary market. During the second quarter the Corporation began booking selected 15 year fixed mortgage loan product in lieu of selling them in the secondary market.

The $649 decrease in consumer time deposits was due primarily to lower market interest rates and a reduction in volume as some of these funds flowed into core deposit transaction accounts at lower costs. Total interest expense decreased $723, with the decrease being attributable to a $667 decrease due to rate and a decrease due to volume of $56. Overall, the total increase in net interest income (FTE) of $124 was mainly attributable to an increase in volume of $549 offset by a $425 reduction due to rate which is the difference between interest income and interest expense.

32

Table 3: Condensed Consolidated Average Balance Sheets

Interest, Rate, and Rate/ Volume differentials are stated on a Fully-Tax Equivalent (FTE) Basis.

Table 3 presents the condensed average balance sheets for the six months ended June 30, 2012 and 2011. Rates are computed on a tax equivalent basis and nonaccrual loans are included in the average loan balances.

	Six Months Ended June 30,
	June 30, 2012									June 30, 2011
	Average Balance			Interest			Rate			Average Balance			Interest			Rate
	(Dollars in thousands)
Assets:
U.S. Govt agencies and corporations	$	192,850		$	2,541			2.65	%	$	209,418		$	3,089			3.00	%
State and political subdivisions		31,804			828			5.23			24,848			739			6.13
Federal funds sold and short-term investments		14,751			19			0.18			36,208			23			0.13
Restricted stock		5,741			141			4.94			5,741			143			5.09
Commercial loans		480,782			11,857			4.96			450,778			11,807			5.28
Residential real estate loans		54,266			1,442			5.35			63,305			1,766			5.73
Home equity lines of credit		107,692			2,158			4.03			109,291			2,129			3.96
Installment loans		220,382			4,851			4.43			194,506			5,368			5.67
Total Earning Assets	$	1,108,268		$	23,837			4.33	%	$	1,094,095		$	25,064			4.64	%
Allowance for loan loss		(17,330	)								(17,240	)
Cash and due from banks		34,351									20,295
Bank owned life insurance		18,009									17,293
Other assets		48,078									53,504
Total Assets	$	1,191,376								$	1,167,947
Liabilities and Shareholders’ Equity
Consumer time deposits	$	422,970		$	2,694			1.28	%	$	466,746		$	3,960			1.74	%
Public time deposits		78,581			199			0.51			63,216			139			0.46
Money market accounts		106,500			103			0.19			99,175			166			0.35
Savings deposits		107,672			62			0.12			95,032			78			0.17
Interest-bearing demand		161,791			100			0.12			149,835			145			0.20
Short-term borrowings		724			—			0.13			880			1			0.25
FHLB advances		47,276			427			1.82			42,500			527			2.54
Trust preferred securities		16,326			349			4.31			16,323			341			4.24
Total Interest-Bearing Liabilities	$	941,840		$	3,934			0.84	%	$	933,707		$	5,357			1.19	%
Noninterest-bearing deposits		130,619									118,409
Other liabilities		4,199									5,046
Shareholders’ Equity		114,718									110,785
Total Liabilities and Shareholders’ Equity	$	1,191,376								$	1,167,947
Net interest Income (FTE)				$	19,903			3.61	%				$	19,707			3.63	%
Taxable Equivalent Adjustment					(316	)		(0.06	)					(257	)		(0.05	)
Net Interest Income Per Financial Statements				$	19,588								$	19,450
Net Yield on Earning Assets								3.55	%								3.58	%

Six Months Ended June 30, 2012 versus Six Months Ended June 30, 2011 Net Interest Income Comparison

Net interest income accounted for 78.33% of the Corporation’s revenues for the six months ended June 30, 2012. 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. The Corporation reviews net interest income on a fully taxable equivalent (FTE) basis, which presents interest income with an adjustment for tax-exempt interest income on an equivalent pre-tax basis assuming a 34% statutory Federal tax rate. These rates may differ from the Corporation’s actual effective tax rate. The net interest margin is net interest income as a percentage of average earning assets.

33

Net interest income, before provision for loan losses, was $19,588 for the first half of 2012 compared to $19,450 during the same period of 2011. Adjusting for tax-exempt income, net interest income FTE, for the first half of 2012 and 2011 was $19,903 and $19,707, respectively. The net interest margin FTE, determined by dividing tax equivalent net interest income by average earning assets, was 3.61% for the six months ended June 30, 2012 compared to 3.63% for the six months ended June 30, 2011. This decrease is mainly attributable to the lower interest rate environment which continues to apply downward pressure on the Corporation’s yield on its investment portfolio and, as a result, negatively impacts the net interest margin.

Average earning assets for the first half of 2012 were $1,108,268. This was an increase of $14,173, or 1.30%, compared to the same period last year. Due in part to the current extended period of lower market interest rates, the yield on average earning assets was 4.33% in the first half of 2012 compared to 4.64% for the same period last year. The yield on average loans during the first half of 2012 was 4.73%. This was 47 basis points lower than that of the first half of 2011 at 5.20%. Interest income from securities was $3,828 (FTE) for the six months ended June 30, 2011, compared to $4,965 during the first half of 2010. The yield on average securities was 2.93% and 3.19% for these periods, respectively.

The cost of interest-bearing liabilities was 0.84% during the first half of 2012 compared to 1.19% during the same period in 2011. Total average interest-bearing liabilities as of June 30, 2012 increased $8.133 or 0.87%. Average core deposits increased 1.58% as of June 30, 2012 compared to the same period of 2011. The average cost of trust preferred securities was 4.31% for the first half of 2012, compared to 4.24% for the first half of 2011.

Net interest income may also be analyzed by comparing the volume and rate components of interest income and interest expense. Table 4 is an analysis of the changes in interest income and expense between the six months ended June 30, 2012 and June 30, 2011. The table is presented on a fully tax-equivalent basis.

34

Table 4: Rate/Volume Analysis of Net Interest Income (FTE)

	Six Months Ended June 30,
	in 2012 over 2011
	Volume			Rate			Total
	(Dollars in thousands)
U.S. Govt agencies and corporations	$	(218	)	$	(330	)	$	(548	)
State and political subdivisions		181			(92	)		89
Federal funds sold and interest-bearing deposits in banks		(20	)		16			(4	)
Restricted stock		—			(2	)		(2	)
Commercial loans		740			(690	)		50
Residential real estate loans		(240	)		(84	)		(324	)
Home equity lines of credit		(32	)		61			29
Installment loans		570			(1,087	)		(517	)
Total Interest Income		981			(2,208	)		(1,227	)
Consumer time deposits		(279	)		(987	)		(1,266	)
Public time deposits		39			21			60
Money market accounts		7			(70	)		(63	)
Savings deposits		7			(24	)		(17	)
Interest bearing demand		7			(52	)		(45	)
Short-term borrowings		—			—			—
FHLB advances		43			(143	)		(100	)
Trust preferred securities		—			9			9
Total Interest Expense		(176	)		(1,246	)		(1,422	)
Net Interest Income (FTE)	$	1,157		$	(962	)	$	195

Net interest income (FTE) for the first half 2012 and 2011 was $19,903 and $19,707, respectively. Interest income (FTE) for the first half of 2012 decreased $1,227 in comparison to the same period in 2011. This decrease is attributable to a $2,208 decrease due to rate and an increase of $981 due to volume. For the same period, interest expense decreased $1,422, with the decrease being primarily attributable to a $1,246 decrease due to rate and a decrease due to volume of $176. Overall, the total increase in net interest income (FTE) of $195 was mainly attributable to an increase in volume of $1,157 offset by a $962 reduction due to rate.

35

Noninterest Income

Table 5: Details on Noninterest Income

	Three Months Ended June 30,						Six Months Ended June 30,
	2012			2011			2012			2011
	(Dollars in thousands)						(Dollars in thousands)
Investment and trust services	$	425		$	470		$	815		$	873
Deposit service charges		929			1,000			1,864			1,916
Electronic banking fees		804			819			1,552			1,725
Income from bank owned life insurance		169			175			334			349
Other income		58			41			400			120
Total fees and other income		2,385			2,505			4,965			4,983
Gain on sale of securities		—			88			—			500
Gain on sale of loans		205			238			552			417
Gains (losses) on sale of other assets		(47	)		(27	)		(99	)		(25	)
Total noninterest income	$	2,543		$	2,804		$	5,418		$	5,875

Three Months Ended June 30, 2012 versus Three Months Ended June 30, 2011 Noninterest Income Comparison

Total fees and other income for the three months ended June 30, 2012 was $2,543, a decrease of $261, or 9.3%, over the same period 2011. Income earned on investment and trust services declined $45 compared to the prior period primarily as a result of lower trust assets under management. Deposit service charges decreased by $71 when compared to a year ago and continued to be impacted by the economic environment and new regulations regarding overdrafts.

Total net gains recorded during the second quarter of 2012 decreased $52 over the second quarter of 2011. This decrease was mainly attributable to the $88 gain on sale of securities recognized in 2011. Gains on the sale of loans decreased $33, primarily as a result of the management electing to portfolio 15 year fixed mortgage loans to rather than selling them in the secondary market. A total of $7,747 of indirect consumer loans were sold during the second quarter of 2012 compared to $13,808 for second quarter 2011, a decrease of 43.9%.

Six Months Ended June 30, 2012 versus Six Months Ended June 30, 2011 Noninterest Income Comparison

Total fees and other income for the six months ended June 30, 2012 was $4,965, a decrease of $18, or 0.4%, over the same period of 2011. Income earned on investment and trust services decreased $58, or 6.6% compared to 2011, primarily as a result of lower trust assets under management. Fees from electronic banking decreased $173, or 10.0%, compared to the same period last year primarily as a result of changes in regulations related to interchange fees. Service charges on deposits decreased $52, or 2.7%, which resulted primarily from both the economic environment and the new regulations regarding overdrafts.

Total net gains recorded during the first half of 2012 increased $453 over the first half of 2011. Of this increase, $552 was attributable to the sale of loans. Sales of bank owned property resulted in a loss of $99 during the first half of 2012 compared to a loss of $25 the same period one year ago.

36

Noninterest Expense

Table 6: Details on Noninterest Expense

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands)				(Dollars in thousands)
Salaries and employee benefits	$	3,894	$	4,072	$	8,005	$	8,163
Furniture and equipment		877		798		1,709		1,478
Net occupancy		554		588		1,133		1,200
Professional fees		564		445		1,059		931
Marketing and public relations		395		275		642		546
Supplies, postage and freight		265		289		508		561
Telecommunications		172		169		345		384
Ohio Franchise tax		307		298		623		596
FDIC Assessments		394		399		786		973
Other real estate owned		175		207		307		797
Electronic banking expenses		323		223		561		432
Loan and Collection Expense		308		310		657		752
Other expense		819		449		1,256		898
Total noninterest expense	$	9,047	$	8,522	$	17,591	$	17,711

Three Months Ended June 30, 2012 versus Three Months Ended June 30, 2011 Noninterest Expense Comparison

Noninterest expense for the second quarter of 2012 increased $525, or 6.2%, compared to the same period of 2011. The increase in noninterest expense was mainly attributable the one-time costs associated with two recently completed initiatives this past quarter. The first was the Treasury’s sale of the Corporation’s TARP preferred stock to private investors through an auction process, resulting in $200 legal and accounting cost. The second was due to a conversion of the Corporation’s bank operating system for both retail and commercial customers. Other expense increased by 370, or 82.4% in comparison to 2011, primarily due to the system conversion. Professional fees increased by $120, or 27.0% and marketing and public relations increased by $121, or 44.0%, primarily due to the TARP preferred stock auction process. Other real estate costs decreased by $32 or 15.5% for the second quarter of 2012 compared to 2011, mainly due to an improvement in the OREO portfolio as management diligently works to control cost on foreclosed assets.

Six Months Ended June 30, 2012 versus Six Months Ended June 30, 2011 Noninterest Expense Comparison

Noninterest expense for the second quarter of 2012 decreased $120, or 0.7%, compared to the same period of 2011. The decrease in noninterest expense was mainly attributable capitalized salary cost related to the conversion of the Bank’s operating system. Other expense increased by $358, primarily due to the system conversion. Professional fees increased by $128, or 13.7%, and marketing and public relations increased by $96, or 17.6%, primarily due to the TARP preferred stock auction process and the systems conversion. Other real estate costs decreased by $490 or 61.5% for the second quarter of 2012 compared to 2011, mainly due to an improvement in the OREO portfolio as management diligently works to control cost on foreclosed assets.

Income taxes

Three Months Ended June 30, 2012 versus Three Months Ended June 30, 2011 Income Taxes Comparison

The Corporation recognized income tax expense of $324 and $61 for the second quarter of 2012 and 2011, respectively. Included in net income for the three months ended June 30, 2012 and June 30, 2011 was $482 and $430, respectively, of nontaxable income, including $136 and $145 related to life insurance policies and $346 and $285, respectively, of tax-exempt investment and loan interest income. The new market tax credit generated by North Coast Community Development Corporation, a wholly-owned subsidiary of the Bank, also had a significant impact on income tax expense and contributes to a lower effective tax rate for the Corporation. After considering the tax-exempt income and relatively small nondeductible expenses, income subject to tax for the quarter was significantly less than income before income tax expense.

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Six Months Ended June 30, 2012 versus Six Months Ended June 30, 2011 Income Taxes Comparison

The Corporation recognized income tax expense of $905 and $327 during the first half of 2012 and 2011, respectively. Included in net income for the six months ended June 30, 2012 and June 30, 2011 was $955 and $843, respectively, of nontaxable income, including $270 and $287, respectively, related to life insurance policies and $684 and $556, respectively, of tax-exempt investment and loan interest income. The new market tax credit generated by North Coast Community Development Corporation, a wholly-owned subsidiary of the Bank, also had a significant impact on income tax expense and contributes to a lower effective tax rate for the Corporation. After considering the tax-exempt income and relatively small nondeductible expenses, income subject to tax for the six month period was significantly less than income before income tax expense.

Financial Condition

Overview

The Corporation’s assets at June 30, 2012 were $1,207,945 compared to $1,168,422 at December 31, 2011. This is an increase of $39,523, or 3.4%. Total securities increased $2,776, or 1.2%, compared to December 31, 2011, mainly as a result of the Corporation’s purchase of U.S. Government agency securities and U.S. agency mortgage backed securities. Portfolio loans increased $24,371, or 2.9%, from December 31, 2011 due to increased loan demand. Total deposits increased $32,473, or 3.3%, at June 30, 2012 to $1,023,553 compared to $991,080 at December 31, 2011. The growth in deposits primarily came in the form of core deposits which generally tends to improve liquidity while reducing costs.

Securities

The composition of the Corporation’s securities portfolio at June 30, 2012 and December 31, 2011 is presented in Note 5 to the Consolidated Financial Statements contained within this Form 10-Q. The Corporation continues to employ its securities portfolio to manage interest rate risk and to manage its liquidity needs. As of June 30, 2012 the portfolio was comprised of 97.55% available for sale securities and 2.45% restricted stock. Available for sale securities were comprised of 23.2% U.S. Government agencies, 51.3% U.S. agency mortgage backed securities, 11.6% U.S. agency collateralized mortgage obligations and 13.9% municipal securities. At June 30, 2012, the available for sale securities had a net temporary unrealized gain of $6,036, representing 2.7% of the total amortized cost of the Bank’s available for sale securities.

Loans

The detail of loan balances are presented in Note 6 to the Consolidated Financial Statements contained within this Form 10-Q. Table 7 provides detail by loan segment.

Table 7: Details on Loan Balances

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Commercial real estate	$	398,251		$	381,852
Commercial		79,461			76,570
Residential real estate		64,834			64,524
Home equity loans		126,568			126,958
Indirect		184,892			180,089
Consumer		13,453			13,095
Total Loans		867,459			843,088
Allowance for loan losses		(17,300	)		(17,063	)
Net Loans	$	850,159		$	826,025

Despite the limited availability of quality loan opportunities throughout the financial industry, the Corporation continued to successfully increase its commercial real estate, commercial and indirect loan portfolios during the second quarter of 2012. Commercial real estate loans increased by $16,399 or 4.3%, compared to December 31, 2012 and commercial loans increased by 2,891 or 3.8%, compared to December 31, 2011. Indirect loans increased by $4,803, or 2.7%, compared to December 31, 2011. The slight increase of $310 in real estate mortgages is mainly

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attributable to refinancing activity in the existing seasoned mortgage portfolio given the low interest rate environment. Home equity loans declined $390, or 0.3%, compared to December 31, 2011 and consumer loans increased $358, or 2.7%, compared to December 31, 2011.

Total portfolio loans at June 30, 2012 were $867,459. This is an increase of $24,371 from December 31, 2011. At June 30, 2012, commercial and commercial real estate loans represented 55.1% of total portfolio loans. Real estate mortgages and home equity loans comprise 7.47% and 14.6% of total portfolio loans, respectively. Indirect and consumer loans were 22.9% of total portfolio loans. Consumer loans are made to borrowers on both secured and unsecured terms, depending on the maturity and nature of the loan.

Loans held for sale, and not included in portfolio loans, were $1,207 at June 30, 2012. Indirect auto loans held for sale accounted for the majority of the loans held for sale. The Corporation has a practice of retaining the servicing rights on all loans that are sold.

Expected cash flow and interest rate information for loans is presented in the following table:

Table 8: Cash Flow and Interest Rate Information for Loans:

	June 30, 2012
Due in one year or less	$	186,461
Due after one year but within five years		404,006
Due after five years		276,992
Totals	$	867,459
Due after one year with a predetermined fixed interest rate	$	510,672
Due after one year with a floating interest rate		170,326
Totals	$	680,998

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 and appropriate to cover probable credit losses inherent in the Corporation’s 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, trends in delinquency, 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 9 presents the detailed activity in the allowance for loan losses and related charge-off activity for the three and six month periods ended June 30, 2012 and 2011.

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Table 9: Analysis of Allowance for Loan Losses

	Three Months Ended						Six Months Ended
	June 30, 2012			June 30, 2011			June 30, 2012			June 30, 2011
	(Dollars in thousands)						(Dollars in thousands)
Balance at beginning of period	$	17,115		$	17,315		$	17,063		$	16,136
Charge-offs:
Commercial real estate		340			1,862			1,319			2,092
Commercial		165			224			165			224
Real estate mortgage		508			753			975			1,026
Home equity loans		152			341			555			686
Indirect		399			143			577			338
Consumer		57			176			106			245
Total charge-offs		1,621			3,499			3,697			4,611
Recoveries:
Commercial real estate		10			114			30			216
Commercial		3			4			20			35
Real estate mortgage		16			6			83			10
Home equity loans		11			1			15			2
Indirect		87			47			190			72
Consumer		12			18			29			46
Total Recoveries		139			190			367			381
Net Charge-offs		1,482			3,309			3,330			4,230
Provision for loan losses		1,667			3,345			3,567			5,445
Balance at end of period	$	17,300		$	17,351		$	17,300		$	17,351
Loans outstanding at end of period	$	867,459		$	830,312		$	867,459		$	830,312
Allowance for loan losses as a percent of loans outstanding at the end of the period		1.99	%		2.09	%		1.99	%		2.09	%
Average Loans Outstanding	$	866,909		$	815,618		$	859,722		$	813,300
Annualized ratio to average loans:
Net Charge-offs		0.69	%		1.63	%		1.56	%		2.09	%
Provision for loan losses		0.77	%		1.64	%		1.67	%		2.69	%

The allowance for loan losses at June 30, 2012 was $17,300, or 1.99%, of outstanding loans, compared to $17,351, or 2.09%, of portfolio loans at June 30, 2011 and $17,063 or 2.02%, of outstanding loans at December 31, 2011. The allowance for loan losses was 50.01% and 44.21% of nonperforming loans at June 30, 2012 and June 30, 2011, respectively.

The provision for loan losses for the quarter ended June 30, 2012 was $1,667 compared to provision for loan losses of $3,345 one year ago and for the six months ended June 30, 2011 was $3,567 compared to $5,445 for the six months ended June 30, 2011. Net charge-offs for the three months ended June 30, 2012 were $1,482 compared to $3,309 for the three months ended June 30, 2011. Net charge-offs for the six months ended June 30, 2012 were $3,330, compared to $4,230 for the six months ended June 30, 2011. Annualized net charge-offs as a percent of average loans for the second quarter and first half of 2012 were 0.69% and 1.56% respectively, compared to 1.63% and 2.09% for the same periods in 2011. The provision for loan losses for the three and six month periods ended June 30, 2012 was, in the opinion of Management, adequate when balancing the charge-off levels with the level of nonperforming loans, the level of potential problem loans and delinquency. The resulting allowance for loan losses is, in the opinion of Management, sufficient given its analysis of the information available about the portfolio at June 30, 2012. The Corporation continues to aggressively address potential problem loans, and underwriting standards continue to be adjusted in response to trends and asset review findings.

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Deposits

Table 10: Deposits and Borrowings

	Average Balances Outstanding				Average Rates Paid
	For the three months ended
	June 30, 2012		December 31, 2011		June 30, 2012			December 31, 2011
	(Dollars in thousands)
Demand deposits	$	124,732	$	125,068		0.00	%		0.00	%
Interest checking		156,296		151,077		0.12			0.14
Savings deposits		104,690		101,586		0.11			0.16
Money Market Accounts		104,896		100,903		0.18			0.23
Consumer time deposits		418,450		432,755		1.22			1.46
Public time deposits		84,775		79,716		0.55			0.45
Total Deposits		993,839		991,105		0.69			0.73
Short-term borrowings		545		565		0.22			0.15
FHLB borrowings		47,057		42,606		1.79			2.46
Junior subordinated debentures		16,325		16,323		4.27			4.25
Total borrowings		63,927		59,494		2.40			2.92
Total funding	$	1,057,766	$	1,050,599		0.81	%		0.86	%

Average deposits for the three months ended June 30, 2012 were $993,839 compared to average deposits of $991,105 for the three months ended December 31, 2011. Deposit accounts and the generation of deposit accounts continued to be the primary source of funds for the Corporation. As indicated in the table above, growth in transaction core deposits has reduced the Corporation’s reliance on higher interest bearing time deposit accounts and has helped maintained the net interest margin. The Corporation offers various deposit products to both retail and business customers. The Corporation also has available 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.

The following table summarizes total consumer and public time deposits greater than or equal to $100,000 as of June 30, 2012 by remaining maturity:

Table 11: Consumer and Public Time Deposits Greater Than $100,000

June 30, 2012
	(Dollars in thousands)
Less than 3 months	$	42,019
3 to 6 months		24,142
6 to 12 months		26,762
Over 12 months		66,351
Total	$	159,274

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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 June 30, 2012, the Corporation had $827 of short-term borrowings. There were no federal funds purchased at June 30, 2012 and December 31, 2011. Long-term borrowings for the Corporation consist of Federal Home Loan Bank advances of $47,495 and junior subordinated debentures of $16,238 at June 30, 2012. Federal Home Loan Bank advances were $42,497 at December 31, 2011. Maturities of long-term Federal Home Loan Bank advances are presented in Note 9 to the Consolidated Financial Statements contained within this Form 10-Q.

During the second quarter of 2007, the Corporation completed a private offering of trust preferred securities, as described in Note 10 to the Consolidated Financial Statements contained within this Form 10-Q. The securities were issued in two $10 million tranches, one of which pays dividends at a fixed rate of 6.64% per annum and the other of which pays dividends at LIBOR plus 1.48% per annum. During the third quarter of 2010, the Corporation exchanged and retired $4,250 principal amount of its non-pooled trust preferred securities for approximately 462,000 newly issued shares of the Corporation’s common stock.

Regulatory Capital

The Corporation continued to maintain an appropriate capital position. Total shareholders’ equity was $115,537 at June 30, 2012. This is an increase of $2,263 or 2.0% over December 31, 2011. For the six months ended June 30, 2012, total shareholders’ equity was increased by net income of $2,943, decreased by $144 for share-based compensation and decrease of $35 in accumulated in other comprehensive income. Factors decreasing shareholders’ equity were cash dividends payable to common shareholders in the amount of $159 and cash dividends payable to preferred shareholders in the amount of $637. The Corporation held 328,194 shares of common stock as treasury stock at June 30, 2012, at a cost of $6,092.

The Corporation and the Bank continue to monitor balance sheet growth in an effort to stay within the guidelines established by applicable regulatory authorities. At June 30, 2012 and December 31, 2011, the Corporation and Bank maintained capital ratios consistent with current guidelines to be deemed well-capitalized under Federal banking regulations.

On July 28, 2005, the Corporation announced a share repurchase program of up to 5 percent, or approximately 332,000, of its common shares outstanding. Repurchased shares can be used for a number of corporate purposes, including the Corporation’s stock option and employee benefit plans. The share repurchase program provides that share repurchases are 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, at the discretion of Management based upon market, business, legal and other factors. However the terms of the Corporation Series B Preferred Stock provided that, as long as the Series B Preferred Stock issued is outstanding, repurchases or redemptions relating to certain equity securities, including the Corporation’s common shares, are prohibited to the extent that there are any accrued and unpaid dividends on such preferred stock, subject to certain limited exceptions. As of June 30, 2012, the Corporation had repurchased an aggregate of 202,500 shares under this program.

On June 13, 2012, the Corporation and the Bank entered into an underwriting agreement (the “Underwriting Agreement”) with the Treasury and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler O’Neill & Partners, L.P. as representatives of the several underwriters named therein (the “Underwriters”) providing for the offer and sale by Treasury of 25,223 shares of the Company’s Series B Preferred Stock. Under the terms of the Underwriting Agreement, the Underwriters agreed to purchase the Series B Preferred Stock from Treasury at a price of $856.1325 per share, and to sell the Series B Preferred Stock to the public through a modified dutch auction at an initial public offering price of $869.17 per share. The Corporation did not receive any of the proceeds from the offering. The offering closed on June 19, 2012.

The Board of Directors reviews the Corporation’s capital requirements on a regular basis and continues to assess potential alternatives for repaying the Corporation’s Series B Preferred Stock, which was originally issued to Treasury in the TARP Capital Purchase Program. The Corporation intends to redeem or repurchase the Series B Preferred Stock at a time and in a manner that it believes is appropriate after considering, among other things, the Corporation’s anticipated capital requirements, projected dividend capacity from the Bank, the availability and relative attractiveness of alternative sources of capital, the Corporation’s risk profile, its earnings performance and asset quality trends, and input from its regulators. See Note 1 to the Consolidated Financial Statements for further information on the Series B Preferred Stock.

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Off-Balance Sheet Arrangements

In the normal course of business, the Corporation enters into commitments with off-balance sheet risk to meet the financing needs of its customers. These arrangements include commitments to extend credit and standby letters of credit. Commitments to extend credit and standby letters of credit involve elements of credit risk and interest rate risk in excess of the amount recognized in the consolidated balance sheets. The Corporation uses the same credit policies in making commitments to extend credit and standby letters of credit as it does for on-balance sheet instruments.

The Corporation’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. Interest rate risk on commitments to extend credit results from the possibility that interest rates may have moved unfavorably from the position of the Corporation 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.

Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Most of these arrangements mature within two years and are expected to expire without being drawn upon. 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.

The Corporation evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral obtained by the Corporation 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.

The Corporation does not believe that off-balance sheet arrangements will have a material impact on its liquidity or capital resources. See Note 11 to the Consolidated Financial Statements for further detail.

Forward-Looking Statements

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:

• a worsening of economic conditions or slowing of any economic recovery, which could negatively impact, among other things, business activity and consumer spending and could lead to a lack of liquidity in the credit markets;

• changes in the interest rate environment which could reduce anticipated or actual margins;

• increases in interest rates or further weakening of economic conditions that could constrain borrowers’ ability to repay outstanding loans or diminish the value of the collateral securing those loans;

• market conditions or other events that could negatively affect the level or cost of funding, affecting the Company’s ongoing ability to accommodate liability maturities and deposit withdrawals, meet contractual obligations, and fund asset growth, and new business transactions at a reasonable cost, in a timely manner and without adverse consequences;

• changes in political conditions or the legislative or regulatory environment, including new or heightened legal standards and regulatory requirements, practices or expectations, which may impede profitability or affect the Company’s financial condition (such as, for example, the Dodd-Frank Act and rules and regulations that have been or may be promulgated under the Act);

• persisting volatility and limited credit availability in the financial markets, particularly if market conditions limit the Company’s ability to raise funding to the extent required by banking regulators or otherwise;

• significant increases in competitive pressure in the banking and financial services industries, particularly in the geographic or business areas in which the Company conducts its operations;

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• limitations on the Company’s ability to return capital to shareholders, including the ability to pay dividends, and the dilution of the Company’s common shares that may result from, among other things, the terms of the CPP, pursuant to which the Company issued securities to the U.S. Treasury;

• adverse effects on the Company’s ability to engage in routine funding transactions as a result of the actions and commercial soundness of other financial institutions;

• general economic conditions becoming less favorable than expected, continued disruption in the housing markets and/or asset price deterioration, which have had and may continue to have a negative effect on the valuation of certain asset categories represented on the Company’s balance sheet;

• increases in deposit insurance premiums or assessments imposed on the Company by the FDIC;

• a failure of the Company’s operating systems or infrastructure, or those of its third-party vendors, that could disrupt its business;

• risks that are not effectively identified or mitigated by the Company’s risk management framework; and

• difficulty attracting and/or retaining key executives and/or relationship managers at compensation levels necessary to maintain a competitive market position; as well as the risks and uncertainties described from time to time in the Company’s reports as filed with the SEC.

Critical Accounting Policies and Estimates

The Corporation’s consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America. The Corporation 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 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 to the Consolidated Financial Statements contained within this Form 10-Q. These policies are fundamental to the understanding of results of operation and financial conditions.

The accounting policies considered by Management to be critical 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 written down by the establishment of a specific allowance where necessary. The fair value of all loans currently evaluated for impairment is 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 pursuant to either Statement of Financial Accounting Standards ASC 450, “Accounting for Contingencies,” or ASC 310-10-45, “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

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environment and specific economic trends affecting the portfolio. For residential real estate, installment 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 collectability 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 from these 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 results of operations could be significantly and adversely affected if circumstances differ substantially from the assumptions used in making the determinations.

Income Taxes

The Corporation’s income tax expense and related current and deferred tax assets and liabilities are presented as prescribed in ASC 740, “Accounting for Income Taxes”. The accounting 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.

Goodwill

The goodwill impairment test is a two-step process that requires Management to make judgments in determining what assumptions to use in the calculation. The first step in impairment testing is to estimate the fair value based on valuation techniques including a discounted cash flow model with revenue and profit forecasts and comparing those estimated fair values with the carrying values, which includes the allocated goodwill. If the carrying value exceeds its fair value, goodwill impairment may be indicated and a second step is performed to compute the amount of the impairment by determining an “implied fair value” of goodwill. The determination of an “implied fair value” of goodwill requires the Corporation to allocate fair value to the assets and liabilities. Any unallocated fair value represents the “implied fair value” of goodwill, which is compared to its corresponding carrying value. An impairment loss would be recognized as a charge to earnings to the extent the carrying amount of the goodwill exceeds the implied fair value of the goodwill. See Note 4 (Goodwill and Intangible Assets) for further detail.

New Accounting Pronouncements

Management is not aware of any proposed regulations or current recommendations by the Financial Accounting Standards Board or by regulatory authorities, which, if they were implemented, would have a material effect on the liquidity, capital resources, or operations of the Corporation.

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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, credit and liquidity 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 Corporation’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 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.

Nonperforming Assets

Total nonperforming assets consist of nonperforming loans and other foreclosed assets. A loan is considered nonperforming if it is 90 days past due and/or in Management’s estimation the collection of interest on the loan is doubtful. Nonperforming loans no longer accrue interest and are accounted for on a cash basis. The ratio of nonperforming loans to total loans decreased from 4.09% at December 31, 2011 to 4.03% at June 30, 2012. This is the result of Management’s continued focus on asset quality. Nonperforming loans at June 30, 2012 were $34,993 compared to $34,471 at December 31, 2011, an increase of $522 or 1.5%. Of this total, commercial real estate loans were $22,456 or 64.2% of total nonperforming loans compared to $21,512 or 62.4% of total nonperforming loans at December 31, 2011. These loans are primarily secured by real estate and, in some cases, by SBA guarantees, and have either been charged-down to their realizable value or a specific reserve has been established for any collateral short-fall. All nonperforming loans are being actively managed.

Other foreclosed assets were $1,506 as of June 30, 2012 compared to $1,687 at December 31, 2011. The $1,506 is comprised of $1,043 in residential properties and $463 in commercial real estate properties. This compares to $856 in residential properties and $831 in commercial real estate properties as of December 31, 2011.

Table 12 sets forth nonperforming assets at June 30, 2012 and December 31, 2011.

46

Table 12: Nonperforming Assets

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Commercial real estate	$	22,456		$	21,512
Commercial		644			1,072
Residential real estate		6,724			6,551
Home equity loans		4,252			4,365
Indirect		530			711
Consumer		387			260
Total nonperforming loans		34,993			34,471
Other foreclosed assets		1,506			1,687
Total nonperforming assets	$	36,499		$	36,158
Loans 90 days past due accruing interest	$	—		$	—
Allowance for loan losses to nonperforming loans		49.44	%		49.50	%

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 the predictive power of the gap measure is limited.

Two more useful tools in managing market risk are net interest income at risk simulation and economic value of equity simulation. A net interest income-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 net interest income 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. Using a rolling 12 month forecast, at June 30, 2012, 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 $643, or 1.7%, and in a -200 basis point shock, net interest income would decrease $1,814, or 4.8%. 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 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 at Risk (EVE) is the difference between the present value of all asset cash flows and the present value of all liability cash flows. EVE at risk is an estimate of the Corporation’s capital at risk to adverse changes in interest rates and represents the structural mismatch between the rate sensitivity of the assets versus the liabilities. It is a comprehensive measure for assessing and managing the Corporation’s interest rate risk exposure. At June 30, 2012, this analysis indicated that a +200 basis point change in rates would reduce the value of the Corporation’s equity by 15.0% while a -200 basis point change in rates would increase the value of the Corporation’s equity by 6.8%.

Liquidity Risk Management

Liquidity risk is the possibility of the Corporation being unable to meet current and future financial obligations in a timely manner. Liquidity is managed to ensure stable, reliable and cost-effective sources of funds to satisfy demand for credit, deposit withdrawals and investment opportunities. The Corporation relies on a large, stable core deposit base and a diversified base of wholesale funding sources to manage liquidity risk.

47

The Corporation’s primary source of liquidity is its core deposit base, raised though its retail branch system, along with unencumbered, or unpledged, investment securities. The Corporation also has available unused wholesale sources of liquidity, including advances from the Federal Home Loan Bank of Cincinnati, borrowings through the discount window at the Federal Reserve Bank of Cleveland and access to certificates of deposit issued through brokers. Liquidity is also provided by unencumbered, or unpledged, investment securities that totaled $48,995 at June 30, 2012.

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) as of June 30, 2012, pursuant to the evaluation of these controls and procedures required by Rule 13a-15 of the Securities Exchange Act of 1934.

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 June 30, 2012 were: (1) designed to ensure that material information relating to the Corporation and its subsidiaries is made known to the Chief Executive Officer and 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 Corporation 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 in Rules 13a-15(f) and 15(d)-15(f) under the Exchange Act) occurred during the fiscal quarter ended June 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

PART II — OTHER INFORMATION

Item 1. Legal Proceedings

On April 18, 2008, the Corporation and Richard M. Osborne and certain other parties entered into a settlement agreement (the “Settlement Agreement”) to settle certain contested matters relating to the Corporation’s 2008 annual meeting of shareholders. Under the Settlement Agreement, among other things, Mr. Osborne agreed not to seek representation on the Corporation’s Board of Directors or to solicit proxies with respect to the voting of the Corporation’s common shares for a period of at least 18 months after April 18, 2008. In proxy materials filed with the SEC on March 20, 2009, Mr. Osborne indicated his intent to solicit proxies in favor of the election of two nominees for election as directors at the Corporation’s 2009 annual meeting of shareholders. On March 24, 2009, the Corporation filed a complaint against Mr. Osborne for a declaratory judgment and preliminary and permanent injunctive relief in the United States District Court for the Northern District of Ohio, Eastern Division, to enforce the “standstill” provisions of the Settlement Agreement and restrain Mr. Osborne from (a) engaging in any solicitation of proxies or consents, (b) seeking to advise, encourage or influence any person or entity with respect to the voting of any voting securities of the Corporation, (c) initiating, proposing or otherwise soliciting shareholders of the Corporation for the approval of shareholder proposals, (d) entering into any discussions, negotiations, agreements, arrangements or understanding with any third party with respect to any of the foregoing and (e) disseminating his proposed proxy materials to shareholders of the Corporation. The Corporation also sought an order from the Court temporarily restraining Mr. Osborne from engaging in any of the foregoing activities. On March 28, 2009, the Court issued an order granting the Corporation’s motion for a temporary restraining order. On April 3, 2009, the Court issued an order granting the Corporation’s motion for a preliminary injunction restraining Mr. Osborne from engaging in any of the foregoing activities. On February 15, 2010, Mr. Osborne filed a motion to dissolve the preliminary injunction, which the Corporation opposed. On March 23, 2010, the Court denied Mr. Osborne’s motion to dissolve the preliminary injunction. Prior to the Court’s decision, on March 19, 2010, Mr. Osborne filed a motion for summary judgment and the Corporation filed a motion for partial summary judgment. On April 14, 2010, Mr. Osborne filed an interlocutory appeal of the denial of his motion to dissolve the preliminary injunction with the Sixth Circuit Court of Appeals. Proceedings in the District Court were stayed pending resolution of Mr. Osborne’s appeal by the Sixth Circuit Court of Appeals. On July 25, 2011, the Sixth Circuit affirmed the decision of the District Court. The case was remanded to the District Court, and, on November 30, 2011, the Court granted the Corporation’s motion for partial summary judgment, ruling that Mr. Osborne must refrain from engaging in any of the conduct specified in the “standstill” provisions of the Settlement Agreement until such time as both of the directors designated by Mr. Osborne pursuant to the Settlement Agreement no longer serve on the Corporation’s

48

Board of Directors. With respect to the remaining claims, the Court scheduled the commencement of a trial on the merits for March 13, 2012. In the meantime, Osborne appealed the District Court’s decision granting a permanent injunction to the Sixth Circuit. The Corporation filed a motion to dismiss the appeal, which remains pending in the Sixth Circuit. The District Court has stayed all proceedings pending resolution of the matter in the Sixth Circuit.

Item 1A. Risk Factors

In addition to the other information set forth in this report, you should carefully consider the risk factors disclosed in Item 1A of the Corporation’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

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

Issuer Purchases of Equity Securities

On July 28, 2005, the Corporation announced a share repurchase program of up to 5 percent, or about 332,000, of its common shares outstanding. Repurchased shares can be used for a number of corporate purposes, including the Corporation’s stock option and employee benefit plans. The share repurchase program provides that share repurchases are 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, at the discretion of Management based upon market, business, legal and other factors. However, the terms of the Corporation’s series B Preferred Stock provide that, as long as the series B Preferred Stock is outstanding, repurchases or redemptions relating to certain equity securities, including the Corporation’s common shares, are prohibited to the extent that there are any accrued and unpaid dividends on such preferred stock, subject to certain limited exceptions. As of June 30, 2012, the Corporation had repurchased an aggregate of 202,500 shares under this program.

Item 6. Exhibits.

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

49

SIGNATURES

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

	LNB BANCORP, INC. (Registrant)
Date: August 13, 2012	/s/ Gary J. Elek
	Gary J. Elek
	Chief Financial Officer (Duly Authorized Officer, and Principal Financial and Accounting Officer)

50

Exhibit Index

Exhibit No.	Exhibit
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.
101	Financial statements from the quarterly report on Form 10-Q of LNB Bancorp, Inc. for the quarter ended June 30, 2012, formatted in XBRL (eXtensible Business Reporting Language): (i) Consolidated Balance Sheets at June 30, 2012 (unaudited) and December 31, 2011; (ii) Consolidated Statements of Income (unaudited) for the three and six months ended June 30, 2012 and 2011; (iii) Consolidated Statements of Shareholders’ Equity (unaudited) for the six months ended June 30, 2012 and 2011; (iv) Consolidated Statements of Cash Flows (unaudited) for the six months ended June 30, 2012 and 2011; and (v) Notes to the Unaudited Consolidated Financial Statements.

51

EX-31.1

Exhibit 31.1

Rule 13a -14(a)/15d -14(a) Certification

I, Daniel E. Klimas, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 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(s) 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(s) 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

(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: August 13, 2012	/s/ Daniel E. Klimas
	Daniel E. Klimas
	President and Chief Executive Officer

EX-31.2

Exhibit 31.2

Rule 13a -14(a)/15d -14(a) Certification

I, Gary J. Elek, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q for the quarter ended June 30, 2012 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(s) 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(s) 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

(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: August 13, 2012	/s/ Gary J. Elek
	Gary J. Elek
	Chief Financial Officer

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 June 30, 2012 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, to my knowledge:

(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

August 13, 2012

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 June 30, 2012 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Gary J. Elek, 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, to my knowledge:

(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/ Gary J. Elek

Gary J. Elek

Chief Financial Officer

August 13, 2012

XML

Securities (Details 2) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Securities [Abstract]
Gross realized gains		$ 500
Gross realized losses
Net Securities Gains		500
Proceeds from sales of available-for-sale securities		$ 24,664

XML

Federal Home Loan Bank Advances (Details Textual) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2012 Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55% [Member]	Dec. 31, 2011 Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55% [Member]	Jun. 30, 2011 Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55% [Member] Maximum [Member]	Jun. 30, 2012 Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55% [Member] Minimum [Member]	Jun. 30, 2012 Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76% [Member]	Dec. 31, 2011 Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76% [Member]	Jun. 30, 2011 Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76% [Member] Maximum [Member]	Jun. 30, 2012 Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76% [Member] Minimum [Member]	Jun. 30, 2012 Multi-family mortgage loans [Member]	Jun. 30, 2012 Residential real estate mortgage loans [Member]
Securities Pledged as Collateral [Line Items]
Investment securities											$ 78,529	$ 27,152
Interest rates on Federal Home Loan Bank Advances	2.37%				3.55%	2.06%			4.76%	0.80%
Federal Home Loan Bank Advances (Textual) [Abstract]
Federal Home Loan Bank advances amount	47,495	42,497	14,995	15,027			32,500	12,470
Maximum borrowing capacity of the Bank	66,755
Unused collateral borrowing capacity	17,734
Cash management line of credit	40,000
Amount outstanding	$ 0	$ 0

XML

Loans and Allowance For Loan Losses (Details Textual) (USD $)	6 Months Ended		12 Months Ended
	Jun. 30, 2012 Contracts Loan	Jun. 30, 2011	Dec. 31, 2011 Loan	Dec. 31, 2010
Loans And Allowance For Loan Losses (Textual) [Abstract]
Bank wide delinquency of loans in percentage	3.13%		3.71%
Management monitors delinquencies	$ 27,158,000		$ 31,315,000
Nonaccrual Loans	34,993,000	34,993,000	34,471,000
Recorded investment	2,972,000			3,099,000
Allocated reserves of nonaccrual TDR loans	455,000		307,000
Number of loans	5		5
Total Past Due	27,158,000		31,315,000
Commitment to lend additional amounts to borrowers	0		0
Time period of repayment based on delinquency period one	30 to 59 days
Time period of repayment based on delinquency period two	60 to 89 days
Time period of repayment based on delinquency period three	Greater than 90 days
Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit score	850,000
Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Credit score	$ 300,000
Non Owner [Member] | Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Family residential properties	4
Non Owner [Member] | Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Family residential properties	1
Conventional [Member] | Maximum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Conventional Family residential properties	4
Conventional [Member] | Minimum [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Conventional Family residential properties	1

XML

Trust Preferred Securities (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Trust Preferred Securities [Line Items]
Accrued interest payable	$ 1,007	$ 1,118
Balance of the subordinated notes payable	16,238	16,238
Trust Preferred Securities (Textual) [Abstract]
Maturity date of subordinate notes	Jun. 15, 2037
Trust I [Member]
Trust Preferred Securities [Line Items]
Preferred securities sold to outside investors	10,000
Floating interest rate period	three-month LIBOR
LIBOR basis points	1.48%
Effective interest rate	1.95%
Accrued interest payable	7	7
Balance of the subordinated notes payable	8,116
Trust II [Member]
Trust Preferred Securities [Line Items]
Preferred securities sold to outside investors	10,000
Floating interest rate period	three-month LIBOR
Fixed interest rate of Trust II	6.64%
LIBOR basis points	1.48%
Effective interest rate	6.64%
Accrued interest payable	22	24
Balance of the subordinated notes payable	$ 8,116

XML

Loans and Allowance For Loan Losses (Details 4) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012 Contracts	Jun. 30, 2012 Loan	Dec. 31, 2011 Loan	Dec. 31, 2010
Troubled debt restructurings
Number of Contracts		5	5
Post-Modification Outstanding Recorded Investment		$ 2,972		$ 3,099

XML

Earnings Per Share (Details Textual)	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011	Dec. 31, 2010
Earnings Per Share (Textual) [Abstract]
Options for aggregate common shares	232,000	197,000	232,000	197,000	197,000	197,000
Warrant to purchase share	561,343	561,343	561,343	561,343
Dilutive stock options	6,174	2,500	3,925	2,500

XML

Commitments, Credit Risk, and Contingencies (Details Textual)	6 Months Ended
	Jun. 30, 2012
Commitments, Credit Risk, and Contingencies (Textual) [Abstract]
Commitment expiration date, Minimum	30 days
Commitment expiration date, Maximum	120 days

XML

Loans and Allowance for Loan Losses (Tables)

6 Months Ended

Jun. 30, 2012

Loans and Allowance for Loan Losses [Abstract]

Summary of activity in the loan balances and the allowance for loan losses by segment

Six Months Ended June 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,714		$	1,409		$	1,331		$	2,289		$	891		$	429		$	17,063
Losses charged off		(1,319	)		(165	)		(975	)		(555	)		(577	)		(106	)		(3,697	)
Recoveries		30			20			83			15			190			29			367
Provision charged to expense		1,971			(424	)		1,277			397			481			(135	)		3,567
Balance, end of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Three Months Ended June 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,651		$	585		$	1,574		$	2,298		$	807		$	200		$	17,115
Losses charged off		(340	)		(165	)		(508	)		(152	)		(399	)		(57	)		(1,621	)
Recoveries		10			3			16			11			87			12			139
Provision charged to expense		75			417			634			(11	)		490			62			1,667
Balance, end of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
As of June 30, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,181		$	80		$	37		$	—		$	—		$	—		$	3,298
Collectively evaluated for impairment		8,215			760			1,679			2,146			985			217			14,002
Total ending allowance balance	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Loans:
Individually evaluated for impairment	$	28,102		$	306		$	1,161		$	—		$	—		$	—		$	29,569
Collectively evaluated for impairment		370,149			79,155			63,673			126,568			184,892			13,453			837,890
Total ending loans balance	$	398,251		$	79,461		$	64,834		$	126,568		$	184,892		$	13,453		$	867,459
Six Months Ended June 30, 2011
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,127		$	1,317		$	805		$	1,512		$	904		$	471		$	16,136
Losses charged off		(2,092	)		(224	)		(1,026	)		(686	)		(338	)		(245	)		(4,611	)
Recoveries		216			35			10			2			72			46			381
Provision charged to expense		2,430			54			1,460			1,063			283			155			5,445
Balance, end of period	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
Three Months Ended June 30, 2011
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	12,003		$	1,151		$	926		$	1,940		$	902		$	393		$	17,315
Losses charged off		(1,862	)		(224	)		(753	)		(341	)		(143	)		(176	)		(3,499	)
Recoveries		114			4			6			1			47			18			190
Provision charged to expense		1,426			251			1,070			291			115			192			3,345
Balance, end of period	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
As of June 30, 2011
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	5,602		$	166		$	302		$	—		$	—		$	—		$	6,070
Collectively evaluated for impairment		6,079			1,016			947			1,891			921			427			11,281
Total ending allowance balance	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
Loans:
Individually evaluated for impairment	$	35,349		$	771		$	2,126		$	—		$	—		$	—		$	38,246
Collectively evaluated for impairment		351,542			71,908			66,711			130,143			158,885			12,877			792,066
Total ending loans balance	$	386,891		$	72,679		$	68,837		$	130,143		$	158,885		$	12,877		$	830,312

Age Analysis of Past Due Loans

Age Analysis of Past Due Loans as of June 30, 2012
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90  Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	701	$	425	$	16,435	$	17,561	$	380,690	$	398,251	$	—
Commercial		404		123		491		1,018		78,443		79,461		—
Residential real estate		506		608		3,579		4,693		60,141		64,834		—
Home equity loans		1,342		272		1,386		3,000		123,568		126,568		—
Indirect		518		96		5		619		184,273		184,892
Consumer		60		163		44		267		13,186		13,453		—
Total	$	3,531	$	1,687	$	21,940	$	27,158	$	840,301	$	867,459	$	—

Age Analysis of Past Due Loans as of December 31, 2011
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90  Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	290	$	804	$	19,023	$	20,117	$	361,735	$	381,852	$	—
Commercial		54		249		805		1,108		75,462		76,570		—
Residential real estate		545		1,172		3,554		5,271		59,253		64,524		—
Home equity loans		1,942		181		1,666		3,789		123,169		126,958		—
Indirect		664		71		124		859		179,230		180,089
Consumer		131		12		28		171		12,924		13,095		—
Total	$	3,626	$	2,489	$	25,200	$	31,315	$	811,773	$	843,088	$	—

Impaired loans

	At June 30, 2012						Three Months Ended June 30, 2012		Six Months Ended June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	8,241	$	12,981	$	—	$	9,121	$	9,758
Commercial		171		171		—		208		177
Residential real estate		1,089		2,138		—		1,353		1,184
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
With allowance recorded:
Commercial real estate		19,861		21,465		3,181		19,600		19,511
Commercial		135		135		80		313		269
Residential real estate		72		72		37		72		72
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	29,569	$	36,962	$	3,298	$	30,667	$	30,971

	At December 31, 2011						Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	12,585	$	20,138	$	—	$	10,575	$	9,609
Commercial		386		386		—		368		484
Residential real estate		1,069		1,897		—		1,771		2,491
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
With allowance recorded:
Commercial real estate		19,161		19,823		3,747		26,667		28,307
Commercial		319		794		148		531		837
Residential real estate		72		72		37		662		1,041
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	33,592	$	43,110	$	3,932	$	40,574	$	42,769

Loans on nonaccrual status

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Commercial real estate	$	22,456		$	21,512
Commercial		644			1,072
Residential real estate		6,724			6,551
Home equity loans		4,252			4,365
Indirect		530			711
Consumer		387			260
Total Nonaccrual Loans	$	34,993		$	34,471
Percentage of nonaccrual loans to portfolio loans		4.03	%		4.09	%
Percentage of nonaccrual loans to total assets		2.90	%		2.95	%

Information's of TDR loans

	For the Six Months Ended June 30, 2012				For the Three Months Ended June 30, 2012
	(Dollars in thousands)				(Dollars in thousands)
	Number of Contracts		Post-Modification Outstanding Recorded Investment		Number of Contracts		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial Real Estate		5	$	2,972		—	$	—

Summary of recorded investment based on delinquency status

	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
Commercial Credit Exposure	June 30, 2012
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1-Minimal	$	—	$	110	$	—	$	—	$	—	$	—	$	110
Grade 2-Modest		—		—		—		—		—		—		—
Grade 3-Better than average		1,566		13		—		—		—		—		1,579
Grade 4-Average		38,195		4,837		232		—		—		—		43,264
Grade 5-Acceptable		319,260		70,231		4,681		—		—		—		394,172
Total Pass Credits		359,021		75,191		4,913		—		—		—		439,125
Grade 6-Special mention		5,789		3,642		46		—		—		—		9,477
Grade 7-Substandard		32,676		628		1,533		—		—		—		34,837
Grade 8-Doubtful		765		—		—		—		—		—		765
Grade 9-Loss		—		—		—		—		—		—		—
Total loans internally credit risk graded		398,251		79,461		6,492		—		—		—		484,204
Loans not monitored by internal risk grade:
Current loans not internally risk graded		—		—		55,181		123,568		184,273		13,186		376,208
30-59 days past due loans not internally risk graded		—		—		506		1,342		518		60		2,426
60-89 days past due loans not internally risk graded		—		—		608		272		96		163		1,139
90+ days past due loans not internally risk graded		—		—		2,047		1,386		5		44		3,482
Total loans not internally credit risk graded		—		—		58,342		126,568		184,892		13,453		383,255
Total loans internally and not internally credit risk graded	$	398,251	$	79,461	$	64,834	$	126,568	$	184,892	$	13,453	$	867,459

	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
Commercial Credit Exposure	December 31, 2011
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1-Minimal	$	—	$	3,157	$	—	$	—	$	—	$	—	$	3,157
Grade 2-Modest		—		—		—		—		—		—		—
Grade 3-Better than average		1,602		19		—		—		—		—		1,621
Grade 4-Average		44,527		5,322		237		—		—		—		50,086
Grade 5-Acceptable		278,458		63,880		4,835		—		—		—		347,173
Total Pass Credits		324,587		72,378		5,072		—		—		—		402,037
Grade 6-Special mention		16,390		2,947		157		—		—		—		19,494
Grade 7-Substandard		40,875		1,245		1,830		—		—		—		43,950
Grade 8-Doubtful		—		—		—		—		—		—		—
Grade 9-Loss		—		—		—		—		—		—		—
Total loans internally credit risk graded		381,852		76,570		7,059		—		—		—		465,481
Loans not monitored by internal risk grade:
Current loans not internally risk graded		—		—		53,276		123,169		179,230		12,924		368,599
30-59 days past due loans not internally risk graded		—		—		545		1,942		664		131		3,282
60-89 days past due loans not internally risk graded		—		—		1,172		181		71		12		1,436
90+ days past due loans not internally risk graded		—		—		2,472		1,666		124		28		4,290
Total loans not internally credit risk graded		—		—		57,465		126,958		180,089		13,095		377,607
Total loans internally and not internally credit risk graded	$	381,852	$	76,570	$	64,524	$	126,958	$	180,089	$	13,095	$	843,088

* Residential loans include conventional 1-4 family residential property loans and conventional 1-4 family residential property loans used to finance the cost of construction when upon completion of construction the loan converts into a permanent mortgage.

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Deposits (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Contractual maturities of certificates of deposits
2013	$ 236,598
2014	187,672
2015	34,411
2016	23,157
2017	14,252
Total	$ 496,090	$ 504,390

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Loans and Allowance for Loan Losses (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Allowance for loan losses:
Balance, beginning of period	$ 17,115	$ 17,135	$ 17,063	$ 16,136
Losses charged off	(1,621)	(3,499)	(3,697)	(4,611)
Recoveries	139	190	367	381
Provision charged to expense	1,667	3,345	3,567	5,445
Balance, end of period	17,300	17,351	17,300	17,351
Ending allowance balance attributable to loans:
Individually evaluated for impairment	3,298	6,070	3,298	6,070
Collectively evaluated for impairment	14,002	11,281	14,002	11,281
Total ending allowance balance	17,300	17,351	17,300	17,351
Loans:
Individually evaluated for impairment	29,569	38,246	29,569	38,246
Collectively evaluated for impairment	837,890	792,066	837,890	792,066
Total ending loans balance	867,459	830,312	867,459	830,312	843,088
Commercial Real Estate [Member]
Allowance for loan losses:
Balance, beginning of period	11,651	12,003	10,714	11,127
Losses charged off	(340)	(1,862)	(1,319)	(2,092)
Recoveries	10	114	30	216
Provision charged to expense	75	1,426	1,971	2,430
Balance, end of period	11,396	11,681	11,396	11,681
Ending allowance balance attributable to loans:
Individually evaluated for impairment	3,181	5,602	3,181	5,602
Collectively evaluated for impairment	8,215	6,079	8,215	6,079
Total ending allowance balance	11,396	11,681	11,396	11,681
Loans:
Individually evaluated for impairment	28,102	35,349	28,102	35,349
Collectively evaluated for impairment	370,149	351,542	370,149	351,542
Total ending loans balance	398,251	386,891	398,251	386,891	381,852
Commercial [Member]
Allowance for loan losses:
Balance, beginning of period	585	1,151	1,409	1,317
Losses charged off	(165)	(224)	(165)	(224)
Recoveries	3	4	20	35
Provision charged to expense	417	251	(424)	54
Balance, end of period	840	1,182	840	1,182
Ending allowance balance attributable to loans:
Individually evaluated for impairment	80	166	80	166
Collectively evaluated for impairment	760	1,016	760	1,016
Total ending allowance balance	840	1,182	840	1,182
Loans:
Individually evaluated for impairment	306	771	306	771
Collectively evaluated for impairment	79,155	71,908	79,155	71,908
Total ending loans balance	79,461	72,679	79,461	72,679	76,570
Residential Real Estate [Member]
Allowance for loan losses:
Balance, beginning of period	1,574	926	1,331	805
Losses charged off	(508)	(753)	(975)	(1,026)
Recoveries	16	6	83	10
Provision charged to expense	634	1,070	1,277	1,460
Balance, end of period	1,716	1,249	1,716	1,249
Ending allowance balance attributable to loans:
Individually evaluated for impairment	37	302	37	302
Collectively evaluated for impairment	1,679	947	1,679	947
Total ending allowance balance	1,716	1,249	1,716	1,249
Loans:
Individually evaluated for impairment	1,161	2,126	1,161	2,126
Collectively evaluated for impairment	63,673	66,711	63,673	66,711
Total ending loans balance	64,834	68,837	64,834	68,837	64,524
Home Equity Loans [Member]
Allowance for loan losses:
Balance, beginning of period	2,298	1,940	2,289	1,512
Losses charged off	(152)	(341)	(555)	(686)
Recoveries	11	1	15	2
Provision charged to expense	(11)	291	397	1,063
Balance, end of period	2,146	1,891	2,146	1,891
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	2,146	1,891	2,146	1,891
Total ending allowance balance	2,146	1,891	2,146	1,891
Loans:
Collectively evaluated for impairment	126,568	130,143	126,568	130,143
Total ending loans balance	126,568	130,143	126,568	130,143	126,958
Indirect [Member]
Allowance for loan losses:
Balance, beginning of period	807	902	891	904
Losses charged off	(399)	(143)	(577)	(338)
Recoveries	87	47	190	72
Provision charged to expense	490	115	481	283
Balance, end of period	985	921	985	921
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	985	921	985	921
Total ending allowance balance	985	921	985	921
Loans:
Collectively evaluated for impairment	184,892	158,885	184,892	158,885
Total ending loans balance	184,892	158,885	184,892	158,885	180,089
Consumer [Member]
Allowance for loan losses:
Balance, beginning of period	200	393	429	471
Losses charged off	(57)	(176)	(106)	(245)
Recoveries	12	18	29	46
Provision charged to expense	62	192	(135)	155
Balance, end of period	217	427	217	427
Ending allowance balance attributable to loans:
Collectively evaluated for impairment	217	427	217	427
Total ending allowance balance	217	427	217	427
Loans:
Collectively evaluated for impairment	13,453	12,877	13,453	12,877
Total ending loans balance	$ 13,453	$ 12,877	$ 13,453	$ 12,877	$ 13,095

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Securities (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 222,752	$ 219,923
Unrealized Gains	6,316	6,426
Unrealized Losses	(280)	(337)
Fair Value	228,788	226,012
U.S. Government agencies and corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	52,908	56,762
Unrealized Gains	215	120
Unrealized Losses	(1)	(1)
Fair Value	53,122	56,881
Mortgage backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	114,294	103,624
Unrealized Gains	3,355	3,705
Unrealized Losses	(278)	(292)
Fair Value	117,371	107,037
Collateralized mortgage obligations [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	25,959	29,537
Unrealized Gains	582	700
Fair Value	26,541	30,237
State and political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	29,591	30,000
Unrealized Gains	2,164	1,901
Unrealized Losses	(1)	(44)
Fair Value	$ 31,754	$ 31,857

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Short-Term Borrowings (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Short Term Borrowings (Textual) [Abstract]
Line of credit	50.00%
Home equity lines of credit	$ 100,863
Available line of credit	50,432
Outstanding amount
Line of credit with an unaffiliated financial institution	4,000
Balance line of credit	0	0
Securities sold under repurchase agreements	827	227
Interest rate paid on borrowings	0.25%	0.25%
Federal funds purchased

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Share Based Compensation (Details Textual) (USD $) In Thousands, except Share data, unless otherwise specified	6 Months Ended				1 Months Ended	3 Months Ended	6 Months Ended		12 Months Ended	6 Months Ended		12 Months Ended
	Jun. 30, 2012 Installments	Jun. 30, 2012 Stock Options [Member]	Jun. 30, 2011 Stock Options [Member]	Jun. 30, 2012 Stock Options [Member] Maximum [Member]	Jan. 31, 2011 Restricted Stock [Member]	Mar. 31, 2012 Restricted Stock [Member]	Jun. 30, 2012 Restricted Stock [Member]	Jun. 30, 2011 Restricted Stock [Member]	Dec. 31, 2006 Stock Appreciation Rights [Member]	Jun. 30, 2012 Stock Appreciation Rights (SARs) [Member]	Jun. 30, 2011 Stock Appreciation Rights (SARs) [Member]	Dec. 31, 2006 Stock Appreciation Rights (SARs) [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum option term												Jan. 01, 2016
Shares issued	35,000				40,000	62,105	62,105
General vesting period		3 years		10 years								3 years
Purchase price of long term restricted share					$ 5.28	$ 5.39	$ 5.39
Expense recorded for stock options		$ 1	$ 0				$ 144	$ 92		$ 2	$ 0
Stock appreciation rights price of long term restricted share									$ 19.00
Forfeited due to employee terminations	2,500
Shares expired due to employee terminations									15,500
Vesting Description	The maximum option term is ten years and the options generally vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years.									The SARS vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years.
Stock appreciation rights shares issued									30,000
Share Based Compensation (Textual) [Abstract]
Grants under nonqualified stock option	From 2005 to 2007
Weighted-average fair value of options granted	$ 5.39
Exercise of stock options
Total intrinsic value of options exercised	0
Total intrinsic value of options outstanding	$ 0
Number of installment	2

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Estimated Fair Value of Financial Instruments (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012
Estimated Fair Value of Financial Instruments (Textual) [Abstract]
Fair value of deposits with stated maturity
Amount of collateral dependent impaired loans minimum considered to be material	$ 250,000

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Loans and Allowance For Loan Losses (Details 5) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Summary of recorded investment based on delinquency status
Total Loans	$ 867,459	$ 843,088	$ 830,312
Commercial Real Estate [Member]
Summary of recorded investment based on delinquency status
Total Loans	398,251	381,852	386,891
Commercial [Member]
Summary of recorded investment based on delinquency status
Total Loans	79,461	76,570	72,679
Residential Real Estate [Member]
Summary of recorded investment based on delinquency status
Total Loans	64,834	64,524	68,837
Home Equity Loans [Member]
Summary of recorded investment based on delinquency status
Total Loans	126,568	126,958	130,143
Home Equity Loans [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Indirect [Member]
Summary of recorded investment based on delinquency status
Total Loans	184,892	180,089	158,885
Indirect [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Consumer [Member]
Summary of recorded investment based on delinquency status
Total Loans	13,453	13,095	12,877
Consumer [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member]
Summary of recorded investment based on delinquency status
Total Loans	867,459	843,088
Total Pass Credits	439,125	402,037
Total loans internally credit risk graded	484,204	465,481
Total loans not internally credit risk graded	383,255	377,607
Commercial Credit Exposure [Member] | Grade 1-Minimal [Member]
Summary of recorded investment based on delinquency status
Total Loans	110	3,157
Commercial Credit Exposure [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Grade 3-Better Than Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	1,579	1,621
Commercial Credit Exposure [Member] | Grade 4-Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	43,264	50,086
Commercial Credit Exposure [Member] | Grade 5-Acceptable [Member]
Summary of recorded investment based on delinquency status
Total Loans	394,172	347,173
Commercial Credit Exposure [Member] | Grade 6-Special mention [Member]
Summary of recorded investment based on delinquency status
Total Loans	9,477	19,494
Commercial Credit Exposure [Member] | Grade 7-Substandard [Member]
Summary of recorded investment based on delinquency status
Total Loans	34,837	43,950
Commercial Credit Exposure [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans	765
Commercial Credit Exposure [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | 1-29 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	376,208	368,599
Commercial Credit Exposure [Member] | 30-59 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	2,426	3,282
Commercial Credit Exposure [Member] | 60-89 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	1,139	1,436
Commercial Credit Exposure [Member] | 90 days and more Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	3,482	4,290
Commercial Credit Exposure [Member] | Commercial Real Estate [Member]
Summary of recorded investment based on delinquency status
Total Loans	398,251	381,852
Total Pass Credits	359,021	324,587
Total loans internally credit risk graded	398,251	381,852
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 3-Better Than Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	1,566	1,602
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 4-Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	38,195	44,527
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 5-Acceptable [Member]
Summary of recorded investment based on delinquency status
Total Loans	319,260	278,458
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 6-Special mention [Member]
Summary of recorded investment based on delinquency status
Total Loans	5,789	16,390
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 7-Substandard [Member]
Summary of recorded investment based on delinquency status
Total Loans	32,676	40,875
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans	765
Commercial Credit Exposure [Member] | Commercial Real Estate [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Commercial [Member]
Summary of recorded investment based on delinquency status
Total Loans	79,461	76,570
Total Pass Credits	75,191	72,378
Total loans internally credit risk graded	79,461	76,570
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 1-Minimal [Member]
Summary of recorded investment based on delinquency status
Total Loans	110	3,157
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 3-Better Than Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	13	19
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 4-Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	4,837	5,322
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 5-Acceptable [Member]
Summary of recorded investment based on delinquency status
Total Loans	70,231	63,880
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 6-Special mention [Member]
Summary of recorded investment based on delinquency status
Total Loans	3,642	2,947
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 7-Substandard [Member]
Summary of recorded investment based on delinquency status
Total Loans	628	1,245
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Commercial [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Residential Real Estate [Member]
Summary of recorded investment based on delinquency status
Total Loans	64,834	64,524
Total Pass Credits	4,913	5,072
Total loans internally credit risk graded	6,492	7,059
Total loans not internally credit risk graded	58,342	57,465
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 4-Average [Member]
Summary of recorded investment based on delinquency status
Total Loans	232	237
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 5-Acceptable [Member]
Summary of recorded investment based on delinquency status
Total Loans	4,681	4,835
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 6-Special mention [Member]
Summary of recorded investment based on delinquency status
Total Loans	46	157
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 7-Substandard [Member]
Summary of recorded investment based on delinquency status
Total Loans	1,533	1,830
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | 1-29 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	55,181	53,276
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | 30-59 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	506	545
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | 60-89 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	608	1,172
Commercial Credit Exposure [Member] | Residential Real Estate [Member] | 90 days and more Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	2,047	2,472
Commercial Credit Exposure [Member] | Home Equity Loans [Member]
Summary of recorded investment based on delinquency status
Total Loans	126,568	126,958
Total loans not internally credit risk graded	126,568	126,958
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | 1-29 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	123,568	123,169
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | 30-59 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	1,342	1,942
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | 60-89 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	272	181
Commercial Credit Exposure [Member] | Home Equity Loans [Member] | 90 days and more Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	1,386	1,666
Commercial Credit Exposure [Member] | Indirect [Member]
Summary of recorded investment based on delinquency status
Total Loans	184,892	180,089
Total loans not internally credit risk graded	184,892	180,089
Commercial Credit Exposure [Member] | Indirect [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Indirect [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Indirect [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Indirect [Member] | 1-29 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	184,273	179,230
Commercial Credit Exposure [Member] | Indirect [Member] | 30-59 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	518	664
Commercial Credit Exposure [Member] | Indirect [Member] | 60-89 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	96	71
Commercial Credit Exposure [Member] | Indirect [Member] | 90 days and more Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	5	124
Commercial Credit Exposure [Member] | Consumer [Member]
Summary of recorded investment based on delinquency status
Total Loans	13,453	13,095
Total loans not internally credit risk graded	13,453	13,095
Commercial Credit Exposure [Member] | Consumer [Member] | Grade 2-Modest [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Consumer [Member] | Grade 8-Doubtful [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Consumer [Member] | Grade 9-Loss [Member]
Summary of recorded investment based on delinquency status
Total Loans
Commercial Credit Exposure [Member] | Consumer [Member] | 1-29 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	13,186	12,924
Commercial Credit Exposure [Member] | Consumer [Member] | 30-59 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	60	131
Commercial Credit Exposure [Member] | Consumer [Member] | 60-89 days Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	163	12
Commercial Credit Exposure [Member] | Consumer [Member] | 90 days and more Past Due [Member]
Summary of recorded investment based on delinquency status
Total Loans	$ 44	$ 28

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Earnings Per Share

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share

(2) Earnings Per Share

Basic earnings per share are computed by dividing income available to common shareholders by the weighted average number of shares outstanding during the year. Diluted earnings per share is computed based on the weighted average number of shares outstanding plus the effects of dilutive stock options and warrants outstanding during the year. Basic and diluted earnings per share are calculated as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands except per share amounts)
Weighted average shares outstanding used in Basic Earnings per Common Share		7,944,354		7,884,749		7,934,458		7,878,119
Dilutive effect of incentive stock options and warrants		6,174		185		3,925		105
Weighted average shares outstanding used in Diluted Earnings Per Common Share		7,950,528		7,884,934		7,938,383		7,878,224
Net Income	$	1,438	$	712	$	2,943	$	1,842
Dividends and accretion on preferred stock		318		318		637		637
Income Available to Common Shareholders	$	1,120	$	394	$	2,306	$	1,205
Basic Earnings Per Common Share	$	0.14	$	0.05	$	0.29	$	0.15
Diluted Earnings Per Common Share	$	0.14	$	0.05	$	0.29	$	0.15

Options to purchase 232,000 common shares and common stock warrants for 561,343 shares were considered in computing diluted earnings per common share for the three and six month periods ended June 30, 2012. Stock options for 6,174 and 3,925 common shares were considered dilutive and the remaining stock options and the stock warrants were antidilutive for the three and six month periods ended June 30, 2012. Stock options to purchase 197,000 common shares and common stock warrants of 561,343 were considered in computing diluted earnings per common share for the three and six month periods ended June 30, 2011. Stock options to purchase 2,500 common shares were considered dilutive and the remaining stock options and stock warrants were antidilutive for the three and six month periods ended June 30, 2011.

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Share Based Compensation (Details)	6 Months Ended
	Jun. 30, 2012
Fair value of options granted determined by using weighted-average assumptions
Risk free interest rate	1.27%
Dividend yield	3.38%
Volatility	33.00%

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Loans and Allowance for Loan Losses (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011	Jun. 30, 2011
Age Analysis of Past Due Loans
30-59 Days Past Due	$ 3,531	$ 3,626
60-89 Days Past Due	1,687	2,489
Greater than 90 Days	21,940	25,200
Total Past Due	27,158	31,315
Current	840,301	811,773
Total Loans	867,459	843,088	830,312
Recorded Investment greater than 90 Days and Accruing
Commercial Real Estate [Member]
Age Analysis of Past Due Loans
30-59 Days Past Due	701	290
60-89 Days Past Due	425	804
Greater than 90 Days	16,435	19,023
Total Past Due	17,561	20,117
Current	380,690	361,735
Total Loans	398,251	381,852	386,891
Recorded Investment greater than 90 Days and Accruing
Commercial [Member]
Age Analysis of Past Due Loans
30-59 Days Past Due	404	54
60-89 Days Past Due	123	249
Greater than 90 Days	491	805
Total Past Due	1,018	1,108
Current	78,443	75,462
Total Loans	79,461	76,570	72,679
Recorded Investment greater than 90 Days and Accruing
Residential Real Estate [Member]
Age Analysis of Past Due Loans
30-59 Days Past Due	506	545
60-89 Days Past Due	608	1,172
Greater than 90 Days	3,579	3,554
Total Past Due	4,693	5,271
Current	60,141	59,253
Total Loans	64,834	64,524	68,837
Recorded Investment greater than 90 Days and Accruing
Home Equity Loans [Member]
Age Analysis of Past Due Loans
30-59 Days Past Due	1,342	1,942
60-89 Days Past Due	272	181
Greater than 90 Days	1,386	1,666
Total Past Due	3,000	3,789
Current	123,568	123,169
Total Loans	126,568	126,958	130,143
Recorded Investment greater than 90 Days and Accruing
Indirect [Member]
Age Analysis of Past Due Loans
30-59 Days Past Due	518	664
60-89 Days Past Due	96	71
Greater than 90 Days	5	124
Total Past Due	619	859
Current	184,273	179,230
Total Loans	184,892	180,089	158,885
Recorded Investment greater than 90 Days and Accruing
Consumer [Member]
Age Analysis of Past Due Loans
30-59 Days Past Due	60	131
60-89 Days Past Due	163	12
Greater than 90 Days	44	28
Total Past Due	267	171
Current	13,186	12,924
Total Loans	13,453	13,095	12,877
Recorded Investment greater than 90 Days and Accruing

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Estimated Fair Value of Financial Instruments (Tables)

6 Months Ended

Jun. 30, 2012

Estimated Fair Value of Financial Instruments [Abstract]

Summary of financial instruments

	June 30, 2012				December 31, 2011
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
			(Dollars in thousands)
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$	56,619	$	56,619	$	40,647	$	40,647
Securities		228,788		228,788		226,012		226,012
Portfolio loans, net		850,159		848,393		826,025		825,662
Loans held for sale		1,207		1,207		3,448		3,448
Accrued interest receivable		3,604		3,604		3,550		3,550
Financial liabilities
Deposits:
Demand, savings and money market	$	527,463		527,463		486,690		486,690
Certificates of deposit		496,090		500,265		504,390		509,449
Total deposits		1,023,553		1,027,728		991,080		996,139
Short-term borrowings		827		827		227		227
Federal Home Loan Bank advances		47,495		48,671		42,497		43,824
Junior subordinated debentures		16,238		16,645		16,238		16,130
Accrued interest payable		1,007		1,007		1,118		1,118

Assets measured by fair value on a recurring basis

Description	Fair Value as of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	53,122	$	—	$	53,122	$	—
Mortgage backed securities		117,371		—		117,371		—
Collateralized mortgage obligations		26,541		—		26,541		—
State and political subdivisions		31,754		—		31,754		—
Total	$	228,788	$	—	$	228,788	$	—

Description	Fair Value as of December 31, 2011		Quoted Prices in  Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	56,881	$	—	$	56,881	$	—
Mortgage backed securities		107,037		—		107,037		—
Collateralized mortgage obligations		30,237		—		30,237		—
State and political subdivisions		31,857		—		31,857		—
Total	$	226,012	$	—	$	226,012	$	—

Balances of assets and liabilities measured at fair value on a nonrecurring basis

June 30, 2012	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	29,569	$	29,569
Other real estate		—		—		1,506		1,506
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	31,075	$	31,075
December 31, 2011	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	33,592	$	33,592
Other real estate		—		—		1,687		1,687
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	35,279	$	35,279

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Commitments, Credit Risk and Contingencies (Tables)

6 Months Ended

Jun. 30, 2012

Commitments, Credit Risk, and Contingencies [Abstract]

Summary of the contractual amount of commitments

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Commitments to extend credit	$	78,859	$	92,128
Home equity lines of credit		75,279		78,410
Standby letters of credit		8,335		8,145
Total	$	162,473	$	178,683

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Commitments, Credit Risk, and Contingencies (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Summary of the contractual amount of commitments
Contractual amount of commitments, Total	$ 162,473	$ 178,683
Commitments to Extend Credit [Member]
Summary of the contractual amount of commitments
Contractual amount of commitments, Total	78,859	92,128
Home Equity Lines of Credit [Member]
Summary of the contractual amount of commitments
Contractual amount of commitments, Total	75,279	78,410
Standby Letters of Credit [Member]
Summary of the contractual amount of commitments
Contractual amount of commitments, Total	$ 8,335	$ 8,145

XML

Loans and Allowance for Loan Losses (Details 2) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
With allowance recorded:
Recorded Investment, Total	$ 29,569		$ 29,569		$ 33,592
Unpaid Principal Balance, Total	36,962		36,962		43,110
Related Allowance, Total	3,298		3,298		3,932
Average Recorded Balance, Total	30,667	40,574	30,971	42,769
Commercial Real Estate [Member]
With no related allowance recorded:
Recorded Investment	8,241		8,241		12,585
Unpaid Principal Balance	12,981		12,981		20,138
Average Recorded Balance	9,121	10,575	9,758	9,609
With allowance recorded:
Recorded Investment	19,861		19,861		19,161
Unpaid Principal Balance	21,465		21,465		19,823
Related Allowance	3,181		3,181		3,747
Average Recorded Balance	19,600	26,667	19,511	28,307
Commercial [Member]
With no related allowance recorded:
Recorded Investment	171		171		386
Unpaid Principal Balance	171		171		386
Average Recorded Balance	208	368	177	484
With allowance recorded:
Recorded Investment	135		135		319
Unpaid Principal Balance	135		135		794
Related Allowance	80		80		148
Average Recorded Balance	313	531	269	837
Residential Real Estate [Member]
With no related allowance recorded:
Recorded Investment	1,089		1,089		1,069
Unpaid Principal Balance	2,138		2,138		1,897
Average Recorded Balance	1,353	1,771	1,184	2,491
With allowance recorded:
Recorded Investment	72		72		72
Unpaid Principal Balance	72		72		72
Related Allowance	37		37		37
Average Recorded Balance	72	662	72	1,041
Home Equity Loans [Member]
With no related allowance recorded:
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Balance
With allowance recorded:
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Balance
Indirect [Member]
With no related allowance recorded:
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Balance
With allowance recorded:
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Balance
Consumer [Member]
With no related allowance recorded:
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Balance
With allowance recorded:
Recorded Investment
Unpaid Principal Balance
Related Allowance
Average Recorded Balance

XML

Share Based Compensation (Tables)

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Fair value of options granted determined by using weighted-average assumptions

	2012
Risk free interest rate		1.27	%
Dividend yield		3.38	%
Volatility		33.00	%

Summary of options outstanding

	Outstanding				Exercisable
	Number		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39		37,500		9.41		2,500	$	5.34
$14.47-$15.34		82,000		5.60		82,000		14.47
$15.35-$16.50		52,500		4.71		52,500		15.78
$16.51-$19.10		30,000		3.59		30,000		19.10
$19.11-$19.17		30,000		2.59		30,000		19.17
Outstanding at end of period		232,000		5.37		197,000	$	16.12

Summary of stock options

	2012				2011
	Options		Weighted Average Exercise Price per Share		Options		Weighted Average Exercise Price per Share
Outstanding at beginning of period		197,000	$	16.12		197,000	$	16.12
Granted		35,000		5.39		—		—
Forfeited or expired		—		—		—		—
Exercised		—		—		—		—
Stock dividend or split		—		—		—		—
Outstanding at end of period		232,000	$	14.50		197,000	$	16.12
Exercisable at end of period		197,000	$	16.12		196,167	$	16.17

Summary of the status of nonvested stock options

	Nonvested Shares		Weighted Average Exercise Price per share
Nonvested at January 1, 2012		833	$	5.34
Granted		35,000		5.39
Vested		833		5.34
Forfeited or expired		—		—
Nonvested at March 31, 2012		35,000	$	5.39

Summary of the status of restricted shares

	2012
	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2012		124,352		$	4.68
Granted		62,105			5.39
Forfeited or expired		—			—
Vested		(33,749	)		4.35
Nonvested at March 31, 2012		152,708		$	5.04

XML

Summary of Significant Accounting Policies (Details Textual) (USD $)	6 Months Ended	12 Months Ended
	Jun. 30, 2012	Dec. 31, 2011	Jul. 02, 2012	Jun. 13, 2012	Jun. 30, 2011
Class of Stock [Line Items]
Preferred stock, shares authorized	1,000,000
Preferred stock, outstanding		25,223
Summary of Significant Accounting Policies (Textual) [Abstract]
Preferred stock, par value	$ 0
Nonaccrual status of loans	90 days
Unrealized gain on available for sale securities	$ 3,984,000	$ 4,019,000
Minimum pension liability adjustment	1,818,000	1,818,000
Warrant to purchase share	561,343				561,343
Exercise price of common share	$ 6.74
Amortization of intangible assets	10 years
Fixed Rate Cumulative Perpetual Preferred Stock offering price				869.17
Warrant repurchased mutually agreed price			860,000
Series A Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized	150,000	150,000
Preferred stock, shares issued
Sale of shares
Summary of Significant Accounting Policies (Textual) [Abstract]
Preferred stock, par value
Series B Preferred Stock [Member]
Class of Stock [Line Items]
Preferred stock, shares authorized	25,223	25,223
Preferred stock, shares issued	25,223	25,223
Preferred stock, outstanding	25,223
Sale of shares	25,223,000	25,223,000
Corporation's Sale	$ 25,200,000
Purchase the Series B preferred stock from Treasury	$ 856.1325
Summary of Significant Accounting Policies (Textual) [Abstract]
Preferred stock, par value

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Summary of Significant Accounting Policies

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Summary of Significant Accounting Policies

(1) Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its primary wholly-owned subsidiary, The Lorain National Bank (the “Bank”). The consolidated financial statements also include the accounts of North Coast Community Development Corporation, which is a wholly-owned subsidiary of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnote disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of the Corporation’s management (“Management”), are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the six month period ended June 30, 2012, are not necessarily indicative of the results which may be expected for a full year.

Use of Estimates

LNB Bancorp Inc. prepares its financial statements in conformity with generally accepted accounting principles (GAAP), which 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 valuation of goodwill, the realization of deferred tax assets, fair values of certain securities, mortgage servicing rights, net periodic pension expense, and accrued pension costs recognized in the Corporation’s consolidated 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 assets and liabilities.

Segment Information

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

Statement of Cash Flows

For purposes of reporting in 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 resale agreements are for one day periods.

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 June 30, 2012 and December 31, 2011, the Corporation did not hold any trading securities. Securities that the Corporation has a positive intent and ability to hold to maturity are classified as held to maturity. As of June 30, 2012 and December 31, 2011, the Corporation did not hold any securities classified as held to maturity. Securities that are not classified as trading or held to maturity are classified as available for sale. Securities classified as available for sale are carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. 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.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. When evaluating investment securities, consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to Management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether the Corporation intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If the Corporation decides to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but the Corporation does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Restricted Stock

The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. The Corporation also owns stock in Bankers Bancshares Inc., an institution that provides correspondent banking services to community banks. Stock in these institutions is classified as restricted stock and is recorded at redemption value which approximates fair value. The Corporation periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held For Sale

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. Net unrealized losses are recognized by charges to income. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in the noninterest income section of the consolidated statement of income.

Loans

Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Loans acquired through business combinations are valued at fair market value on or near the date of acquisition. The difference between the principal amount outstanding and the fair market valuation is amortized over the aggregate average life of each class of loan. Unearned income includes deferred 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. Deferred direct loan origination fees and costs are amortized to interest income, over the contractual life of the loan, using the interest method.

Loans are generally placed on nonaccrual status when they are 90 days past due for interest or principal or when the full and timely collection of interest or principal becomes uncertain. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed against interest income. Placement of an account on nonaccrual status includes a reversal of all previously accrued but uncollected interest against interest income. When doubt exists as to the collectability of the principal portion of the loan, payments received must be applied to principal to the extent necessary to eliminate such doubt.

While in nonaccrual status, some or all of the cash interest payments may be treated as interest income on a cash basis as long as the remaining principal (after charge-off of identified losses, if any) is deemed to be fully collectible. The determination as to the ultimate collectability must be supported by a current, well-documented credit evaluation of the borrower’s financial condition and prospects for repayment, including consideration of the borrower’s historical repayment performance and other relevant factors. Generally, a loan is returned to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement and when the collectability is no longer doubtful.

A loan is impaired when full payment of principal and interest under the original loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by Management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

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 general economic conditions, loan portfolio composition, loan loss experience, Management’s evaluation of credit risk relating to pools of loans and individual borrowers, sensitivity analysis and expected loss models, value of underlying collateral, and 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 for loan losses under current economic conditions and such other factors which, in Management’s judgment, deserve current recognition. Additional information can be found in Note 6 (Loans and Allowance for Loan Losses).

Servicing

Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment on a quarterly basis based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

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. Goodwill is tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Corporation tests for goodwill impairment annually as of November 30 ^th of each year. Core deposit intangible assets are amortized using the straight-line method over ten years and are subject to annual impairment testing.

Other Real Estate Owned

Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Other real estate owned also includes bank premises formerly but no longer used for banking. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs.

Split-Dollar Life Insurance

The Corporation recognizes a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to certain employees extending to post-retirement periods. Based on the present value of expected future cash flows, the liability is recognized based on the substantive agreement with the employee.

Investment and Trust Services Assets and Income

Property held by the Corporation in fiduciary or agency capacity for its customers is not included in the Corporation’s financial statements as such items are not assets of the Corporation. Income from the Investment and Trust Services Division is reported on an accrual basis.

Income Taxes

The Corporation and its wholly-owned subsidiary file an annual 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. A valuation allowance is recorded when necessary to reduce deferred tax assets to amounts which are deemed more likely than not to be realized.

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the pension plan, which are also recognized as separate components of shareholders’ equity.

Unrealized gains on the Corporation’s available-for-sale securities (after applicable income tax expense) totaling $3,984 and $4,019 at June 30, 2012 and December 31, 2011, respectively, and the minimum pension liability adjustment (after applicable income tax benefit) totaling $1,818 for both June 30, 2012 and December 31, 2011 are included in accumulated other comprehensive income.

Preferred Stock

The Corporation is authorized to issue up to 1,000,000 shares of Voting Preferred Stock, no par value. As of June 30, 2011, the Corporation had authorized 150,000 Series A Voting Preferred Shares. No Series A Voting Preferred Shares have been issued.

As of June 30, 2012 and December 31, 2011, 25,223 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) were issued and outstanding. The Board of Directors of the Corporation is authorized to provide for the issuance of one or more series of Voting Preferred Stock and establish the dividend rate, dividend dates, whether dividends are cumulative, liquidation prices, redemption rights and prices, sinking fund requirements, conversion rights, and restrictions on the issuance of any series of Voting Preferred Stock. The Voting Preferred Stock may be issued with conversion rights to common stock and may rank prior to the common stock in dividends, liquidation preferences, or both. In connection with the Corporation’s sale of $25.2 million of its Series B Preferred Stock to United States Department of Treasury (Treasury) in conjunction with the Capital Purchase Program on December 12, 2008. The Corporation also issued a warrant to purchase 561,343 of its common shares at an exercise price of $6.74.

As part of the Treasury’s strategy for winding down its remaining investment in the Troubled Asset Relief Program (TARP), particularly in community banks, the Treasury conducted various public auctions of TARP preferred stock in 2012.

On June 13, 2012, the Corporation and the bank entered into an underwriting agreement (the “Underwriting Agreement”) with the Treasury and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler O’Neill & Partners, L.P. as representatives of the several underwriters named therein (the “Underwriters”) providing for the offer and sale by Treasury of 25,223 shares of the Company’s Series B preferred stock. Under the terms of the Underwriting Agreement, the Underwriters agreed to purchase the Series B preferred stock from Treasury at a price of $856.1325 per share, and to sell the Series B Preferred Stock to the public through a modified dutch auction at an initial public offering price of $869.17 per share. The Corporation did not receive any of the proceeds from the offering. The offering closed on June 19, 2012.

Subsequent Event

On July 2, 2012, the Corporation entered into a Warrant Repurchase Agreement to purchase 561,343 shares of common stock of the Corporation that was issued to the United States Department of the Treasury in connection with the Corporation’s participation in the Troubled Asset Relief Program Capital Purchase Program. The Warrant was repurchased at a mutually agreed upon price of $860. Settlement of the repurchase of the Warrant occurred on July 18, 2012. Following settlement of the TARP Warrant, the Treasury has no remaining investment in the Corporation.

New Accounting Pronouncements

ASC Topic 220: Comprehensive Income: Presentation of Comprehensive Income. On June 16, 2011, the FASB issued Accounting Standards Update (ASU) 2011-05. This ASU is intended to increase the prominence of other comprehensive income in financial statements. The new guidance does not change whether items are reported in net income or in other comprehensive income or whether and when items of other comprehensive income are reclassified to net income. ASU 2011-05 eliminates the option in current U.S. generally accepted accounting principles that permits the presentation of other comprehensive income in the statement of changes in equity. The new guidance in the ASU requires that an entity report comprehensive income in either a single continuous statement that presents the components of net income or a separate but consecutive statement. The new guidance is to be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this pronouncement did not have a material impact on the Corporation’s financial statements.

Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. On September 15, 2011 the FASB issued an accounting standards update (ASU) to simplify testing of goodwill for impairment. The changes will reduce complexity and costs by allowing an entity (public or nonpublic) to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. Specifically, an entity will have the option of first assessing qualitative factors (events and circumstances) to determine whether it is more likely than not (meaning a likelihood of more than fifty percent) that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment testing performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Corporation early adopted the ASU for the year ended December 31, 2011 and concluded that a full impairment test was not required. Refer to Note 4, Goodwill and Intangible Assets, for additional information.

FASB ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This amendment was issued as result of an effort to develop common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). While ASU 2011-04 is largely consistent with existing fair value measurement principles under U.S. GAAP, it expands the disclosure requirements for fair value measurements and clarifies the existing guidance or wording changes to align with IRFS No. 13. Many of the requirements for the amendments in ASU 2011-04 do not result in a change in the application of the requirements in ASC 820. ASU 2011-04 was effective for the Corporation on a prospective basis beginning in the quarter ended March 31, 2012. The adoption of this pronouncement did not have a material impact on the Corporation’s financial statements

Reclassification

Certain amounts appearing in the prior year’s financial statements have been reclassified to conform to the current period’s financial statements.

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Earnings Per Share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Basic and diluted earnings per share
Weighted average shares outstanding used in Basic Earnings per Common Share	7,944,354	7,884,749	7,934,458	7,878,119
Dilutive effect of stock options and warrants	6,174	185	3,925	105
Weighted average shares outstanding used in Diluted Earnings Per Common Share	7,950,528	7,884,934	7,938,383	7,878,224
Net Income	$ 1,438	$ 712	$ 2,943	$ 1,842
Dividends and accretion on preferred stock	318	318	637	637
Income Available to Common Shareholders	$ 1,120	$ 394	$ 2,306	$ 1,205
Basic Earnings Per Common Share	$ 0.14	$ 0.05	$ 0.29	$ 0.15
Diluted Earnings Per Common Share	$ 0.14	$ 0.05	$ 0.29	$ 0.15

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Securities (Details 3) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	$ 36,229	$ 39,274
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	36,229	39,274
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(280)	(337)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	(280)	(337)
U.S. Government agencies and corporations [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	9,999	9,999
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	9,999	9,999
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(1)	(1)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	(1)	(1)
Mortgage backed securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	25,827	25,606
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	25,827	25,606
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(278)	(292)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	(278)	(292)
State and political subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than Twelve Months, Fair Value	403	3,669
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Fair Value
Available-for-sale Securities, Continuous Unrealized Loss Position, Fair Value, Total	403	3,669
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	(1)	(44)
Available-for-sale Securities, Continuous Unrealized Loss Position, Twelve Months or Longer, Aggregate Losses
Available-for-sale Securities, Continuous Unrealized Loss Position, Aggregate Losses, Total	$ (1)	$ (44)

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Federal Home Loan Bank Advances (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Maturities of FHLB advances outstanding
Federal Home Loan Bank advances amount	$ 47,495	$ 42,497
Maturity January 2012, fixed rate 2.37% [Member]
Maturities of FHLB advances outstanding
Federal Home Loan Bank advances amount		15,000
Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55% [Member]
Maturities of FHLB advances outstanding
Federal Home Loan Bank advances amount	14,995	15,027
Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76% [Member]
Maturities of FHLB advances outstanding
Federal Home Loan Bank advances amount	$ 32,500	$ 12,470

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Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
ASSETS
Cash and due from banks (Note 3)	$ 37,449	$ 34,323
Federal funds sold and interest bearing deposits in banks	19,170	6,324
Cash and cash equivalents	56,619	40,647
Securities available for sale, at fair value (Note 5)	228,788	226,012
Restricted stock	5,741	5,741
Loans held for sale	1,207	3,448
Loans:
Portfolio loans (Note 6)	867,459	843,088
Allowance for loan losses (Note 6)	(17,300)	(17,063)
Net loans	850,159	826,025
Bank premises and equipment, net	9,308	8,968
Other real estate owned	1,506	1,687
Bank owned life insurance	18,202	17,868
Goodwill, net (Note 4)	21,582	21,582
Intangible assets, net (Note 4)	664	731
Accrued interest receivable	3,604	3,550
Other assets	10,565	12,163
Total Assets	1,207,945	1,168,422
Deposits: (Note 7)
Demand and other noninterest-bearing	143,778	126,713
Savings, money market and interest-bearing demand	383,685	359,977
Time deposits	496,090	504,390
Total deposits	1,023,553	991,080
Short-term borrowings (Note 8)	827	227
Federal Home Loan Bank advances (Note 9)	47,495	42,497
Junior subordinated debentures (Note 10)	16,238	16,238
Accrued interest payable	1,007	1,118
Accrued expenses and other liabilities	3,288	3,988
Total Liabilities	1,092,408	1,055,148
Shareholders' Equity
Discount on Series B preferred stock	(94)	(101)
Warrant to purchase common stock	146	146
Common stock, par value $1 per share, authorized 15,000,000 shares, issued 8,272,548 shares at June 30, 2012 and 8,210,443 at December 31, 2011.	8,272	8,210
Additional paid-in capital	39,689	39,607
Retained earnings	46,227	44,080
Accumulated other comprehensive income	2,166	2,201
Treasury shares at cost, 328,194 shares at June 30, 2012 and at December 31,2011	(6,092)	(6,092)
Total Shareholders' Equity	115,537	113,274
Total Liabilities and Shareholders' Equity	1,207,945	1,168,422
Preferred Stock [Member]
Shareholders' Equity
Preferred stock
Series A Preferred Stock
Shareholders' Equity
Preferred stock
Series B Preferred Stock
Shareholders' Equity
Preferred stock	$ 25,223	$ 25,223

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Loans and Allowance For Loan Losses (Details 3) (USD $) In Thousands, unless otherwise specified	6 Months Ended		12 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2011
Loans on nonaccrual status
Total nonaccrual Loans	$ 34,993	$ 34,993	$ 34,471
Percentage of nonaccrual loans to portfolio loans	4.03%		4.09%
Percentage of nonaccrual loans to total assets	2.90%		2.95%
Commercial Real Estate [Member]
Loans on nonaccrual status
Total nonaccrual Loans	22,456		21,512
Commercial [Member]
Loans on nonaccrual status
Total nonaccrual Loans	644		1,072
Residential Real Estate [Member]
Loans on nonaccrual status
Total nonaccrual Loans	6,724		6,551
Home Equity Loans [Member]
Loans on nonaccrual status
Total nonaccrual Loans	4,252		4,365
Indirect [Member]
Loans on nonaccrual status
Total nonaccrual Loans	530		711
Consumer [Member]
Loans on nonaccrual status
Total nonaccrual Loans	$ 387		$ 260

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Consolidated Statements of Shareholders' Equity (Unaudited) (Parenthetical) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Dividends declared	$ 0.02	$ 0.02
Restricted shares granted	62,105	40,000
Common Stock
Restricted shares granted	62,105	40,000
Additional Paid-In Capital
Restricted shares granted	62,105	40,000
Retained Earnings
Dividends declared	$ 0.02	$ 0.02

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Estimated Fair Value of Financial Instruments (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	$ 228,788	$ 226,012
Recurring [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	228,788	226,012
Recurring [Member] | U.S. Government agencies and corporations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	53,122	56,881
Recurring [Member] | Mortgage backed securities [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	117,371	107,037
Recurring [Member] | Collateralized mortgage obligations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	26,541	30,237
Recurring [Member] | State and political subdivisions [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	31,754	31,857
Level 1 [Member] | Recurring [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 1 [Member] | Recurring [Member] | U.S. Government agencies and corporations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 1 [Member] | Recurring [Member] | Mortgage backed securities [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 1 [Member] | Recurring [Member] | Collateralized mortgage obligations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 1 [Member] | Recurring [Member] | State and political subdivisions [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 2 [Member] | Recurring [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	228,788	226,012
Level 2 [Member] | Recurring [Member] | U.S. Government agencies and corporations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	53,122	56,881
Level 2 [Member] | Recurring [Member] | Mortgage backed securities [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	117,371	107,037
Level 2 [Member] | Recurring [Member] | Collateralized mortgage obligations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	26,541	30,237
Level 2 [Member] | Recurring [Member] | State and political subdivisions [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value	31,754	31,857
Level 3 [Member] | Recurring [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 3 [Member] | Recurring [Member] | U.S. Government agencies and corporations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 3 [Member] | Recurring [Member] | Mortgage backed securities [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 3 [Member] | Recurring [Member] | Collateralized mortgage obligations [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value
Level 3 [Member] | Recurring [Member] | State and political subdivisions [Member]
Assets measured by fair value on a recurring basis
Securities available for sale, at fair value

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Goodwill and Intangible Assets
Carrying value of core deposit intangibles	$ 664	$ 731
Core Deposits [Member]
Goodwill and Intangible Assets
Core deposit intangibles	1,367	1,367
Less: accumulated amortization	703	636
Carrying value of core deposit intangibles	$ 664	$ 731

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Share-Based Compensation (Details 3) (USD $)	6 Months Ended
	Jun. 30, 2012
Summary of the status of nonvested stock options
Nonvested Shares, beginning balance	833
Weighted Average Exercise Price per Share, beginning balance	$ 5.34
Nonvested Shares, Granted	35,000
Weighted Average Exercise Price per Share, Granted	$ 5.39
Nonvested Shares, vested	(833)
Weighted Average Exercise Price per Share, vested	$ 5.34
Nonvested shares, Forfeited or expired
Weighted Average Exercise Price per Share, forfeited or expired
Nonvested Shares, ending balance	35,000
Weighted Average Exercise Price per Share, Ending balance	$ 5.39

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Earnings Per Share (Tables)

6 Months Ended

Jun. 30, 2012

Earnings Per Share [Abstract]

Basic and diluted earning per share

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
	(Dollars in thousands except per share amounts)
Weighted average shares outstanding used in Basic Earnings per Common Share		7,944,354		7,884,749		7,934,458		7,878,119
Dilutive effect of incentive stock options and warrants		6,174		185		3,925		105
Weighted average shares outstanding used in Diluted Earnings Per Common Share		7,950,528		7,884,934		7,938,383		7,878,224
Net Income	$	1,438	$	712	$	2,943	$	1,842
Dividends and accretion on preferred stock		318		318		637		637
Income Available to Common Shareholders	$	1,120	$	394	$	2,306	$	1,205
Basic Earnings Per Common Share	$	0.14	$	0.05	$	0.29	$	0.15
Diluted Earnings Per Common Share	$	0.14	$	0.05	$	0.29	$	0.15

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Goodwill and Intangible Assets (Details Textual ) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Goodwill and Intangible Assets (Textual) [Abstract]
Goodwill	$ 21,582	$ 21,582
Goodwill impairment charge	$ 0
Cash flow period	5 years
Capitalization rate	10.00%
Discount rate	13.00%
Core Deposits [Member]
Finite-Lived Intangible Assets [Line Items]
Estimated useful life	10 years

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Securities (Tables)

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Amortized cost, gross unrealized gains and losses and fair values of securities available for sale

	At June 30, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	52,908	$	215	$	(1	)	$	53,122
Mortgage backed securities		114,294		3,355		(278	)		117,371
Collateralized mortgage obligations		25,959		582		—			26,541
State and political subdivisions		29,591		2,164		(1	)		31,754
Total Securities	$	222,752	$	6,316	$	(280	)	$	228,788
	At December 31, 2011
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	56,762	$	120	$	(1	)	$	56,881
Mortgage backed securities		103,624		3,705		(292	)		107,037
Collateralized mortgage obligations		29,537		700		—			30,237
State and political subdivisions		30,000		1,901		(44	)		31,857
Total Securities	$	219,923	$	6,426	$	(337	)	$	226,012

Amortized cost and fair value of the debt securities portfolio are shown by expected maturity

	At June 30, 2012
	(Dollars in thousands)
	Amortized Cost		Fair Value
Securities available for sale:
Due in one year or less	$	34,404	$	34,523
Due from one year to five years		30,229		30,959
Due from five years to ten years		10,087		11,084
Due after ten years		7,779		8,310
Mortgage backed securities and collateralized mortgage obligations		140,253		143,912
	$	222,752	$	228,788

Realized gains and losses related to securities available-for-sale

	2012		2011
	(Dollars in thousands)
Gross realized gains	$	—	$	500
Gross realized losses		—		—
Net Securities Gains	$	—	$	500
Proceeds from the sale of available for sale securities	$	—	$	24,664

Summary of securities that had unrealized losses

	At June 30, 2012
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	9,999	$	(1	)	$	—	$	—	$	9,999	$	(1	)
Mortgage backed securities		25,827		(278	)		—		—		25,827		(278	)
State and political subdivisions		403		(1	)		—		—		403		(1	)
Total	$	36,229	$	(280	)	$	—	$	—	$	36,229	$	(280	)

	At December 31, 2011
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	9,999	$	(1	)	$	—	$	—	$	9,999	$	(1	)
Mortgage backed securities		25,606		(292	)		—		—		25,606		(292	)
State and political subdivisions		3,669		(44	)		—		—		3,669		(44	)
Total	$	39,274	$	(337	)	$	—	$	—	$	39,274	$	(337	)

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011
Operating Activities
Net income	$ 2,943	$ 1,842
Adjustments to reconcile net income to net cash provided by operating activities:
Provision for loan losses	3,567	5,445
Depreciation and amortization	559	636
Amortization of premiums and discounts	805	675
Amortization of intangibles	29	67
Amortization of loan servicing rights	181	26
Amortization of deferred loan fees	(501)	(140)
Federal deferred income tax expense	197	637
Securities gains, net		(500)
Share-based compensation expense	144	92
Loans originated for sale	(34,330)	(35,116)
Proceeds from sales of loan originations	37,123	39,330
Net gain from loan sales	(552)	(417)
Net (gain) or loss on sale of other assets	99	25
Net (increase) decrease in accrued interest receivable and other assets	863	(1,339)
Net decrease in accrued interest payable, taxes and other liabilities	(610)	(560)
Net cash provided by operating activities	10,517	10,703
Investing Activities
Proceeds from sales of available-for-sale securities		24,664
Proceeds from maturities of available-for-sale securities	75,498	23,826
Purchase of available-for-sale securities	(79,132)	(56,621)
Net (increase) decrease in loans made to customers	(27,688)	(23,843)
Proceeds from the sale of other real estate owned	594	2,837
Purchase of bank premises and equipment	(1,099)	(197)
Net cash used in investing activities	(31,827)	(29,334)
Financing Activities
Net increase in demand and other noninterest-bearing	17,065	14,734
Net increase in savings, money market and interest-bearing demand	23,708	19,135
Net decrease in certificates of deposit	(8,300)	(30,358)
Net increase (decrease) in short-term borrowings	600	(175)
Proceeds from Federal Home Loan Bank advances	20,000	15,000
Payment of Federal Home Loan Bank advances	(15,002)	(15,003)
Dividends paid	(789)	(789)
Net cash provided by financing activities	37,282	2,544
Net increase (decrease) in cash and cash equivalents	15,972	(16,087)
Cash and cash equivalents, January 1	40,647	48,568
Cash and cash equivalents, June 30	56,619	32,481
Supplemental cash flow information
Interest paid	5,992	5,412
Income taxes paid	770	610
Transfer of loans to other real estate owned	$ 677	$ 2,295

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Consolidated Balance Sheets (Parenthetical) (USD $)	Jun. 30, 2012	Dec. 31, 2011
Preferred stock, par value	$ 0
Preferred stock, shares authorized	1,000,000
Common stock, par value	$ 1	$ 1
Common stock, shares authorized	15,000,000	15,000,000
Common stock, shares issued	8,272,548	8,210,443
Treasury stock, shares	328,194	328,194
Series A Preferred Stock
Preferred stock, par value
Preferred stock, shares authorized	150,000	150,000
Preferred stock, shares issued
Series B Preferred Stock
Preferred stock, par value
Preferred stock, shares authorized	25,223	25,223
Preferred stock, shares issued	25,223	25,223
Preferred stock, liquidation value	$ 1,000	$ 1,000

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Trust Preferred Securities

6 Months Ended

Jun. 30, 2012

Trust Preferred Securities [Abstract]

Trust Preferred Securities

(10) Trust Preferred Securities

In May 2007, LNB Trust I (“Trust I”) and LNB Trust II (“Trust II”) each sold $10,000 of preferred securities to outside investors and invested the proceeds in junior subordinated debentures issued by the Corporation. The Corporation used the proceeds from the debentures to fund the cash portion of its acquisition of Morgan Bancorp, Inc. Trust I and Trust II are wholly-owned unconsolidated subsidiaries of the Corporation. The Corporation’s obligations under the transaction documents, taken together, have the effect of providing a full guarantee by the Corporation, on a subordinated basis, of the payment obligation of the Trusts.

The subordinated notes mature in 2037. Trust I bears a floating interest rate (current three-month LIBOR plus 148 basis points). Trust II bears a fixed rate of 6.64% through June 15, 2017, and then becomes a floating interest rate (current three-month LIBOR plus 148 basis points). Interest on the notes is payable quarterly. The interest rates in effect as of the last determination date in 2012 were 1.95% and 6.64% for Trust I and Trust II, respectively. At June 30, 2012 and December 31, 2011, accrued interest payable for Trust I was $7 and $7 and for Trust II was $22 and $24, respectively.

The subordinated notes are redeemable in whole or in part, without penalty, at the Corporation’s option on or after June 15, 2012 and mature on June 15, 2037. The notes are junior in right of payment to the prior payment in full of all Senior Indebtedness of the Corporation, whether outstanding at the date of the indenture governing the notes or thereafter incurred. At June 30, 2012, the balance of the subordinated notes payable to Trust I and Trust II were each $8,116.

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Document and Entity Information	6 Months Ended
	Jun. 30, 2012	Aug. 13, 2012
Document and Entity Information [Abstract]
Entity Registrant Name	LNB BANCORP INC
Entity Central Index Key	0000737210
Document Type	10-Q
Document Period End Date	Jun. 30, 2012
Amendment Flag	false
Document Fiscal Year Focus	2012
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Entity Common Stock, Shares Outstanding		7,944,354

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Commitments, Credit Risk, and Contingencies

6 Months Ended

Jun. 30, 2012

Commitments, Credit Risk, and Contingencies [Abstract]

Commitments, Credit Risk, and Contingencies

(11) Commitments, Credit Risk, and Contingencies

In the normal course of business, the Bank enters into commitments that involve 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 evaluation of the applicant’s credit. Collateral held is generally single-family residential real estate and commercial real estate. Substantially all of the obligations to extend credit are variable rate. Standby letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. Payments under 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.

A summary of the contractual amount of commitments at June 30, 2012 and December 31, 2011 are as follows:

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Commitments to extend credit	$	78,859	$	92,128
Home equity lines of credit		75,279		78,410
Standby letters of credit		8,335		8,145
Total	$	162,473	$	178,683

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Consolidated Statements of Income (Unaudited) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Jun. 30, 2012	Jun. 30, 2011
Interest and Dividend Income
Loans	$ 10,194	$ 10,523	$ 20,243	$ 21,039
Securities:
U.S. Government agencies and corporations	1,281	1,612	2,541	3,089
State and political subdivisions	291	257	578	513
Other debt and equity securities	69	71	141	143
Federal funds sold and interest on deposits in banks	10	9	19	23
Total interest and dividend income	11,845	12,472	23,522	24,807
Interest Expense
Deposits	1,527	2,204	3,158	4,487
Federal Home Loan Bank advances	212	261	427	527
Short-term borrowings		1		2
Junior subordinated debentures	173	170	349	341
Total interest expense	1,912	2,636	3,934	5,357
Net Interest Income	9,933	9,836	19,588	19,450
Provision for Loan Losses (Note 6)	1,667	3,345	3,567	5,445
Net interest income after provision for loan losses	8,266	6,491	16,021	14,005
Noninterest Income
Investment and trust services	425	470	815	873
Deposit service charges	929	1,000	1,864	1,916
Other service charges and fees	804	819	1,552	1,725
Income from bank owned life insurance	169	175	334	349
Other income	58	41	400	120
Total fees and other income	2,385	2,505	4,965	4,983
Securities gains, net		88		500
Gains on sale of loans	205	238	552	417
Loss on sale of other assets, net	(47)	(27)	(99)	(25)
Total noninterest income	2,543	2,804	5,418	5,875
Noninterest Expense
Salaries and employee benefits	3,894	4,072	8,005	8,163
Furniture and equipment	877	798	1,709	1,478
Net occupancy	554	588	1,133	1,200
Professional fees	564	445	1,059	931
Marketing and public relations	395	275	642	546
Supplies, postage and freight	265	289	508	561
Telecommunications	172	169	345	384
Ohio franchise tax	307	298	623	596
FDIC assessments	394	399	786	973
Other real estate owned	175	207	307	797
Electronic banking expenses	323	223	561	432
Loan and collection expense	308	310	657	752
Other expense	819	449	1,256	898
Total noninterest expense	9,047	8,522	17,591	17,711
Income before income tax expense	1,762	773	3,848	2,169
Income tax expense	324	61	905	327
Net Income	1,438	712	2,943	1,842
Other comprehensive income (loss), net of taxes:
Changes in unrealized securities' holding gain (loss) net of taxes	357	751	(35)	1,221
Minimum pension liability adjustment, net of taxes during the period
Less: reclassification adjustments for securities' gains realized in net income, net of taxes		59		333
Total other comprehensive loss, net of taxes	357	692	(35)	888
Comprehensive income	1,795	2,730	2,908	2,730
Dividends and accretion on preferred stock	318	318	637	637
Net Income Available to Common Shareholders	$ 1,120	$ 394	$ 2,306	$ 1,205
Net Income Per Common Share (Note 2)
Basic	$ 0.14	$ 0.05	$ 0.29	$ 0.15
Diluted	$ 0.14	$ 0.05	$ 0.29	$ 0.15
Dividends declared	$ 0.01	$ 0.01	$ 0.02	$ 0.02
Average Common Shares Outstanding
Basic	7,944,354	7,884,749	7,934,458	7,878,119
Diluted	7,950,528	7,884,934	7,938,383	7,878,224

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Securities

6 Months Ended

Jun. 30, 2012

Securities [Abstract]

Securities

(5) Securities

The amortized cost, gross unrealized gains and losses and fair values of securities available for sale at June 30, 2012 and December 31, 2011 is as follows:

	At June 30, 2012
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	52,908	$	215	$	(1	)	$	53,122
Mortgage backed securities		114,294		3,355		(278	)		117,371
Collateralized mortgage obligations		25,959		582		—			26,541
State and political subdivisions		29,591		2,164		(1	)		31,754
Total Securities	$	222,752	$	6,316	$	(280	)	$	228,788
	At December 31, 2011
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair Value
	(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	56,762	$	120	$	(1	)	$	56,881
Mortgage backed securities		103,624		3,705		(292	)		107,037
Collateralized mortgage obligations		29,537		700		—			30,237
State and political subdivisions		30,000		1,901		(44	)		31,857
Total Securities	$	219,923	$	6,426	$	(337	)	$	226,012

The carrying value of securities pledged to secure trust deposits, public deposits, line of credit, and for other purposes required by law amounted to $173,757 and $137,388 at June 30, 2012 and December 31, 2011 respectively.

The amortized cost and fair value of the debt securities portfolio are shown by expected maturity. Expected maturities may differ from contractual maturities if issuers have the right to call or prepay obligations with or without call or prepayment penalties. U.S. Government agencies and corporations include callable and bullet agency issues and agency-backed mortgage backed securities. Mortgage backed securities and collateralized mortgage obligations are not due at a single maturity date and are shown separately.

	At June 30, 2012
	(Dollars in thousands)
	Amortized Cost		Fair Value
Securities available for sale:
Due in one year or less	$	34,404	$	34,523
Due from one year to five years		30,229		30,959
Due from five years to ten years		10,087		11,084
Due after ten years		7,779		8,310
Mortgage backed securities and collateralized mortgage obligations		140,253		143,912
	$	222,752	$	228,788

Realized gains and losses related to securities available-for-sale at June 30, 2012 and 2011 is as follows:

	2012		2011
	(Dollars in thousands)
Gross realized gains	$	—	$	500
Gross realized losses		—		—
Net Securities Gains	$	—	$	500
Proceeds from the sale of available for sale securities	$	—	$	24,664

The following is a summary of securities that had unrealized losses at June 30, 2012 and December 31, 2011. The information is presented for securities that have been in an unrealized loss position for less than 12 months and for more than 12 months. At June 30, 2012 there were 7 securities with unrealized losses totaling $280 and at December 31, 2011, the Corporation held 10 securities with unrealized losses totaling $337. Factors that are temporary in nature may result in securities being valued at less than amortized cost. For example, when the current levels of interest rates offered on securities are higher compared to the coupon interest rates on the securities held by the Corporation or when impairment is not due to credit deterioration, securities will be valued at less than amortized cost. The Corporation has the ability and the intent to hold these securities until their value recovers.

	At June 30, 2012
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	9,999	$	(1	)	$	—	$	—	$	9,999	$	(1	)
Mortgage backed securities		25,827		(278	)		—		—		25,827		(278	)
State and political subdivisions		403		(1	)		—		—		403		(1	)
Total	$	36,229	$	(280	)	$	—	$	—	$	36,229	$	(280	)

	At December 31, 2011
	Less than 12 months					12 months or longer				Total
	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
	(Dollars in thousands)
U.S. Government agencies and corporations	$	9,999	$	(1	)	$	—	$	—	$	9,999	$	(1	)
Mortgage backed securities		25,606		(292	)		—		—		25,606		(292	)
State and political subdivisions		3,669		(44	)		—		—		3,669		(44	)
Total	$	39,274	$	(337	)	$	—	$	—	$	39,274	$	(337	)

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Goodwill and Intangible Assets

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

(4) Goodwill and Intangible Assets

The Corporation has goodwill of $21,582 primarily from an acquisition completed in 2007. The Corporation assesses goodwill for impairment annually and more frequently in certain circumstances. Goodwill is assessed using the Bank as the reporting unit. The Corporation considers several methodologies in determining the fair value of the reporting unit, including the discounted estimated future net cash flows, price to tangible book value, and core deposit premium values. Primary reliance is placed on the discounted estimated future net cash flow approach. The key assumptions used to determine the fair value of the Corporation subsidiary include: (a) cash flow period of 5 years; (b) capitalization rate of 10.0%; and (c) a discount rate of 13.0%, which is based on the Corporation’s average cost of capital adjusted for the risk associated with its operations. A variance in these assumptions could have a significant effect on the determination of goodwill impairment. The Corporation cannot predict the occurrences of certain future events that might adversely affect the reported value of goodwill. Such events include, but are not limited to, strategic decisions in response to economic and competitive conditions, the effect of the economic environment on the Corporation’s customer base or a material negative change in the relationship with significant customers.

Core deposit intangibles are amortized over their estimated useful life of 10 years. A summary of core deposit intangible assets follows:

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Core deposit intangibles	$	1,367	$	1,367
Less: accumulated amortization		703		636
Carrying value of core deposit intangibles	$	664	$	731

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Goodwill and Intangible Assets (Tables )

6 Months Ended

Jun. 30, 2012

Goodwill and Intangible Assets [Abstract]

Summary of core deposit intangible assets

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Core deposit intangibles	$	1,367	$	1,367
Less: accumulated amortization		703		636
Carrying value of core deposit intangibles	$	664	$	731

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Estimated Fair Value of Financial Instruments

6 Months Ended

Jun. 30, 2012

Estimated Fair Value of Financial Instruments [Abstract]

Estimated Fair Value of Financial Instruments

(12) Estimated Fair Value of Financial Instruments

The Corporation discloses estimated fair values for its financial instruments. Fair value estimates, methods and assumptions are set forth below for the Corporation’s financial instruments.

The following methods and assumptions were used to estimate the fair value of each class of financial instruments for which it is practicable to estimate that value:

• The carrying value of cash and due from banks, Federal funds sold, short-term investments, interest-bearing deposits in other banks and accrued interest receivable and other financial assets is a reasonable estimate of fair value due to the short-term nature of the asset.

• The fair value of investment securities is based on quoted market prices, where available. If quoted market prices are not available, fair value is estimated using the quoted market prices of comparable instruments.

• For variable rate loans with interest rates that may be adjusted on a quarterly, or more frequent basis, the carrying amount is a reasonable estimate of fair value. The fair value of other types of loans is estimated by discounting future cash flows using the current rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities.

• The carrying value approximates the fair value for bank owned life insurance.

• The fair value of deposits with no stated maturity, such as noninterest-bearing demand deposits, savings, money market, checking and interest-bearing checking, is equal to the amount payable on demand as of the balance sheet date, for each year presented. The fair value of fixed-maturity certificates of deposit is estimated using the rates currently offered for deposits of similar remaining maturities. For variable rate certificates of deposit, the carrying amount is a reasonable estimate of fair value.

• Securities sold under repurchase agreements, other short-term borrowings, accrued interest payable and other financial liabilities approximate fair value due to the short-term nature of the liability.

• The fair value of Federal Home Loan Bank advances is estimated by discounting future cash flows using current FHLB rates for the remaining term to maturity.

• The fair value of junior subordinated debentures is based on the discounted value of contractual cash flows using rates currently offered for similar maturities.

• The fair value of commitments to extend credit approximates the fees charged to make these commitments; since rates and fees of the commitment contracts approximates those currently charged to originate similar commitments. The carrying amount and fair value of off-balance sheet instruments is not significant as of June 30, 2012 and December 31, 2011.

Limitations

Estimates of fair value are made at a specific point in time, based on relevant market information and information about the financial instrument. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and, therefore, cannot be determined with precision. Changes in assumptions could significantly affect the estimates.

Estimates of fair value are based on existing on-and-off balance sheet financial instruments without attempting to estimate the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. For example, the Corporation has a substantial Investment and Trust Services Division that contributes net fee income annually. The Investment and Trust Services Division is not considered a financial instrument and its value has not been incorporated into the fair value estimates. Other significant assets and liabilities that are not considered financial instruments include property, plant and equipment, goodwill and deferred tax liabilities. In addition, it is not practicable for the Corporation to estimate the tax ramifications related to the realization of the unrealized gains and losses and they have not been reflected in any of the estimates of fair value. The impact of these tax ramifications can have a significant effect on estimates of fair value.

The estimated fair values of the Corporation’s financial instruments at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012				December 31, 2011
	Carrying Value		Estimated Fair Value		Carrying Value		Estimated Fair Value
			(Dollars in thousands)
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$	56,619	$	56,619	$	40,647	$	40,647
Securities		228,788		228,788		226,012		226,012
Portfolio loans, net		850,159		848,393		826,025		825,662
Loans held for sale		1,207		1,207		3,448		3,448
Accrued interest receivable		3,604		3,604		3,550		3,550
Financial liabilities
Deposits:
Demand, savings and money market	$	527,463		527,463		486,690		486,690
Certificates of deposit		496,090		500,265		504,390		509,449
Total deposits		1,023,553		1,027,728		991,080		996,139
Short-term borrowings		827		827		227		227
Federal Home Loan Bank advances		47,495		48,671		42,497		43,824
Junior subordinated debentures		16,238		16,645		16,238		16,130
Accrued interest payable		1,007		1,007		1,118		1,118

The fair value of financial assets and liabilities is categorized in three levels. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. These levels are:

• Level 1 —Valuations based on quoted prices in active markets, such as the New York Stock Exchange. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.

• Level 2 —Valuations of assets and liabilities traded in less active dealer or broker markets. Valuations include quoted prices for similar assets and liabilities traded in the same market; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from, or corroborated by, third-party pricing services.

• Level 3 —Assets and liabilities with valuations that include methodologies and assumptions that may not be readily observable, including option pricing models, discounted cash flow models, yield curves and similar techniques. Level 3 valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities, but in all cases are corroborated by external data, which may include third-party pricing services.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporation’s assessment of the significance of particular inputs to these fair value measurements requires judgment and considers factors specific to each asset or liability.

The following information pertains to assets measured by fair value on a recurring basis (in thousands):

Description	Fair Value as of June 30, 2012		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	53,122	$	—	$	53,122	$	—
Mortgage backed securities		117,371		—		117,371		—
Collateralized mortgage obligations		26,541		—		26,541		—
State and political subdivisions		31,754		—		31,754		—
Total	$	228,788	$	—	$	228,788	$	—

Description	Fair Value as of December 31, 2011		Quoted Prices in  Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable  Inputs (Level 3)
(Dollars in thousands)
Securities available for sale:
U.S. Government agencies and corporations	$	56,881	$	—	$	56,881	$	—
Mortgage backed securities		107,037		—		107,037		—
Collateralized mortgage obligations		30,237		—		30,237		—
State and political subdivisions		31,857		—		31,857		—
Total	$	226,012	$	—	$	226,012	$	—

There were no transfers between Levels 1 and 2 of the fair value hierarchy during the three and six months ended June 30, 2012. For the available for sale securities, the Corporation obtains fair value measurements from an independent third party service and or from independent brokers.

The following tables present the balances of assets and liabilities measured at fair value on a nonrecurring basis at June 30, 2012 and December 31, 2011:

June 30, 2012	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	29,569	$	29,569
Other real estate		—		—		1,506		1,506
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	31,075	$	31,075
December 31, 2011	Quoted Market Prices in Active Markets (Level 1)		Internal Models with Significant Observable Market Parameters (Level 2)		Internal Models with Significant Unobservable Market Parameters (Level 3)		Total
(Dollars in thousands)
Impaired and nonaccrual loans	$	—	$	—	$	33,592	$	33,592
Other real estate		—		—		1,687		1,687
Total assets at fair value on a nonrecurring basis	$	—	$	—	$	35,279	$	35,279

The Corporation has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. The fair value of collateral-dependent impaired loans and other real estate owned is determined through the use of an independent third-party appraisal (Level 3 input), once a loan is identified as impaired or the Corporation takes ownership of a property. The Corporation maintains a disciplined approach of obtaining updated independent third-party appraisals relating to such loans or property on at least an annual basis, at which time the determination of fair value is updated as necessary to reflect the appraisal. In addition, Management reviews the fair value of those collateral-dependent impaired loans in amounts that it considers to be material ($250,000 or greater) on a monthly basis and makes necessary adjustments to the fair value based on individual facts and circumstances, which review may include obtaining new third-party appraisals.

Mortgage Servicing Rights (MSR). The Corporation carries its mortgage servicing rights at lower of cost or fair value, and therefore, can be subject to fair value measurements on a nonrecurring basis. Since sales of mortgage servicing rights occur in private transactions and the precise terms and conditions of the sales are typically not readily available (Level 3), there is a limited market to refer to in determining the fair value of mortgage servicing rights. As such the Corporation utilizes a third party vendor to perform a valuation on the mortgage servicing rights to estimate the fair value. The Corporation reviews the estimated fair values and assumptions used by the third party vendor on a quarterly basis.

Impaired Loans. Impaired loans valued using Level 3 inputs consist of non-homogeneous loans that are considered impaired. The Corporation estimates the fair value of these loans based on the estimated realizable values of available collateral, which is typically based on current independent third-party appraisals.

Other Real Estate Owned. Other real estate owned (“OREO”) is measured and reported at fair value when the current book value exceeds the estimated fair value of the property. Management’s determination of the fair value for these loans uses a market approach representing the estimated net proceeds to be received from the sale of the property based on observable market prices and market value provided by independent, licensed or certified appraisers (Level 3 Inputs).

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Short-Term Borrowings

6 Months Ended

Jun. 30, 2012

Short-Term Borrowings [Abstract]

Short-Term Borrowings

(8) Short-Term Borrowings

The Corporation has a line of credit for advances and discounts with the Federal Reserve Bank of Cleveland. The amount of this line of credit varies on a monthly basis. The line is equal to 50% of the balances of qualified home equity lines of credit that are pledged as collateral. At June 30, 2012, the Bank had pledged approximately $100,863 in qualifying home equity lines of credit, resulting in an available line of credit of approximately $50,432. No amounts were outstanding at June 30, 2012 or December 31, 2011. The Corporation also has a $4,000 line of credit with an unaffiliated financial institution. The balance of this line of credit was $0 as of June 30, 2012 and December 31, 2011.

Short-term borrowings include securities sold under repurchase agreements and Federal funds purchased from correspondent banks. Securities sold under repurchase agreements at June 30, 2012 and December 31, 2011 were $827 and $227, respectively. The interest rate paid on these borrowings was 0.25% at June 30, 2012 and December 31, 2011. No Federal Funds were purchased as of June 30, 2012 and December 31, 2011.

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Estimated Fair Value of Financial Instruments (Details 2) (Nonrecurring [Member], USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Balances of assets and liabilities measured at fair value on a nonrecurring basis
Impaired and nonaccrual loans	$ 29,569	$ 33,592
Other real estate	1,506	1,687
Total assets at fair value on a nonrecurring basis	31,075	35,279
Level 1 [Member]
Balances of assets and liabilities measured at fair value on a nonrecurring basis
Impaired and nonaccrual loans
Other real estate
Total assets at fair value on a nonrecurring basis
Level 2 [Member]
Balances of assets and liabilities measured at fair value on a nonrecurring basis
Impaired and nonaccrual loans
Other real estate
Total assets at fair value on a nonrecurring basis
Level 3 [Member]
Balances of assets and liabilities measured at fair value on a nonrecurring basis
Impaired and nonaccrual loans	29,569	33,592
Other real estate	1,506	1,687
Total assets at fair value on a nonrecurring basis	$ 31,075	$ 35,279

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Loans and Allowance for Loan Losses

6 Months Ended

Jun. 30, 2012

Loans and Allowance for Loan Losses [Abstract]

Loans and Allowance for Loan Losses

(6) Loans 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. 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. 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.

The allowance is comprised of a general allowance for unidentified problem loans and a specific allowance for identified problem loans. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. The methodology applies to the Corporation’s total loan portfolio including the performing portion of commercial and commercial real estate loans, real estate, and all types of other loans. The loss factors are applied accordingly 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 collectability of the loan portfolio. These other factors include but are not limited to: changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; changes in national and local economic and business conditions, including the condition of various market segments; changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past due and classified loans, the volume of nonaccrual loans, troubled debt restructurings and other loan modifications; the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and the effect of external factors, such as legal and regulatory requirements, on the level of estimated credit losses in the Corporation’s current portfolio. Specific allowances are established for all impaired loans when Management has determined that, due to identified significant conditions, it is probable that a loss will be incurred.

Activity in the loan balances and the allowance for loan losses by segment at June 30, 2012 and June 30, 2011 are summarized as follows:

Six Months Ended June 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	10,714		$	1,409		$	1,331		$	2,289		$	891		$	429		$	17,063
Losses charged off		(1,319	)		(165	)		(975	)		(555	)		(577	)		(106	)		(3,697	)
Recoveries		30			20			83			15			190			29			367
Provision charged to expense		1,971			(424	)		1,277			397			481			(135	)		3,567
Balance, end of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Three Months Ended June 30, 2012
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,651		$	585		$	1,574		$	2,298		$	807		$	200		$	17,115
Losses charged off		(340	)		(165	)		(508	)		(152	)		(399	)		(57	)		(1,621	)
Recoveries		10			3			16			11			87			12			139
Provision charged to expense		75			417			634			(11	)		490			62			1,667
Balance, end of period	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
As of June 30, 2012
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	3,181		$	80		$	37		$	—		$	—		$	—		$	3,298
Collectively evaluated for impairment		8,215			760			1,679			2,146			985			217			14,002
Total ending allowance balance	$	11,396		$	840		$	1,716		$	2,146		$	985		$	217		$	17,300
Loans:
Individually evaluated for impairment	$	28,102		$	306		$	1,161		$	—		$	—		$	—		$	29,569
Collectively evaluated for impairment		370,149			79,155			63,673			126,568			184,892			13,453			837,890
Total ending loans balance	$	398,251		$	79,461		$	64,834		$	126,568		$	184,892		$	13,453		$	867,459
Six Months Ended June 30, 2011
	Commercial Real Estate			Commercial			Residential Real Estate			Home Equity Loans			Indirect			Consumer			Total
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	11,127		$	1,317		$	805		$	1,512		$	904		$	471		$	16,136
Losses charged off		(2,092	)		(224	)		(1,026	)		(686	)		(338	)		(245	)		(4,611	)
Recoveries		216			35			10			2			72			46			381
Provision charged to expense		2,430			54			1,460			1,063			283			155			5,445
Balance, end of period	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
Three Months Ended June 30, 2011
							(Dollars in thousands)
Allowance for loan losses:
Balance, beginning of period	$	12,003		$	1,151		$	926		$	1,940		$	902		$	393		$	17,315
Losses charged off		(1,862	)		(224	)		(753	)		(341	)		(143	)		(176	)		(3,499	)
Recoveries		114			4			6			1			47			18			190
Provision charged to expense		1,426			251			1,070			291			115			192			3,345
Balance, end of period	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
As of June 30, 2011
Ending allowance balance attributable to loans:
Individually evaluated for impairment	$	5,602		$	166		$	302		$	—		$	—		$	—		$	6,070
Collectively evaluated for impairment		6,079			1,016			947			1,891			921			427			11,281
Total ending allowance balance	$	11,681		$	1,182		$	1,249		$	1,891		$	921		$	427		$	17,351
Loans:
Individually evaluated for impairment	$	35,349		$	771		$	2,126		$	—		$	—		$	—		$	38,246
Collectively evaluated for impairment		351,542			71,908			66,711			130,143			158,885			12,877			792,066
Total ending loans balance	$	386,891		$	72,679		$	68,837		$	130,143		$	158,885		$	12,877		$	830,312

Delinquencies

Delinquencies are a sign of weakness in credit quality. Lending staff at the Corporation monitor the financial performance and delinquency of borrowers in its portfolios. Lenders are responsible for managing delinquencies by following up with borrowers and arranging for payments. The Corporation determines if a commercial or commercial real estate loan is delinquent based on the number of days past due according to the contractual terms of the loan. For residential, home equity and consumer loans, the Corporation considers the borrower delinquent if the borrower is in arrears by two or more monthly payments. The following procedure is followed in managing delinquent accounts:

• 15-30 days past due- a collection notice is sent reminding the borrower of past due status and the urgency of bringing the account current.

• 45 days past due- a default letter is sent declaring the loan in default and advising the borrower that legal action will be necessary if the account is not brought current immediately.

• 60 days past due- an “attorney letter” accelerating the loan is sent advising the borrower that legal proceeding to collect the debt will begin immediately.

Management monitors delinquencies and potential problem loans on a recurring basis. At June 30, 2012 there was $27,158 in total past due loans or 3.13% of total loans compared to $31,315 or 3.71% of total loans at December 31, 2011. A table showing total loan delinquencies as of June 30, 2012 and December 31, 2011 by loan segment is as follows:

Age Analysis of Past Due Loans as of June 30, 2012
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90  Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	701	$	425	$	16,435	$	17,561	$	380,690	$	398,251	$	—
Commercial		404		123		491		1,018		78,443		79,461		—
Residential real estate		506		608		3,579		4,693		60,141		64,834		—
Home equity loans		1,342		272		1,386		3,000		123,568		126,568		—
Indirect		518		96		5		619		184,273		184,892
Consumer		60		163		44		267		13,186		13,453		—
Total	$	3,531	$	1,687	$	21,940	$	27,158	$	840,301	$	867,459	$	—

Age Analysis of Past Due Loans as of December 31, 2011
(Dollars in thousands)	30-59 Days Past Due		60-89 Days Past Due		Greater than 90  Days		Total Past Due		Current		Total Loans		Recorded Investment > 90 Days and Accruing
Commercial real estate	$	290	$	804	$	19,023	$	20,117	$	361,735	$	381,852	$	—
Commercial		54		249		805		1,108		75,462		76,570		—
Residential real estate		545		1,172		3,554		5,271		59,253		64,524		—
Home equity loans		1,942		181		1,666		3,789		123,169		126,958		—
Indirect		664		71		124		859		179,230		180,089
Consumer		131		12		28		171		12,924		13,095		—
Total	$	3,626	$	2,489	$	25,200	$	31,315	$	811,773	$	843,088	$	—

Impaired Loans

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 are evaluated for impairment. Impaired loans are written down by the establishment of a specific allowance where necessary. Interest income recognized on impaired loans while considered impaired was immaterial for the periods reported. Information regarding impaired loans as of June 30, 2012 and June 30, 2011 is as follows:

	At June 30, 2012						Three Months Ended June 30, 2012		Six Months Ended June 30, 2012
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	8,241	$	12,981	$	—	$	9,121	$	9,758
Commercial		171		171		—		208		177
Residential real estate		1,089		2,138		—		1,353		1,184
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
With allowance recorded:
Commercial real estate		19,861		21,465		3,181		19,600		19,511
Commercial		135		135		80		313		269
Residential real estate		72		72		37		72		72
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	29,569	$	36,962	$	3,298	$	30,667	$	30,971

	At December 31, 2011						Three Months Ended June 30, 2011		Six Months Ended June 30, 2011
	Recorded Investment		Unpaid Principal Balance		Related Allowance		Average Recorded Balance		Average Recorded Balance
(Dollars in thousands)
With no related allowance recorded:
Commercial real estate	$	12,585	$	20,138	$	—	$	10,575	$	9,609
Commercial		386		386		—		368		484
Residential real estate		1,069		1,897		—		1,771		2,491
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
With allowance recorded:
Commercial real estate		19,161		19,823		3,747		26,667		28,307
Commercial		319		794		148		531		837
Residential real estate		72		72		37		662		1,041
Home equity loans		—		—		—		—		—
Indirect		—		—		—		—		—
Consumer		—		—		—		—		—
Total	$	33,592	$	43,110	$	3,932	$	40,574	$	42,769

Nonaccrual loans at June 30, 2012 were $34,993 compared to $34,471 at December 31, 2011.

	June 30, 2012			December 31, 2011
	(Dollars in thousands)
Commercial real estate	$	22,456		$	21,512
Commercial		644			1,072
Residential real estate		6,724			6,551
Home equity loans		4,252			4,365
Indirect		530			711
Consumer		387			260
Total Nonaccrual Loans	$	34,993		$	34,471
Percentage of nonaccrual loans to portfolio loans		4.03	%		4.09	%
Percentage of nonaccrual loans to total assets		2.90	%		2.95	%

Troubled Debt Restructuring

A restructuring of a debt constitutes a troubled debt restructuring if the creditor, for economic or legal reasons related to the debtor’s financial difficulties, grants a concession to the debtor that it would not otherwise consider. That concession either stems from an agreement between the creditor and the debtor or is imposed by law or a court. The Corporation adheres to ASC 310-40, Troubled Debt Restructurings by Creditors, to determine whether a troubled debt structuring applies in a particular instance. As of June 30, 2012, the Corporation had five loans that were classified as troubled debt restructurings which totaled $2,972. As of December 31, 2011, the Corporation had five loans that were classified as a troubled debt restructuring in the amount of $3,099. The Corporation has allocated $455 and $307 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2012 and December 31, 2011, respectively. There are no commitments to lend additional amounts to borrowers with loans that are classified as troubled debt restructurings at June 30, 2012 and December 31, 2011.

Information regarding TDR loans for the three and six months end June 30, 2012 is as follows:

	For the Six Months Ended June 30, 2012				For the Three Months Ended June 30, 2012
	(Dollars in thousands)				(Dollars in thousands)
	Number of Contracts		Post-Modification Outstanding Recorded Investment		Number of Contracts		Post-Modification Outstanding Recorded Investment
Troubled Debt Restructurings
Commercial Real Estate		5	$	2,972		—	$	—

Credit Risk Grading

Sound credit systems, practices and procedures such as credit risk grading systems; effective credit review and examination processes; effective loan monitoring, problem identification, and resolution processes; and a conservative loss recognition process and charge-off policy are integral to Management’s proper assessment of the adequacy of the allowance. Many factors are considered when grades are assigned to individual loans such as current and historic delinquency, financial statements of the borrower, current net realizable value of collateral and the general economic environment and specific economic trends affecting the portfolio. Commercial, commercial real estate and residential construction loans are assigned internal credit risk grades. The loan’s internal credit risk grade is reviewed on at least an annual basis and more frequently if needed based on specific borrower circumstances. Credit quality indicators used in Management’s periodic analysis of the adequacy of the allowance include the Corporation’s internal credit risk grades which are described below and are included in the table below for June 30, 2012 and December 31, 2011:

• Grades 1 -5: defined as “Pass” credits — loans which are protected by the borrower’s current net worth and paying capacity or by the value of the underlying collateral. Pass credits are current or have not displayed a significant past due history.

• Grade 6: defined as “Special Mention” credits — loans where a potential weakness or risk exists, which could cause a more serious problem if not monitored. Loans listed for special mention generally demonstrate a history of repeated delinquencies, which may indicate a deterioration of the repayment abilities of the borrower.

• Grade 7: defined as “Substandard” credits — loans that have a well-defined weakness based on objective evidence and are characterized by the distinct possibility that the Corporation will sustain some loss if the deficiencies are not corrected.

• Grade 8: defined as “Doubtful” credits — loans classified as doubtful have all the weaknesses inherent in a substandard asset. In addition, these weaknesses make collection or liquidation in full highly questionable and improbable.

• Grade 9: defined as “Loss” credits — loans classified as a loss are considered uncollectible, or of such value that continuance as an asset is not warranted.

For residential, home equity, indirect and consumer loan segments, the Corporation monitors credit quality using a combination of the delinquency status of the loan and/or the Corporation’s internal credit risk grades as indicated above.

The following table presents the recorded investment of commercial, commercial real estate and residential construction loans by internal credit risk grade and the recorded investment in residential, home equity, indirect and consumer loans based on delinquency status as of June 30, 2012 and December 31, 2011:

	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
Commercial Credit Exposure	June 30, 2012
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1-Minimal	$	—	$	110	$	—	$	—	$	—	$	—	$	110
Grade 2-Modest		—		—		—		—		—		—		—
Grade 3-Better than average		1,566		13		—		—		—		—		1,579
Grade 4-Average		38,195		4,837		232		—		—		—		43,264
Grade 5-Acceptable		319,260		70,231		4,681		—		—		—		394,172
Total Pass Credits		359,021		75,191		4,913		—		—		—		439,125
Grade 6-Special mention		5,789		3,642		46		—		—		—		9,477
Grade 7-Substandard		32,676		628		1,533		—		—		—		34,837
Grade 8-Doubtful		765		—		—		—		—		—		765
Grade 9-Loss		—		—		—		—		—		—		—
Total loans internally credit risk graded		398,251		79,461		6,492		—		—		—		484,204
Loans not monitored by internal risk grade:
Current loans not internally risk graded		—		—		55,181		123,568		184,273		13,186		376,208
30-59 days past due loans not internally risk graded		—		—		506		1,342		518		60		2,426
60-89 days past due loans not internally risk graded		—		—		608		272		96		163		1,139
90+ days past due loans not internally risk graded		—		—		2,047		1,386		5		44		3,482
Total loans not internally credit risk graded		—		—		58,342		126,568		184,892		13,453		383,255
Total loans internally and not internally credit risk graded	$	398,251	$	79,461	$	64,834	$	126,568	$	184,892	$	13,453	$	867,459

	Commercial Real Estate		Commercial		Residential Real Estate*		Home Equity Loans		Indirect		Consumer		Total
Commercial Credit Exposure	December 31, 2011
	(Dollars in thousands)
Loans graded by internal credit risk grade:
Grade 1-Minimal	$	—	$	3,157	$	—	$	—	$	—	$	—	$	3,157
Grade 2-Modest		—		—		—		—		—		—		—
Grade 3-Better than average		1,602		19		—		—		—		—		1,621
Grade 4-Average		44,527		5,322		237		—		—		—		50,086
Grade 5-Acceptable		278,458		63,880		4,835		—		—		—		347,173
Total Pass Credits		324,587		72,378		5,072		—		—		—		402,037
Grade 6-Special mention		16,390		2,947		157		—		—		—		19,494
Grade 7-Substandard		40,875		1,245		1,830		—		—		—		43,950
Grade 8-Doubtful		—		—		—		—		—		—		—
Grade 9-Loss		—		—		—		—		—		—		—
Total loans internally credit risk graded		381,852		76,570		7,059		—		—		—		465,481
Loans not monitored by internal risk grade:
Current loans not internally risk graded		—		—		53,276		123,169		179,230		12,924		368,599
30-59 days past due loans not internally risk graded		—		—		545		1,942		664		131		3,282
60-89 days past due loans not internally risk graded		—		—		1,172		181		71		12		1,436
90+ days past due loans not internally risk graded		—		—		2,472		1,666		124		28		4,290
Total loans not internally credit risk graded		—		—		57,465		126,958		180,089		13,095		377,607
Total loans internally and not internally credit risk graded	$	381,852	$	76,570	$	64,524	$	126,958	$	180,089	$	13,095	$	843,088

* Residential loans include conventional 1-4 family residential property loans and conventional 1-4 family residential property loans used to finance the cost of construction when upon completion of construction the loan converts into a permanent mortgage.

The Corporation adheres to underwriting standards consistent with its Loan Policy for indirect and consumer loans. Final approval of a consumer credit depends on the repayment ability of the borrower. Repayment ability generally requires the determination of the borrower’s capacity to meet current and proposed debt service requirements. A borrower’s repayment ability is monitored based on delinquency, generally for time periods of 30 to 59 days past due, 60 to 89 days past due and greater than 90 days past due. This information is provided in the above delinquent loan table. Additionally, a good indicator of repayment ability is a borrower’s credit history. A borrower’s credit history is evaluated though the use of credit reports and/or an automated underwriting system. A borrower’s credit score is an indication of a person’s creditworthiness that is used to access the likelihood that a borrower will repay their debts. A credit score is generally based upon a person’s past credit history and is a number between 300 and 850—the higher the number, the more creditworthy the person is deemed to be.

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Deposits

6 Months Ended

Jun. 30, 2012

Deposits [Abstract]

Deposits

(7) Deposits

Deposit balances at June 30, 2012 and December 31, 2011 are summarized as follows:

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Demand and other noninterest-bearing	$	143,778	$	126,713
Interest checking		165,176		151,894
Savings		111,742		102,440
Money market accounts		106,767		105,643
Consumer time deposits		411,265		424,870
Public time deposits		84,825		79,520
Total deposits	$	1,023,553	$	991,080

The aggregate amount of certificates of deposit in denominations of $100,000 or more amounted to $252,197 and $241,217 at June 30, 2012 and December 31, 2011, respectively.

The maturity distribution of certificates of deposit as of June 30, 2012 follows:

June 30, 2012
(Dollars in thousands)
2013	$	236,598
2014		187,672
2015		34,411
2016		23,157
2017		14,252
Total	$	496,090

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Federal Home Loan Bank Advances

6 Months Ended

Jun. 30, 2012

Federal Home Loan Bank Advances [Abstract]

Federal Home Loan Bank Advances

(9) Federal Home Loan Bank Advances

Federal Home Loan Bank advances amounted to $47,521 and $42,497 at June 30, 2012 and December 31, 2011, respectively. All advances are bullet maturities with no call features. At June 30, 2012, collateral pledged for FHLB advances consisted of qualified multi-family and residential real estate mortgage loans and investment securities of $78,529 and 27,152, respectively. The maximum borrowing capacity of the Bank at June 30, 2012 was $66,755 with unused collateral borrowing capacity of $17,734. The Bank maintains a $40,000 cash management line of credit (CMA) with the FHLB. The amount outstanding was $0 for the CMA line of credit as of June 30, 2012 and December 31, 2011.

Maturities of FHLB advances outstanding at June 30, 2012 and December 31, 2011 are as follows.

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Maturity January 2012, fixed rate 2.37%	$	—	$	15,000
Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55%		14,995		15,027
Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76%		32,500		12,470
Total FHLB advances	$	47,495	$	42,497

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Share-Based Compensation (Details 2) (USD $)	6 Months Ended
	Jun. 30, 2012	Jun. 30, 2011	Dec. 31, 2010
Summary of stock options
Outstanding at beginning of period, shares	197,000	197,000	197,000
Outstanding at beginning of period, weighted average exercise price per share	$ 16.12	$ 16.12	$ 16.12
Granted, shares	35,000
Granted, Weighted average exercise price per share	$ 5.39
Forfeited or expired, shares
Weighted Average Exercise Price per Share, forfeited or cancelled
Exercised, shares
Weighted Average Exercise Price per Share, exercised
Stock dividend or split
Weighted Average Exercise Price per Share, stock dividend or split
Outstanding at end of period, shares	232,000	197,000	197,000
Outstanding at end of period, weighted average exercise price per share	$ 14.50	$ 16.12	$ 16.12
Exercisable at end of period, shares	197,000	196,167
Weighted Average Exercise Price per Share, Exercisable	$ 16.12	$ 16.17

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Share-Based Compensation (Details 4) (USD $)	1 Months Ended	3 Months Ended	6 Months Ended
	Jan. 31, 2011	Mar. 31, 2012	Jun. 30, 2012
Summary of status of restricted shares
Nonvested Shares, Granted			35,000
Nonvested shares, Forfeited or expired			2,500
Restricted Stock [Member]
Summary of status of restricted shares
Nonvested Shares, Beginning balance		124,352	124,352
Weighted Average Exercise Price per Share, Beginning balance		$ 4.68	$ 4.68
Nonvested Shares, Granted	40,000	62,105	62,105
Weighted Average Exercise Price per Share, Granted	$ 5.28	$ 5.39	$ 5.39
Nonvested shares, Forfeited or expired
Weighted Average Exercise Price per Share, forfeited or expired
Nonvested Shares, vested			(33,749)
Weighted Average Exercise Price per Share, vested			$ 4.35
Nonvested Shares, ending balance			152,708
Weighted Average Exercise Price per Share, Ending balance			$ 5.04

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Share Based Compensation (Details 1) (USD $)	6 Months Ended
	Jun. 30, 2012
Summary of options outstanding
Weighted Average Remaining Contractual Life (Years)	5 years 7 months 13 days
Outstanding, Number	232,000
Exercisable, Number	197,000
Weighted Average Exercise Price, Ending balance	$ 16.12
5.34-5.39 [Member]
Summary of options outstanding
Range of Exercise Prices, minimum	$ 5.34
Range of Exercise Prices, maximum	$ 5.39
Weighted Average Remaining Contractual Life (Years)	9 years 4 months 28 days
Outstanding, Number	37,500
Exercisable, Number	2,500
Weighted Average Exercise Price	$ 5.34
14.47-15.34 [Member]
Summary of options outstanding
Range of Exercise Prices, minimum	$ 14.47
Range of Exercise Prices, maximum	$ 15.34
Weighted Average Remaining Contractual Life (Years)	5 years 7 months 6 days
Outstanding, Number	82,000
Exercisable, Number	82,000
Weighted Average Exercise Price	$ 14.47
15.35-16.50 [Member]
Summary of options outstanding
Range of Exercise Prices, minimum	$ 15.35
Range of Exercise Prices, maximum	$ 16.50
Weighted Average Remaining Contractual Life (Years)	4 years 8 months 16 days
Outstanding, Number	52,500
Exercisable, Number	52,500
Weighted Average Exercise Price	$ 15.78
16.51-19.10 [Member]
Summary of options outstanding
Range of Exercise Prices, minimum	$ 16.51
Range of Exercise Prices, maximum	$ 19.10
Weighted Average Remaining Contractual Life (Years)	3 years 7 months 2 days
Outstanding, Number	30,000
Exercisable, Number	30,000
Weighted Average Exercise Price	$ 19.10
19.11-19.17 [Member]
Summary of options outstanding
Range of Exercise Prices, minimum	$ 19.11
Range of Exercise Prices, maximum	$ 19.17
Weighted Average Remaining Contractual Life (Years)	2 years 7 months 2 days
Outstanding, Number	30,000
Exercisable, Number	30,000
Weighted Average Exercise Price	$ 19.17

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Cash and Due From Banks (Details Textual) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Cash and Due from Banks (Textual) [Abstract]
Reserve Balance	$ 1,099	$ 690

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Deposits (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012	Dec. 31, 2011
Deposits (Textual) [Abstract]
Aggregate amount of certificates of deposit in denominations of $100,000 or more	$ 252,197	$ 241,217
Certificates of deposit denominations	$ 100,000

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Jun. 30, 2012

Summary of Significant Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation

The consolidated financial statements include the accounts of LNB Bancorp, Inc. (the “Corporation”) and its primary wholly-owned subsidiary, The Lorain National Bank (the “Bank”). The consolidated financial statements also include the accounts of North Coast Community Development Corporation, which is a wholly-owned subsidiary of the Bank. All intercompany transactions and balances have been eliminated in consolidation.

The accompanying unaudited consolidated financial statements were prepared in accordance with instructions for Form 10-Q and, therefore, do not include information or footnote disclosures necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States of America (“US GAAP”). Accordingly, these financial statements should be read in conjunction with the consolidated financial statements and notes thereto of the Corporation included in the Corporation’s Annual Report on Form 10-K for the year ended December 31, 2011. However, all adjustments (consisting only of normal recurring accruals) which, in the opinion of the Corporation’s management (“Management”), are necessary for a fair presentation of the consolidated financial statements have been included. The results of operations for the six month period ended June 30, 2012, are not necessarily indicative of the results which may be expected for a full year.

Use of Estimates

Use of Estimates

LNB Bancorp Inc. prepares its financial statements in conformity with generally accepted accounting principles (GAAP), which 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 valuation of goodwill, the realization of deferred tax assets, fair values of certain securities, mortgage servicing rights, net periodic pension expense, and accrued pension costs recognized in the Corporation’s consolidated 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 assets and liabilities.

Segment Information

Segment Information

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

Statement of Cash Flows

Statement of Cash Flows

For purposes of reporting in 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 resale agreements are for one day periods.

Securities

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 June 30, 2012 and December 31, 2011, the Corporation did not hold any trading securities. Securities that the Corporation has a positive intent and ability to hold to maturity are classified as held to maturity. As of June 30, 2012 and December 31, 2011, the Corporation did not hold any securities classified as held to maturity. Securities that are not classified as trading or held to maturity are classified as available for sale. Securities classified as available for sale are carried at their fair value with unrealized gains and losses, net of tax, included as a component of accumulated other comprehensive income. 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.

Management evaluates securities for other-than-temporary impairment (“OTTI”) on a quarterly basis, and more frequently when economic or market conditions warrant such an evaluation. When evaluating investment securities, consideration is given to the length of time and the extent to which the fair value has been less than cost, the financial condition and near-term prospects of the issuer, whether the market decline was affected by macroeconomic conditions and whether the Corporation has the intent to sell the debt security or more likely than not will be required to sell the debt security before its anticipated recovery. In analyzing an issuer’s financial condition, the Corporation may consider whether the securities are issued by the federal government or its agencies, or U.S. Government sponsored enterprises, whether downgrades by bond rating agencies have occurred, and the results of reviews of the issuer’s financial condition. The assessment of whether an other-than-temporary decline exists involves a high degree of subjectivity and judgment and is based on the information available to Management at a point in time.

When OTTI occurs, the amount of the OTTI recognized in earnings depends on whether the Corporation intends to sell the security or it is more likely than not it will be required to sell the security before recovery of its amortized cost basis. If the Corporation decides to sell or it is more likely than not that it will be required to sell the security before recovery of its amortized cost basis, the OTTI will be recognized in earnings equal to the entire difference between the investment’s amortized cost basis and its fair value at the balance sheet date. The previous amortized cost basis less the OTTI recognized in earnings becomes the new amortized cost basis of the investment. If a security is determined to be other-than-temporarily impaired, but the Corporation does not intend to sell the security, only the credit portion of the estimated loss is recognized in earnings, with the other portion of the loss recognized in other comprehensive income.

Restricted Stock

Restricted Stock

The Bank is a member of the Federal Home Loan Bank (FHLB) system. Members are required to own a certain amount of stock based on the level of borrowings and other factors, and may invest in additional amounts. The Bank is also a member of and owns stock in the Federal Reserve Bank. The Corporation also owns stock in Bankers Bancshares Inc., an institution that provides correspondent banking services to community banks. Stock in these institutions is classified as restricted stock and is recorded at redemption value which approximates fair value. The Corporation periodically evaluates the restricted stock for impairment based on ultimate recovery of par value. Both cash and stock dividends are reported as income.

Loans Held For Sale

Loans Held For Sale

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. Net unrealized losses are recognized by charges to income. Gains and losses on loan sales (sales proceeds minus carrying value) are recorded in the noninterest income section of the consolidated statement of income.

Loans

Loans

Loans are reported at the principal amount outstanding, net of unearned income and premiums and discounts. Loans acquired through business combinations are valued at fair market value on or near the date of acquisition. The difference between the principal amount outstanding and the fair market valuation is amortized over the aggregate average life of each class of loan. Unearned income includes deferred 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. Deferred direct loan origination fees and costs are amortized to interest income, over the contractual life of the loan, using the interest method.

Loans are generally placed on nonaccrual status when they are 90 days past due for interest or principal or when the full and timely collection of interest or principal becomes uncertain. When a loan has been placed on nonaccrual status, the accrued and unpaid interest receivable is reversed against interest income. Placement of an account on nonaccrual status includes a reversal of all previously accrued but uncollected interest against interest income. When doubt exists as to the collectability of the principal portion of the loan, payments received must be applied to principal to the extent necessary to eliminate such doubt.

While in nonaccrual status, some or all of the cash interest payments may be treated as interest income on a cash basis as long as the remaining principal (after charge-off of identified losses, if any) is deemed to be fully collectible. The determination as to the ultimate collectability must be supported by a current, well-documented credit evaluation of the borrower’s financial condition and prospects for repayment, including consideration of the borrower’s historical repayment performance and other relevant factors. Generally, a loan is returned to accrual status when all delinquent interest and principal becomes current under the terms of the loan agreement and when the collectability is no longer doubtful.

A loan is impaired when full payment of principal and interest under the original loan terms is not expected. Impairment is evaluated in total for smaller-balance loans of similar nature such as real estate mortgages and installment loans, and on an individual loan basis for commercial loans that are graded substandard or below. Factors considered by Management in determining impairment include payment status, collateral value, and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis. If a loan is impaired, a portion of the allowance may be allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan’s existing rate or at the fair value of collateral if repayment is expected solely from the collateral.

Allowance for loan losses

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 general economic conditions, loan portfolio composition, loan loss experience, Management’s evaluation of credit risk relating to pools of loans and individual borrowers, sensitivity analysis and expected loss models, value of underlying collateral, and 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 for loan losses under current economic conditions and such other factors which, in Management’s judgment, deserve current recognition. Additional information can be found in Note 6 (Loans and Allowance for Loan Losses).

Servicing

Servicing

Servicing assets are recognized as separate assets when rights are acquired through sale of financial assets. Capitalized servicing rights are reported in other assets and are amortized into noninterest income in proportion to, and over the period of, the estimated future net servicing income of the underlying financial assets. Servicing assets are evaluated for impairment on a quarterly basis based upon the fair value of the rights as compared to amortized cost. Impairment is determined by stratifying rights by predominant characteristics, such as interest rates and terms. Fair value is determined using prices for similar assets with similar characteristics, when available, or based upon discounted cash flows using market-based assumptions. Impairment is recognized through a valuation allowance for an individual stratum, to the extent that fair value is less than the capitalized amount for the stratum.

Bank premises and equipment

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

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. Goodwill is tested at least annually for impairment or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The Corporation tests for goodwill impairment annually as of November 30 ^th of each year. Core deposit intangible assets are amortized using the straight-line method over ten years and are subject to annual impairment testing.

Other Real Estate Owned

Other Real Estate Owned

Other real estate owned (OREO) is comprised of property acquired through a foreclosure proceeding or acceptance of a deed-in-lieu of foreclosure, and loans classified as in-substance foreclosure. Other real estate owned is recorded at the lower of the recorded investment in the loan at the time of acquisition or the fair value of the underlying property collateral, less estimated selling costs. Any write-down in the carrying value of a property at the time of acquisition is charged to the allowance for loan losses. Any subsequent write-downs to reflect current fair market value, as well as gains and losses on disposition and revenues and expenses incurred in maintaining such properties, are treated as period costs. Other real estate owned also includes bank premises formerly but no longer used for banking. Banking premises are transferred at the lower of carrying value or estimated fair value, less estimated selling costs.

Split-Dollar life insurance

Split-Dollar Life Insurance

The Corporation recognizes a liability and related compensation costs for endorsement split-dollar life insurance policies that provide a benefit to certain employees extending to post-retirement periods. Based on the present value of expected future cash flows, the liability is recognized based on the substantive agreement with the employee.

Investment and trust services assets and income

Investment and Trust Services Assets and Income

Property held by the Corporation in fiduciary or agency capacity for its customers is not included in the Corporation’s financial statements as such items are not assets of the Corporation. Income from the Investment and Trust Services Division is reported on an accrual basis.

Income Taxes

Income Taxes

The Corporation and its wholly-owned subsidiary file an annual 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. A valuation allowance is recorded when necessary to reduce deferred tax assets to amounts which are deemed more likely than not to be realized.

Comprehensive Income

Comprehensive Income

Comprehensive income consists of net income and other comprehensive income. Other comprehensive income includes unrealized gains and losses on securities available for sale and changes in the funded status of the pension plan, which are also recognized as separate components of shareholders’ equity.

Unrealized gains on the Corporation’s available-for-sale securities (after applicable income tax expense) totaling $3,984 and $4,019 at June 30, 2012 and December 31, 2011, respectively, and the minimum pension liability adjustment (after applicable income tax benefit) totaling $1,818 for both June 30, 2012 and December 31, 2011 are included in accumulated other comprehensive income.

Preferred stock

Preferred Stock

The Corporation is authorized to issue up to 1,000,000 shares of Voting Preferred Stock, no par value. As of June 30, 2011, the Corporation had authorized 150,000 Series A Voting Preferred Shares. No Series A Voting Preferred Shares have been issued.

As of June 30, 2012 and December 31, 2011, 25,223 shares of the Corporation’s Fixed Rate Cumulative Perpetual Preferred Stock, Series B (“Series B Preferred Stock”) were issued and outstanding. The Board of Directors of the Corporation is authorized to provide for the issuance of one or more series of Voting Preferred Stock and establish the dividend rate, dividend dates, whether dividends are cumulative, liquidation prices, redemption rights and prices, sinking fund requirements, conversion rights, and restrictions on the issuance of any series of Voting Preferred Stock. The Voting Preferred Stock may be issued with conversion rights to common stock and may rank prior to the common stock in dividends, liquidation preferences, or both. In connection with the Corporation’s sale of $25.2 million of its Series B Preferred Stock to United States Department of Treasury (Treasury) in conjunction with the Capital Purchase Program on December 12, 2008. The Corporation also issued a warrant to purchase 561,343 of its common shares at an exercise price of $6.74.

As part of the Treasury’s strategy for winding down its remaining investment in the Troubled Asset Relief Program (TARP), particularly in community banks, the Treasury conducted various public auctions of TARP preferred stock in 2012.

On June 13, 2012, the Corporation and the bank entered into an underwriting agreement (the “Underwriting Agreement”) with the Treasury and Merrill Lynch, Pierce, Fenner & Smith Incorporated and Sandler O’Neill & Partners, L.P. as representatives of the several underwriters named therein (the “Underwriters”) providing for the offer and sale by Treasury of 25,223 shares of the Company’s Series B preferred stock. Under the terms of the Underwriting Agreement, the Underwriters agreed to purchase the Series B preferred stock from Treasury at a price of $856.1325 per share, and to sell the Series B Preferred Stock to the public through a modified dutch auction at an initial public offering price of $869.17 per share. The Corporation did not receive any of the proceeds from the offering. The offering closed on June 19, 2012.

Subsequent Event

On July 2, 2012, the Corporation entered into a Warrant Repurchase Agreement to purchase 561,343 shares of common stock of the Corporation that was issued to the United States Department of the Treasury in connection with the Corporation’s participation in the Troubled Asset Relief Program Capital Purchase Program. The Warrant was repurchased at a mutually agreed upon price of $860. Settlement of the repurchase of the Warrant occurred on July 18, 2012. Following settlement of the TARP Warrant, the Treasury has no remaining investment in the Corporation.

New Accounting Pronouncements

New Accounting Pronouncements

ASC Topic 220: Comprehensive Income: Presentation of Comprehensive Income. On June 16, 2011, the FASB issued Accounting Standards Update (ASU) 2011-05. This ASU is intended to increase the prominence of other comprehensive income in financial statements. The new guidance does not change whether items are reported in net income or in other comprehensive income or whether and when items of other comprehensive income are reclassified to net income. ASU 2011-05 eliminates the option in current U.S. generally accepted accounting principles that permits the presentation of other comprehensive income in the statement of changes in equity. The new guidance in the ASU requires that an entity report comprehensive income in either a single continuous statement that presents the components of net income or a separate but consecutive statement. The new guidance is to be applied retrospectively. For public entities, the amendments are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this pronouncement did not have a material impact on the Corporation’s financial statements.

Intangibles — Goodwill and Other (Topic 350): Testing Goodwill for Impairment. On September 15, 2011 the FASB issued an accounting standards update (ASU) to simplify testing of goodwill for impairment. The changes will reduce complexity and costs by allowing an entity (public or nonpublic) to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. Specifically, an entity will have the option of first assessing qualitative factors (events and circumstances) to determine whether it is more likely than not (meaning a likelihood of more than fifty percent) that the fair value of a reporting unit is less than its carrying amount. The amendments are effective for annual and interim goodwill impairment testing performed for fiscal years beginning after December 15, 2011. Early adoption is permitted. The Corporation early adopted the ASU for the year ended December 31, 2011 and concluded that a full impairment test was not required. Refer to Note 4, Goodwill and Intangible Assets, for additional information.

FASB ASU 2011-04, Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS. This amendment was issued as result of an effort to develop common fair value measurement and disclosure requirements in U.S. GAAP and International Financial Reporting Standards (“IFRS”). While ASU 2011-04 is largely consistent with existing fair value measurement principles under U.S. GAAP, it expands the disclosure requirements for fair value measurements and clarifies the existing guidance or wording changes to align with IRFS No. 13. Many of the requirements for the amendments in ASU 2011-04 do not result in a change in the application of the requirements in ASC 820. ASU 2011-04 was effective for the Corporation on a prospective basis beginning in the quarter ended March 31, 2012. The adoption of this pronouncement did not have a material impact on the Corporation’s financial statements

Financing Receivable, Allowance for Credit 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. 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. 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.

The allowance is comprised of a general allowance for unidentified problem loans and a specific allowance for identified problem loans. The general allowance is determined by applying estimated loss factors to the credit exposures from outstanding loans. The methodology applies to the Corporation’s total loan portfolio including the performing portion of commercial and commercial real estate loans, real estate, and all types of other loans. The loss factors are applied accordingly 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 collectability of the loan portfolio. These other factors include but are not limited to: changes in lending policies and procedures, including underwriting standards and collection, charge-off and recovery practices; changes in national and local economic and business conditions, including the condition of various market segments; changes in the nature and volume of the portfolio; changes in the experience, ability, and depth of lending management and staff; changes in the volume and severity of past due and classified loans, the volume of nonaccrual loans, troubled debt restructurings and other loan modifications; the existence and effect of any concentrations of credit, and changes in the level of such concentrations; and the effect of external factors, such as legal and regulatory requirements, on the level of estimated credit losses in the Corporation’s current portfolio. Specific allowances are established for all impaired loans when Management has determined that, due to identified significant conditions, it is probable that a loss will be incurred.

Reclassification

Reclassification

Certain amounts appearing in the prior year’s financial statements have been reclassified to conform to the current period’s financial statements.

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Deposits (Tables)

6 Months Ended

Jun. 30, 2012

Deposits [Abstract]

Deposit balances

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Demand and other noninterest-bearing	$	143,778	$	126,713
Interest checking		165,176		151,894
Savings		111,742		102,440
Money market accounts		106,767		105,643
Consumer time deposits		411,265		424,870
Public time deposits		84,825		79,520
Total deposits	$	1,023,553	$	991,080

Contractual maturities of certificates of deposits

June 30, 2012
(Dollars in thousands)
2013	$	236,598
2014		187,672
2015		34,411
2016		23,157
2017		14,252
Total	$	496,090

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Deposits (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Deposits [Abstract]
Demand and other noninterest-bearing	$ 143,778	$ 126,713
Interest checking	165,176	151,894
Savings	111,742	102,440
Money market accounts	106,767	105,643
Consumer time deposits	411,265	424,870
Public time deposits	84,825	79,520
Total deposits	$ 1,023,553	$ 991,080

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Securities (Details Textual) (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Jun. 30, 2012 Securities	Dec. 31, 2011 Securities
Securities (Textual) [Abstract]
Carrying value of securities	$ 173,757	$ 137,388
Available-for-sale Securities, Continuous Unrealized Loss Position, Less than 12 Months, Aggregate Losses	$ (280)	$ (337)
Number of securities	7	10
Unrealized loss position on securities, current	less than 12 months
Unrealized loss position on securities, non current	more than 12 months

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Consolidated Statements of Shareholders' Equity (Unaudited) (USD $) In Thousands	Total	Preferred Stock (net of discount)	Warrant to Purchase Common Stock	Common Stock	Additional Paid-In Capital	Retained Earnings	Accumulated Other Comprehensive Income (Loss)	Treasury Stock
Beginning Balance at Dec. 31, 2010	$ 109,464	$ 25,107	$ 146	$ 8,173	$ 39,455	$ 40,668	$ 2,007	$ (6,092)
Net Income	1,842					1,842
Common dividends declared, $.02 and .02 per share for 2011 and 2012 respectively	(159)					(159)
Preferred dividends and accretion of discount	(630)	7				(637)
Net unrealized gains and losses on securities	888						888
Share-based compensation	92				92
Restricted shares granted (40,000 and 62,105 shares) for the year 2011 and 2012 respectively				40	(40)
Ending Balance at Jun. 30, 2011	111,497	25,114	146	8,213	39,507	41,714	2,895	(6,092)
Beginning Balance at Dec. 31, 2011	113,274	25,122	146	8,210	39,607	44,080	2,201	(6,092)
Net Income	2,943					2,943
Common dividends declared, $.02 and .02 per share for 2011 and 2012 respectively	(159)					(159)
Preferred dividends and accretion of discount	(630)	7				(637)
Net unrealized gains and losses on securities	(35)						(35)
Share-based compensation	144				144
Restricted shares granted (40,000 and 62,105 shares) for the year 2011 and 2012 respectively				62	(62)
Ending Balance at Jun. 30, 2012	$ 115,537	$ 25,129	$ 146	$ 8,272	$ 39,689	$ 46,227	$ 2,166	$ (6,092)

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Cash and Due from Banks

6 Months Ended

Jun. 30, 2012

Cash and Due from Banks [Abstract]

Cash and Due from Banks

(3) Cash and Due from Banks

Federal Reserve Board regulations require the Bank to maintain reserve balances on deposits with the Federal Reserve Bank of Cleveland. The required ending reserve balance was $1,099 on June 30, 2012 and $690 on December 31, 2011.

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Estimated Fair Value of Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Carrying Amount [Member]
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	$ 56,619	$ 40,647
Securities	228,788	226,012
Portfolio loans, net	850,159	826,025
Loans held for sale	1,207	3,448
Accrued interest receivable	3,604	3,550
Deposits:
Demand, savings and money market	527,463	486,690
Certificates of deposit	496,090	504,390
Total deposits	1,023,553	991,080
Short-term borrowings	827	227
Federal Home Loan Bank advances	47,495	42,497
Junior subordinated debentures	16,238	16,238
Accrued interest payable	1,007	1,118
Estimated Fair Value [Member]
Financial assets
Cash and due from banks, Federal funds sold and interest bearing deposits in other banks	56,619	40,647
Securities	228,788	226,012
Portfolio loans, net	848,393	825,662
Loans held for sale	1,207	3,448
Accrued interest receivable	3,604	3,550
Deposits:
Demand, savings and money market	527,463	486,690
Certificates of deposit	500,265	509,449
Total deposits	1,027,728	996,139
Short-term borrowings	827	227
Federal Home Loan Bank advances	48,671	43,824
Junior subordinated debentures	16,645	16,130
Accrued interest payable	$ 1,007	$ 1,118

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Federal Home Loan Bank Advances (Tables)

6 Months Ended

Jun. 30, 2012

Federal Home Loan Bank Advances [Abstract]

Maturities of FHLB advances outstanding

	June 30, 2012		December 31, 2011
	(Dollars in thousands)
Maturity January 2012, fixed rate 2.37%	$	—	$	15,000
Maturities January 2014 through August 2014, with fixed rates ranging from 2.06% to 3.55%		14,995		15,027
Maturities January 2015 and July 2015, with fixed rates ranging from 0.80% to 4.76%		32,500		12,470
Total FHLB advances	$	47,495	$	42,497

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Securities (Details 1) (USD $) In Thousands, unless otherwise specified	Jun. 30, 2012	Dec. 31, 2011
Securities [Abstract]
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Amortized Cost Basis	$ 34,404
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Amortized Cost Basis	30,229
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Amortized Cost Basis	10,087
Available-for-sale Securities, Debt Maturities, after Ten Years, Amortized Cost Basis	7,779
Mortgage backed securities and collateralized mortgage obligations, Amortized cost	140,253
Amortized Cost	222,752	219,923
Available-for-sale Securities, Debt Maturities, Next Twelve Months, Fair Value	34,523
Available-for-sale Securities, Debt Maturities, Year Two Through Five, Fair Value	30,959
Available-for-sale Securities, Debt Maturities, Year Six Through Ten, Fair Value	11,084
Available-for-sale Securities, Debt Maturities, after Ten Years, Fair Value	8,310
Mortgage backed securities and collateralized mortgage obligations, Fair value	143,912
Fair Value	$ 228,788	$ 226,012

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Share-Based Compensation

6 Months Ended

Jun. 30, 2012

Share-Based Compensation [Abstract]

Share-Based Compensation

(13) Share-Based Compensation

A broad-based stock option incentive plan, the 2006 Stock Incentive Plan, was originally adopted by the Corporation’s shareholders on April 18, 2006 and an amended and restated version of the plan was adopted by shareholders effective May 2, 2012. As of June 30, 2012, outstanding awards granted under this Plan consisted of stock options granted in 2007, 2008 and 2009 and long-term restricted shares issued in 2010, 2011 and 2012 In addition, the Corporation has nonqualified stock option agreements outside of the 2006 Stock Incentive Plan. Grants under the nonqualified stock option agreements have been made from 2005 to 2007.

Stock Options

The expense recorded for stock options was $1 and $0 for the first six months of June 30, 2012 and June 30, 2011, respectively. The maximum option term is ten years and the options generally vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years.

The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	2012
Risk free interest rate		1.27	%
Dividend yield		3.38	%
Volatility		33.00	%

The weighted-average fair value of options granted in 2012 was $5.39.

Options outstanding at June 30, 2012 were as follows:

	Outstanding				Exercisable
	Number		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price
Range of Exercise Prices
$5.34-$5.39		37,500		9.41		2,500	$	5.34
$14.47-$15.34		82,000		5.60		82,000		14.47
$15.35-$16.50		52,500		4.71		52,500		15.78
$16.51-$19.10		30,000		3.59		30,000		19.10
$19.11-$19.17		30,000		2.59		30,000		19.17
Outstanding at end of period		232,000		5.37		197,000	$	16.12

A summary of the status of stock options at June 30, 2012 and June 30, 2011 and changes during the six months then ended is presented in the table below:

	2012				2011
	Options		Weighted Average Exercise Price per Share		Options		Weighted Average Exercise Price per Share
Outstanding at beginning of period		197,000	$	16.12		197,000	$	16.12
Granted		35,000		5.39		—		—
Forfeited or expired		—		—		—		—
Exercised		—		—		—		—
Stock dividend or split		—		—		—		—
Outstanding at end of period		232,000	$	14.50		197,000	$	16.12
Exercisable at end of period		197,000	$	16.12		196,167	$	16.17

There were no options exercised during the first six months of 2012, therefore the total intrinsic value of options exercised was $0. The total intrinsic value of all options outstanding for the first six months of 2012 was $0.

A summary of the status of nonvested stock options at June 30, 2012 is presented in the table below:

	Nonvested Shares		Weighted Average Exercise Price per share
Nonvested at January 1, 2012		833	$	5.34
Granted		35,000		5.39
Vested		833		5.34
Forfeited or expired		—		—
Nonvested at March 31, 2012		35,000	$	5.39

Restricted Shares

In the first quarter of 2012, the Corporation issued 62,105 shares of long-term restricted stock. The market price of the Corporation’s common shares on the date of grant of the long-term restricted stock was $5.39 per share. In 2011, the Corporation issued 40,000 shares of long-term restricted stock, 2,500 of which were forfeited by the recipients due to employee terminations. The market price of the Corporation’s common shares on the date of grant of the long-term restricted shares was $5.28 per share. Shares of long-term restricted stock generally vest in two equal installments on the second and third anniversaries of the date of grant, or upon the earlier death or disability of the recipient or a qualified change of control of the Corporation. The expense recorded for long-term restricted stock for the six months ended June 30, 2012 and 2011 was $144 and $92, respectively.

The market price of the Corporation’s common shares at the date of grant is used to estimate the fair value of restricted stock awards. A summary of the status of restricted shares at June 30, 2012 is presented in the table below:

	2012
	Shares			Weighted Average Grant Date Fair Value
Nonvested at January 1, 2012		124,352		$	4.68
Granted		62,105			5.39
Forfeited or expired		—			—
Vested		(33,749	)		4.35
Nonvested at March 31, 2012		152,708		$	5.04

Stock Appreciation Rights (“SAR”)

In 2006, the Corporation issued an aggregate of 30,000 stock appreciation rights (“SAR”) at $19.00 per share, 15,500 of which have expired due to employee terminations. The SAR vest over three years as follows: one-third after one year from the grant date, two-thirds after two years and completely after three years. Any unexercised portion of the SAR shall expire at the end of the stated term which is decided at the date of grant and shall not exceed ten years. The SAR issued in 2006 will expire in January 2016. The expense recorded for SAR for the first half of 2012 and 2011 was $2 and $0.