<PAGE>1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
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 or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
457 Broadway, Lorain, Ohio 44052 - 1769
(Address of principal executive offices) (Zip Code)
(216) 244 - 6000
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such requirements for the past 90
days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at April 18, 1996: 4,124,781 shares
Class of Common Stock: $1.00 par value
<PAGE>2
LNB Bancorp, Inc.
Quarterly Report on From 10-Q
Quarter Ended March 31, 1996
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Regulation 210.10-01 of
Regulation S-X is included in this Form 10-Q as referenced below:
Page
Number(s)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements
of Cash Flows 7
Notes to the Condensed Consolidated Financial 9
Statements
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 11
Part II - Other Information
Item 1 - Legal Proceedings 15
Item 2 - Changes in Securities 15
Item 3 - Defaults upon Senior Securities 15
Item 4 - Submission of matters to a Vote of
Security Holders 15
Item 5 - Other Information 16
Item 6 - Exhibits and Reports on Form 8-K 16
Signatures 16
Exhibit Index 17
<PAGE>3
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MARCH 31, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 1996 1995
------------- --------------
(Unaudited) (See Note 1)
ASSETS:
Cash and due from banks $ 21,869,000 $ 27,428,000
Federal funds sold and other interest
bearing instruments 3,202,000 102,000
Securities:
Securities available for sale 15,650,000 15,161,000
Investment securities 87,920,000 89,405,000
-------------- --------------
Total securities 103,570,000 104,566,000
(Market value $104,382,000 and -------------- --------------
$106,076,000, respectively)
Total loans 278,483,000 276,493,000
Reserve for possible loan losses (3,945,000) (4,002,000)
-------------- --------------
Net loans 274,538,000 272,491,000
-------------- --------------
Premises and equipment, net 10,918,000 11,006,000
Other assets 6,430,000 6,010,000
-------------- --------------
TOTAL ASSETS $420,527,000 $421,603,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Noninterest-bearing deposits $ 58,101,000 $ 60,163,000
Interest-bearing deposits 292,945,000 293,292,000
-------------- --------------
Total deposits 351,046,000 353,455,000
-------------- --------------
Federal funds purchased and securities
sold under agreements to repurchase 24,214,000 24,148,000
Other liabilities 3,734,000 3,209,000
-------------- --------------
Total liabilities 378,994,000 380,812,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>4
STATEMENT CONTINUED FROM PREVIOUS PAGE
Shareholders' equity:
Common stock $1.00 par:
Authorized 5,000,000
Outstanding 4,043,902 and 4,039,347
respectively 4,044,000 4,039,000
Additional capital 17,882,000 17,854,000
Retained earnings 19,621,000 18,856,000
Net unrealized security gains(losses) (14,000) 42,000
-------------- --------------
Total shareholders' equity 41,533,000 40,791,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $420,527,000 $421,603,000
============== ==============
Note 1: The consolidated balance sheet at December 31, 1995 has been
taken from the audited Financial Statements and condensed.
See notes to condensed consolidated financial statements.
<PAGE>5
FORM 10-Q LNB BANCORP, INC. Unaudited
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THREE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS MARCH 31,
OF INCOME ------------------------------
1996 1995
INTEREST INCOME: ------------------------------
Interest and fees on loans:
Taxable $ 6,242,000 $ 5,877,000
Tax-exempt 16,000 20,000
Interest and dividends on securities:
Taxable 1,500,000 1,305,000
Tax-exempt 73,000 99,000
Interest on Federal funds sold and other
interest bearing instruments 61,000 45,000
------------- -------------
TOTAL INTEREST INCOME 7,892,000 7,346,000
------------- -------------
INTEREST EXPENSE:
Interest on certificates of deposit
of $100,000 or more 444,000 393,000
Interest on other deposits 2,196,000 2,035,000
Interest on Federal funds purchased
and securities sold under agreements
to repurchase 238,000 288,000
------------- -------------
TOTAL INTEREST EXPENSE 2,878,000 2,716,000
------------- -------------
NET INTEREST INCOME 5,014,000 4,630,000
Provision for possible loan losses 125,000 100,000
NET INTEREST INCOME AFTER PROVISION ------------- -------------
FOR POSSIBLE LOAN LOSSES 4,889,000 4,530,000
------------- -------------
OTHER INCOME:
Trust division income 278,000 239,000
Service charges on deposit accounts 484,000 375,000
Other charges fees and exchanges 423,000 462,000
Other operating income 36,000 2,000
------------- -------------
TOTAL OTHER INCOME 1,221,000 1,078,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>6
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 1,986,000 1,896,000
Net occupancy expense 328,000 307,000
Furniture and equipment expense 541,000 507,000
Ohio franchise tax 147,000 125,000
FDIC deposit insurance premium 1,000 186,000
Other operating expenses 1,125,000 999,000
------------- -------------
TOTAL OTHER EXPENSES 4,128,000 4,020,000
------------- -------------
INCOME BEFORE FEDERAL INCOME TAXES 1,982,000 1,588,000
FEDERAL INCOME TAXES 656,000 501,000
------------- -------------
NET INCOME $ 1,326,000 $ 1,087,000
============= =============
PER SHARE DATA:
EARNINGS $ .33 $ .27
======= =======
CASH DIVIDENDS $ .14 $ .12
======= =======
See notes to condensed consolidated financial statements.
<PAGE>7
FORM 10-Q LNB BANCORP, INC. Unaudited
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THREE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS MARCH 31,
OF CASH FLOWS ----------------------------
1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES: ----------------------------
Interest received $ 7,693,000 $ 7,036,000
Other income received 1,213,000 1,047,000
Interest paid (2,881,000) (2,504,000)
Cash paid for salaries and benefits (1,848,000) (1,800,000)
Net occupancy expense of premises paid (254,000) (226,000)
Furniture and equipment expenses paid (195,000) (188,000)
Cash paid for supplies and postage (245,000) (232,000)
Cash paid for other operating expenses (1,185,000) (1,981,000)
Federal income taxes paid (150,000) -0-
------------- -------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 2,148,000 1,152,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (decrease) in securities
available for sale (56,000) (46,000)
Proceeds from maturities of securities
available for sale 2,395,000 -0-
Proceeds from maturities of investment
securities 5,596,000 9,760,000
Purchase of securities available
for sale (1,742,000) (425,000)
Purchases of investment securities (5,297,000) (14,967,000)
Net decrease in credit card loans 233,000 437,000
Net (increase) in long-term
loans (2,443,000) (6,337,000)
Purchases of bank premises, equipment
and software (316,000) (894,000)
Proceeds from sales of bank premises,
and equipment -0- -0-
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (1,630,000) (12,472,000)
------------- -------------
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>8
STATEMENT CONTINUED FROM PREVIOUS PAGE
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in demand and other
oninterest-bearing deposits (2,062,000) (4,690,000)
Net increase (decrease) in savings and
passbook deposits 20,000 (9,403,000)
Net increase (decrease) in time deposit (367,000) 19,465,000
Net increase in federal funds
purchased and other interest
bearing instruments 46,000 7,425,000
Proceeds from exercise of stock options 33,000 91,000
Dividends paid (647,000) (544,000)
------------- -------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES (2,977,000) 12,344,000
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (2,459,000) 1,024,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 27,530,000 21,275,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $25,071,000 $22,299,000
============= =============
See notes to condensed consolidated financial statements.
<PAGE>9
FORM 10-Q LNB Bancorp, Inc. Unaudited
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTRODUCTION
The following areas of discussion pertain to the condensed consolidated
financial statements of LNB Bancorp, Inc. at March 31, 1996, compared to
December 31, 1995 and the results of operations for the three months
ending March 31, 1996 compared to the same period in 1995. It is the
intent of this discussion to provide the reader with a more thorough
understanding of the condensed consolidated financial statements and
supporting schedules, and should be read in conjunction with those
condensed consolidated financial statements and schedules.
LNB Bancorp, Inc. is not aware of any trends, events, or uncertainties
that might have a material effect on the soundness of operations; neither
is LNB Bancorp, Inc. aware of any proposed recommendations by regulatory
authorities which would have a similar effect if implemented.
BASIS OF PRESENTATION
The unaudited condensed consolidated balance sheet as of March 31, 1996,
the condensed consolidated statements of income and the condensed
consolidated statement of cash flows for the three months ended March 31,
1996 are prepared in accordance with generally accepted accounting
principles for interim financial information. The above mentioned
statements reflect all normal and recurring adjustments which are, in the
opinion of management, necessary for a fair presentation of the financial
position and the results of operation for the interim periods presented.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. It is suggested
that these condensed consolidated financial statements be read in
conjunction with the financial statements and notes thereto included in
the Corporation's December 31, 1995 Annual Report to Shareholders.
The results of operations for the period ended March 31, 1996 are not
necessarily indicative of the operating results for the full year.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities as
of the balance sheet date and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
<PAGE>10
RESERVE FOR POSSIBLE LOAN LOSSES
Because some loans may not be repaid in full, a reserve for possible loan
losses is recorded. This reserve is increased by provisions charged to
earnings and is reduced by loan charge-offs, net of recoveries. Estimating
the risk of loss on any loan is necessarily subjective. Accordingly, the
reserve is maintained by Management at a level considered adequate to
cover possible loan losses that are currently anticipated based on
Management's evaluation of several key factors including information about
specific borrower situations, their financial position and collateral
values, current economic conditions, changes in the mix and levels of the
various types of loans, past charge-off experience and other pertinent
information. The reserve for possible loan losses is based on estimates
using currently available information, and ultimate losses may vary from
current estimates due to changes in circumstances. These estimates are
reviewed periodically and, as adjustments become necessary, they are
reported in earnings in the periods in which they become known. While
Management may periodically allocate portions of the reserve for specific
problem situations, the entire reserve is available for any charge-offs
that may occur. Charge-offs are made against the reserve for possible
loan losses when Management concludes that it is probable that all or a
portion of a loan is uncollectible. After a loan is charged-off,
collection efforts continue and future recoveries may occur.
The Corporation adopted the provision of Statement of Financial Accounting
Standards No. 114 (SFAS No. 114), "Accounting by Creditors for Impairment
of a Loan" and SFAS No. 118 "Accounting for Creditors for Impairment of a
Loan - Income Recognition and Disclosure" on January 1, 1995. SFAS No.
114 provides guidelines for measuring impairment losses on loans. Under
SFAS No. 114, a loan is considered impaired, based on current information
and events, if it is probable that the Bank will be unable to collect the
scheduled payments of principal or interest when due according to the
contractual terms of the loan agreement. The measurement of impaired
loans is generally based on the present value of the expected future cash
flows discounted at the loans initial effective interest rate, except that
all collateral-dependent loans are measured for impairment based on the
fair value of the collateral. If the loan valuation is less than the
recorded value of the loan, an impairment reserve must be established for
the difference. The impairment reserve is established by either an
allocation of the reserve for possible loan losses or by a provision for
possible loan losses, depending upon the adequacy of the reserve for
possible loan losses. SFAS No. 118 permits existing income recognition
practices to continue.
RECLASSIFICATIONS
Certain 1995 amounts have been reclassified to conform to 1996
presentation.
LONG-LIVED ASSETS
The Corporation adopted SFAS No. 121 "Accounting for the Impairment of
Long- Lived Assets and for Long-Lived Assets to be Disposed of" on January
1, 1996. This Statement establishes accounting for long-lived assets.
Corporate management determined that the adoption of SFAS No. 121 did not
have a significant impact on the carrying value of the long-lived assets
or on net income during the first quarter 1996.
<PAGE>11
STOCK-BASED COMPENSATION
The Corporation adopted SFAS No. 123 "Accounting for Stock-Based
Compensation" on January 1, 1996. This Statement provides elective
accounting for stock-based employee compensation arrangements using a fair
value model. Companies currently accounting for such arrangements under
APB Opinion 25 "Accounting for Stock Issued to Employees," may continue to
do so. The Corporation has elected to continue to report Stock-Based
compensation under APB Opinion 25. Corporate management has determined
that the adoption on SFAS No. 123 will have no effect on net income for
the first quarter. However, SFAS No. 123 will increase year-end
disclosure requirements for stock-based compensation.
2. PER SHARE DATA
Earnings per common and common equivalent shares (stock options) have been
computed using the weighted-average number of shares outstanding during
each period after giving consideration to the dilutive effect of incentive
stock options and the five-for-four stock split which was approved by
shareholders during 1995.
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATION
FINANCIAL CONDITION
Total assets of the Corporation decreased $1,076,000 during the first
quarter, to $420,527,000. This decrease in assets is attributable to
decreases in demand deposits and decreases in time deposits with a related
decrease in consumer debt as consumers paid off debt incurred during the
Christmas season.
Federal funds sold and other interest-bearing investments increased by
$3,100,000 during the first quarter of 1996. The decrease in cash and due
from banks of $5,559,000 is due in part to a change in the timing of
deposits made and the related collection of funds on said deposits which
become available to purchase federal funds.
The total securities portfolio decreased $996,000 ending the first
quarter at $103,570,000. At March 31, 1996 unrealized gains (losses) in
the securities portfolio were approximately $1,122,000 and ($310,000),
respectively. The decrease in the market value of the security portfolio
is due to market interst rate fluctuations and not due to the
deterioration of the credit worthiness of debt issuers.
The level of nonperforming assets increased $561,000 during the first
quarter 1996. The first quarter increase is the result of a net increase
in nonaccrual loans plus an increase in other real estate owned. The
increase in nonaccrual loans is due to decreases in nonaccrual principal
balances of $374,000 which have been paid off and brought current and
increases in nonaccrual principal balances of $840,000. The increase in
nonaccrual loans in the first quarter of 1996 was due primarily to three
commercial loan customers. Although total nonperforming assets increased,
the level of nonperforming assets remains at relatively low levels and
Corporate management believes nonperforming assets are well
collateralized. The table below presents the level of nonperforming
assets at the end of the last four calendar quarters.
<PAGE>12
Amounts in thousands 03/31/96 12/31/95 09/30/95 06/30/95
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual $1,198 $ 732 $ 356 $ 368
Restructured 0 0 0 0
Other Real Estate Owned 95 0 0 0
------ ------ ------ ------
Total Nonperforming Assets $1,293 $ 732 $ 356 $ 368
====== ====== ====== ======
Reserve for possible
loan losses to
nonperforming assets 305.1% 546.7% 1,106.2% 1,063.9%
====== ====== ====== ======
Accruing loans past due
90 days 183 0 124 127
====== ====== ====== ======
Net loans increased $1,990,000 during the first quarter to $278,483,000 at
March 31, 1996. The reserve for possible loan losses ended the quarter at
$3,945,000 supported by a provision for loan losses of $125,000,
recoveries of $73,000 and loan charge-offs of $255,000. The reserve for
possible loan losses as a percentage of ending loans was 1.45% at December
31, 1995 and 1.42% at March 31, 1996. Corporate management believes that
the reserve for possible loan losses as a percentage of ending loans at
March 31, 1996 remains at an appropriate level as the ratio of the reserve
for possible loan losses to nonperforming assets remains strong at 305.1%
as of March 31, 1996. Corporate management believes that the current
level of the reserve for possible loan losses is adequate based upon
quantitative analysis of identified risks and analysis of historical
trends.
The Corporation's credit policies are reviewed and modified on an ongoing
basis in order to remain suitable for the management of credit risk within
the loan portfolio as conditions change. At March 31, 1996 there are no
significant concentrations of credit in the loan portfolio.
The Corporation had outstanding loan and credit commitments to make loans
totaling $67,920,000 and $71,078,000 at March 31, 1996 and 1995,
respectively. The decrease in outstanding loan commitments results in part
from decreased loan demand in the first quarter of 1996. Mortgage and
commercial construction loan demand is expected to increase in the second
quarter of 1996 as seasonal weather conditions improve and the
construction season begins.
Total deposits decreased $2,409,000 during the first quarter to
$351,046,000. Noninterest-bearing deposits decreased to $58,101,000, at
March 31, 1996 for a decrease of $2,062,000, while interest-bearing
deposits decreased to $292,945,000 for an decrease of $347,000. Federal
funds purchased and securities sold under agreements to repurchase
increased $66,000 during the first quarter of 1996. Due to the volatility
of customer repurchase agreements, most funds generated by repurchase
activity enter the Corporation's earning assets as short-term investments.
<PAGE>13
LIQUIDITY
Liquidity measures a corporation's ability to generate cash or otherwise
obtain funds at reasonable prices to fund commitments to borrowers as well
as the demand of depositors and debt holders. Principal internal sources
of liquidity for the Corporation and the Bank are cash and cash
equivalents, Federal funds sold, and the maturity structures of investment
securities and portfolio loans. Securities and loans available for sale
provide another source of liquidity through the cash flows of these
interest bearing assets as they mature or are sold.
The Corporation continues to maintain a relatively high liquid position in
order to take advantage of interest rate fluctuations. As of March 31,
1996 short-term security investments with maturities of one year or less
totalled $33,650,000 which represented 32.5% of total securities. Adding
cash and due from banks of $21,869,000 and Federal Funds sold of
$3,100,000, total liquid assets represented 13.9% of total assets.
CAPITAL RESOURCES
Total shareholders' equity increased to $41,533,000, at March 31, 1996.
The increase resulted primarily from $1,326,000 of net income generated
from the first quarter of operations less a cash dividend payable to
shareholders of $566,000. Financial Accounting Standards Board Statement
No. 115, "Accounting for Certain Investments in Debt and Equity
Securities", requires that securities which the Bank has classified as
"Available-for-Sale" are recorded at market value with any adjustments
recorded to equity. The increase in interest rates experienced in the
first quarter of 1996 has caused a decrease in the market value of these
securities which resulted in a reduction of shareholders' equity by
$56,000 for the quarter ended March 31, 1996.
The Corporation continues to monitor growth to stay within the constraints
established by the regulatory authorities. Under Federal banking
regulations, an institution is deemed to be well-capitalized if it has a
Risk-based Tier 1 capital ratio of 6.00 percent or greater, a Risk-based
Total capital ratio of 10.00 percent or greater and a Leverage ratio of
5.00 percent or greater. The Corporation's Risk-based capital and
Leverage ratios have exceeded the ratios for a well-capitalized financial
institution for all periods presented. The Corporation's capital and
leverage ratios as of March 31, 1996 and 1995 follow.
MARCH 31,
--------------------
1996 1995
------ -------
Tier I capital ratio 16.86% 16.41%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 18.11% 17.59%
Required total capital ratio 8.00% 8.00%
Leverage ratio 9.93% 9.56%
Required leverage ratio 3.00% 3.00%
On an ongoing basis the Corporation analyzes acquisition opportunities in
markets which are adjacent to or within the Corporation's current
geographical market. Corporate management believes that it's current
capital resources are sufficient to support any foreseeable acquisition
activity.
<PAGE>14
The Corporation has decided to let the lease lapse on June 30, 1996 for
its Plaza branch which is located at 1147 Meister Road, Lorain. A new
branch facility will be built next to the Corporation's nearby Oberlin
Avenue Auto Bank. The Corporation expects the new facility to be opened
in June of 1996 at a cost of approximately $700,000 for the building,
improvements and equipment.
There were no material commitments outstanding at March 31, 1996, other
than the loan commitments and the contractual obligation for the new Plaza
office.
RESULTS OF OPERATIONS
Interest and fees on loans increased $361,000 when compared to the first
quarter of 1995. This was the result of the impact of increases in rates
during the last three quarters of 1995 combined with loan portfolio
growth. Interest and dividends on securities was $1,573,000 for the first
quarter of 1996 for a increase of $169,000 over the same period in 1995.
Interest and dividends on securities represented 19.9% of total interest
income at March 31, 1996 compared to 19.1% at March 31, 1995. Interest on
Federal funds sold and other interest bearing instruments was $61,000 at
March 31, 1996 compared to $45,000 at March 31, 1995. The increase
resulted from increased average balances invested in this form of
financial instrument which was not offset by lower interest rates.
Total interest expense increased by $162,000 when compared to the first
quarter of 1995. The impact of increases in rates on certificates of
deposit during the first half of 1995 plus increases in the volume of
certificates of deposit, due in part to a certificate of deposit
promotion, contributed to the increase in total interest expense. Also,
total interest expense for the first quarter of 1996 was impacted by
decreases in interest rates paid on savings accounts plus decreases in the
average balance of savings accounts when compared to the first quarter of
1995.
Total other income increased by $143,000 when compared to the first
quarter of 1995. This increase resulted from increases in income from
fiduciary fees of $39,000, increases in service charges of $109,000 and
decreases in other charges of $39,000. The increase in service charges is
due, in part, to reevaluating the assessment of transaction account
charges.
The Corporation continuously monitors noninterest expenses for greater
profitability. The entire staff is geared to improving productivity at
all levels. Noninterest expense for the quarter ended March 31, 1996 was
$4,128,000, 2.7% above the first quarter of 1995. This increase was due
primarily to increases in salaries and benefits, net occupancy, furniture
and equipment expense, and postage rate increases and the impacts of
inflation, less a $185,000 reduction in F.D.I.C. insurance premiums.
The effective tax rate increased from 31.5% during the first quarter of
1995 to 33.1% during the first quarter of 1996. The increase in the
effective rate is primarily due to changes of the proportion of nontaxable
to taxable interest income. Net income was $1,326,000 and $1,087,000 for
the quarters ended March 31, 1996 and 1995, respectively. Net income per
share after adjusting for the five-for-four stock split in 1995 was $.32
and $.27 for the quarters ended March 31, 1996 and 1995, respectively.
<PAGE>15
IMPACTS OF ACCOUNTING AND REGULATORY PRONOUNCEMENTS
Corporate management is not aware of any current recommendations by the
Financial Accounting Standards Board or by regulatory authorities which,
if they were implemented, would have a material effect on the liquidity,
capital resources or operations of the Corporation. However, the
potential impact of certain accounting and regulatory pronouncements
warrant further discussion.
Significant actions by the Federal government and its agencies, affecting
the financial institutions industry in general, are currently having and
will continue to have an impact on the Corporation. A discussion of these
actions follows:
"Omnibus Budget Reconciliation Act of 1993":
Effective date of impact on the Corporation: August 10, 1993
Impact on the Corporation: Although the cost of tax compliance will
increase, Corporate management does not anticipate that this tax act will
have a material impact on net income.
"The President's Reform Plan for the Savings and Loan Industry" and
subsequent action by the FDIC:
Effective date (direct impact on the Corporation): January 1, 1990
Impact on the Corporation: During 1993, a risk-related assessment system
was developed by the Federal Deposit Insurance Corporation. Effective,
January 1, 1993, the Bank was assigned to the lowest deposit insurance
rate currently possible. Under the system, the FDIC will reevaluate the
Bank's deposit insurance rate on a semi-annual basis. The FDIC approved a
new rate schedule due to the fact that the Bank Insurance Fund (BIF) has
reached its designated reserve ratio. The new rates became effective
September 15, 1995 and are applied retroactive to June 1, 1995. The Bank
was assigned the lowest deposit insurance assessment rate under the
September 15, 1995 guidelines. During the first quarter of 1996, the Bank
paid FDIC Insurance Premiums of $1,000 compared to the 1995 first quarter
premium of $186,000. The lower 1996 FDIC Premium results from the new
rate which was effective September 15, 1995.
<PAGE>16
Part II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
None
ITEM 2 - Changes in Securities
See item 4, (c), (1)
ITEM 3 - Defaults Upon Senior Securities
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
(a) LNB Bancorp Inc.'s 1996 Annual Meeting of Shareholders
was held on April 16, 1996.
(b) Proxies were solicited by LNB Bancorp Inc.`s management
pursuant to Regulation 14 under the Securities Exchange
Act of 1934, there was no solicitation in opposition to
management's nominees for election to the board of
directors as listed in the proxy statement, and all
such nominees were elected to the classes in the proxy
statement pursuant to the vote of the shareholders.
(c) Other matters voted upon - complete descriptions of the
matters voted upon is contained in Item 6, (c)
(1) Election of directors to serve as Class I Directors until
April 20, 1999 Annual Meeting of Shareholders as follows:
ABSTAIN/ BROKER
FOR AGAINST WITHELD NON-VOTES
James L. Bardoner 3,708,771 19,877 311,739
Wellsley O. Gray 3,714,532 14,116 311,739
Benjamin G. Norton 3,715,289 13,359 311,739
T.L. Smith, M.D. 3,703,247 25,401 311,739
The total number of shares of LNB Bancorp, Inc. Common Stock,
$1.00 par value, outstanding as of March 18, 1996, the record
date of the Annual Meeting, was 4,043,902.
(2) A proposed two percent (2%) common stock dividend
(totaling 80,879 shares) payable to shareholders of record
April 16, 1996 was approved: increasing the total number
of shares outstanding to 4,124,781. The vote on Item 4,
(c), (2):
ABSTAIN/ BROKER
FOR AGAINST WITHELD NON-VOTES
3,728,455 19,240 11,930 280,762
<PAGE>17
ITEM 5 - Other Information
(a) The Notice of the Annual Meeting to Shareholders and Proxy
Statement (dated March 18, 1996) was previously filed as
Exhibit 28 to the Bancorp's 1995 Annual Report on Form 10-K.
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibit (11) - Computation of Shares Used for Earnings
Per Share Calculations.
(b) Exhibit (13) - First Quarter Report to shareholders of
LNB Bancorp, Inc. - March 31, 1996 - EDGAR Version.
(c) Exhibit (27) - Financial Data Schedule
(d) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended March 31, 1996.
Also, see the Exhibit Index which is found on the next page of
this Form.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LNB BANCORP, INC.
(registrant)
Date: May 10, 1996 --------------------------
Gregory D. Friedman,
Senior Vice President,
Chief Operating Officer and
Chief Financial Officer
Date: May 10, 1996 --------------------------
Mitchell J. Fallis,
Vice President and
Chief Accounting Officer
<PAGE>18
LNB Bancorp, Inc.
Form 10-Q
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K
S-K Reference Exhibit
Number
(11) Computation of Shares Used for Earnings Per Share
Calculations
(12) First Quarter Report to Shareholders of LNB Bancorp, Inc. -
March 31, 1996 - EDGAR Version
(27) Financial Data Schedule
<PAGE>19
LNB Bancorp, Inc.
Exhibit to Form 10-Q
(For the three months ended March 31, 1996)
S - K Reference Number (11)
Computation of Shares Used for Earnings Per Share Calculations.
Three Months Ended March 31
1996 1995
--------- ---------
Weighted-Average Shares Outstanding 4,041,055 4,011,714
Common Stock Equivalents
(Stock Options) 16,349 33,021
--------- ---------
4,057,404 4,044,735
========= =========
<PAGE>20
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the three months ended March 31, 1996)
S - K Reference Number (13)
First Quarter Report to Shareholders of
LNB Bancorp, Inc. - March 31, 1996
EDGAR Version
DESCRIPTION:
Two sided pamphlet: Outside green cover with beige lettering.
Inside contains: List of Officers of LNB Bancorp, Inc., Unaudited
Consolidated Balance Sheets for period ending March 31, 1996 and March 31,
1995, respectively, unaudited EDGAR version Consolidated Statements of
Income for the Three Months Ended March 31, 1996 and March 31, 1995,
respectively, and the list of Directors of LNB Bancorp, Inc..
<PAGE>21
Outside cover description:
Green background, beige lettering.
Front Cover:
Quarterly Report
LNB
BANCORP, INC.
(middle of cover)
March 31, 1996
(lower middle of cover)
Back Cover:
(LOGO) LNB
Bancorp, Inc.
(lower middle of cover)
<PAGE>22
Officers of LNB Bancorp, Inc.
Stanley G. Pijor
Chairman
James F. Kidd
President and Chief Executive Officer
Thomas P. Ryan
Executive Vice President
Secretary and Treasurer
Willard H. DoBrunz
Senior Vice President
Gregory D. Friedman
Senior Vice President
and Chief Operating Officer
Michael D. Ireland
Senior Vice President
Emma N. Mason
Senior Vice President
James H. Weber
Senior Vice President
<PAGE>23
Consolidated Balance Sheets
March 31
--------------------------
1996 1995
------------ ------------
ASSETS:
Cash and Due from Banks $ 21,869,000 $ 20,199,000
Federal Funds Sold 3,202,000 2,100,000
Securities Available for Sale 15,650,000 10,693,000
Investment Securities 87,920,000 94,601,000
Loans 278,483,000 267,640,000
Reserve for Possible Loan Losses (3,945,000) (3,915,000)
- -----------------------------------------------------------------
NET LOANS 274,538,000 263,725,000
- -----------------------------------------------------------------
Premises and Equipment (net) 10,918,000 11,112,000
Other Assets 6,430,000 5,672,000
- -----------------------------------------------------------------
TOTAL ASSETS $420,527,000 $408,102,000
- -----------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-Interest Bearing Deposits $ 58,101,000 $ 51,442,000
Interest Bearing Deposits 292,945,000 288,185,000
- -----------------------------------------------------------------
TOTAL DEPOSITS 351,046,000 339,627,000
- -----------------------------------------------------------------
Securities Sold under Repurchase
Agreements 24,214,000 26,596,000
Other Liabilities 3,734,000 3,586,000
- -----------------------------------------------------------------
TOTAL LIABILITIES 378,994,000 369,809,000
- -----------------------------------------------------------------
Common stock 4,044,000 3,211,000
Additional capital 17,882,000 18,495,000
Retained Earnings 19,621,000 16,634,000
Net Unrealized Security Losses (14,000) (47,000)
- -----------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 41,533,000 38,293,000
- -----------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $420,527,000 $408,102,000
- -----------------------------------------------------------------
(LOGO) LNB
Bancorp, Inc.
<PAGE>24
Consolidated Statements of Income
Three Months Ended
March 31
------------------------
1996 1995
------------ -----------
INTEREST INCOME:
Interest and Fees on Loans $6,258,000 $5,897,000
Interest and Dividends on Securities: 1,575,000 1,404,000
Interest on Federal Funds Sold 59,000 45,000
- ----------------------------------------------------------------
TOTAL INTEREST INCOME 7,892,000 7,346,000
- ----------------------------------------------------------------
INTEREST EXPENSE:
Interest Deposits 2,640,000 2,428,000
Interest on Federal Funds Purchased
and Securities Sold under
Repurchase Agreements 238,000 288,000
- ----------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,878,000 2,716,000
- ----------------------------------------------------------------
NET INTEREST INCOME 5,014,000 4,630,000
Provision for Loan Losses 125,000 100,000
- ----------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 4,889,000 4,530,000
- ----------------------------------------------------------------
OTHER INCOME:
Trust Department Income 278,000 239,000
Fees and Service Charges 908,000 837,000
Gains from Sales of Loans
and Securities -0- -0-
Other Operating Income 35,000 2,000
- ----------------------------------------------------------------
TOTAL OTHER INCOME 1,221,000 1,078,000
- ----------------------------------------------------------------
OTHER EXPENSES:
Salaries and Employee Benefits 1,986,000 1,896,000
Net Occupancy Expense of Premises 328,000 307,000
Furniture and Equipment Expenses 541,000 507,000
FDIC Deposit Insurance Premium 1,000 186,000
Ohio Franchise Tax 147,000 125,000
Other Operating Expenses 1,125,000 999,000
- ----------------------------------------------------------------
TOTAL OTHER EXPENSES 4,128,000 4,020,000
- ----------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 1,982,000 1,588,000
Federal Income Taxes 656,000 501,000
- ----------------------------------------------------------------
NET INCOME $1,326,000 $1,087,000
- ----------------------------------------------------------------
PER SHARE DATA:
NET INCOME $ .33 $ .27
- ----------------------------------------------------------------
DIVIDENDS DECLARED $ .14 $ .12
================================================================
The per share data has been adjusted to reflect the five-for-four
stock split in 1995. Net income per share is based on weighted
average common and common equivalent shares outstanding.
<PAGE>25
Two column format
Directors of LNB Bancorp, Inc.
Directors
James L. Bardoner Thomas P. Ryan
Retired, Former President Executive Vice President
Dorn Industries, Inc. and Secretary/Treasurer
LNB Bancorp, Inc.
Daniel P. Batista Executive Vice President
Attorney/Partner and Secretary
Cook & Batista Co., L.P.A. Lorain National Bank
Robert M. Campana Don A. Sanborn
Managing Director Retired
P.C. Campana, Inc.
Wellsley O. Gray T.L. Smith, M.D.
Sales Consultant Retired Physician
Smith Dairy Company
James F. Kidd Eugene M. Sofranko
President & Chief Executive Officer President and
LNB Bancorp, Inc. and Chief Executive Officer
Lorain National Bank Lorain Glass Company, Inc.
David M. Koethe Paul T. Stack
Chairman of the Board Manufacturer's Representative
The Lorain Printing Company Coley's Inc. and
A-1 Welding and Fabricating, Inc.
Benjamin G. Norton
Employee and Community Leo Weingarten
Relations Manager Retired
RELTEC Corporation
Lorain Products
Stanley G. Pijor Directors Emeritus
Chairman Lorain National Bank
LNB Bancorp, Inc. and
Lorain National Bank James H. Riddell
Chairman of the Board
Jeffrey F. Riddell Consumers Builders Supply Co.
President President, Consumeracq, Inc.
Consumers Builders Supply Co.
Vice President
and Chief Executive Officer,
Consumeracq, Inc.
<PAGE>26
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the three months ended March 31, 1996)
S - K Reference Number (27)
Financial Data Schedule
<PAGE>27
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