<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, 1997
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 15, 1997: 4,222,275 shares
Class of Common Stock: $1.00 par value
<PAGE>2
LNB Bancorp, Inc.
Quarterly Report on From 10-Q
Quarter Ended March 31, 1997
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 16
Item 2 - Changes in Securities 16
Item 3 - Defaults upon Senior Securities 16
Item 4 - Submission of matters to a Vote of
Security Holders 16
Item 5 - Other Information 17
Item 6 - Exhibits and Reports on Form 8-K 17
Signatures 17
Exhibit Index 18
<PAGE>3
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MARCH 31, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 1997 1996
------------- --------------
(Unaudited) (See Note 1)
ASSETS:
Cash and due from banks $ 19,369,000 $ 18,890,000
Federal funds sold and other interest
bearing instruments 2,505,000 103,000
Securities:
Securities available for sale 16,077,000 16,102,000
Investment securities 89,158,000 88,858,000
-------------- --------------
Total securities 105,235,000 104,960,000
(Market value $104,382,000 and -------------- --------------
$106,076,000, respectively)
Total loans 305,786,000 302,073,000
Reserve for possible loan losses (4,089,000) (4,116,000)
-------------- --------------
Net loans 301,697,000 297,957,000
-------------- --------------
Premises and equipment, net 10,726,000 10,893,000
Other assets 5,916,000 5,440,000
-------------- --------------
TOTAL ASSETS $445,448,000 $438,243,000
============== ==============
LIABILITIES AND STOCKHOLDERS' EQUITY:
Noninterest-bearing deposits $ 60,943,000 $ 63,802,000
Interest-bearing deposits 310,061,000 302,578,000
-------------- --------------
Total deposits 371,004,000 366,380,000
-------------- --------------
Federal funds purchased and securities
sold under agreements to repurchase 24,346,000 23,386,000
Federal Home Loan Bank advances 1,095,000 1,095,000
Other liabilities 3,974,000 3,184,000
-------------- --------------
Total liabilities 400,419,000 394,045,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>4
STATEMENT CONTINUED FROM PREVIOUS PAGE
Shareholders' equity:
Common stock $1.00 par:
Authorized 5,000,000
Outstanding 4,138,533 and 4,138,533
respectively 4,138,000 4,138,000
Additional capital 20,178,000 20,178,000
Retained earnings 20,737,000 19,873,000
Net unrealized security gains(losses) (24,000) 9,000
-------------- --------------
Total shareholders' equity 45,029,000 44,198,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $445,448,000 $438,243,000
============== ==============
Note 1: The consolidated balance sheet at December 31, 1996 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 ------------------------------
1997 1996
INTEREST INCOME: ------------------------------
Interest and fees on loans:
Taxable $ 6,642,000 $ 6,242,000
Tax-exempt 13,000 16,000
Interest and dividends on securities:
Taxable 1,556,000 1,500,000
Tax-exempt 35,000 73,000
Interest on Federal funds sold and other
interest bearing instruments 10,000 61,000
------------- -------------
TOTAL INTEREST INCOME 8,256,000 7,892,000
------------- -------------
INTEREST EXPENSE:
Interest on certificates of deposit
of $100,000 or more 558,000 444,000
Interest on other deposits 2,172,000 2,196,000
Interest on Federal funds purchased
and securities sold under agreements
to repurchase 252,000 238,000
Federal Home Loan Bank interest 17,000 -0-
------------- -------------
TOTAL INTEREST EXPENSE 2,999,000 2,878,000
------------- -------------
NET INTEREST INCOME 5,257,000 5,014,000
Provision for possible loan losses 125,000 125,000
NET INTEREST INCOME AFTER PROVISION ------------- -------------
FOR POSSIBLE LOAN LOSSES 5,132,000 4,889,000
------------- -------------
OTHER INCOME:
Trust division income 278,000 278,000
Service charges on deposit accounts 545,000 484,000
Other charges fees and exchanges 460,000 423,000
Other operating income 10,000 36,000
------------- -------------
TOTAL OTHER INCOME 1,293,000 1,221,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>6
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 2,008,000 1,986,000
Net occupancy expense 329,000 328,000
Furniture and equipment expense 561,000 541,000
Ohio Franchise Tax 129,000 147,000
Supplies and postage 247,000 245,000
FDIC deposit insurance premium 11,000 1,000
Other operating expenses 828,000 880,000
------------- -------------
TOTAL OTHER EXPENSES 4,113,000 4,128,000
------------- -------------
INCOME BEFORE FEDERAL INCOME TAXES 2,312,000 1,982,000
FEDERAL INCOME TAXES 787,000 656,000
------------- -------------
NET INCOME $ 1,525,000 $ 1,326,000
============= =============
PER SHARE DATA:
EARNINGS $ .37 $ .32
======= =======
CASH DIVIDENDS $ .16 $ .14
======= =======
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 ----------------------------
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES: ----------------------------
Interest received $ 7,835,000 $ 7,693,000
Other income received 1,294,000 1,213,000
Interest paid (2,855,000) (2,881,000)
Cash paid for salaries and benefits (1,856,000) (1,848,000)
Net occupancy expense of premises paid (232,000) (254,000)
Furniture and equipment expenses paid (207,000) (195,000)
Cash paid for supplies and postage (247,000) (245,000)
Cash paid for other operating expenses (908,000) (1,185,000)
Federal income taxes paid -0- (150,000)
------------- -------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 2,824,000 2,148,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Net (decrease) in securities
available for sale (33,000) (56,000)
Proceeds from maturities of securities
available for sale -0- 2,395,000
Proceeds from maturities of investment
securities 5,806,000 5,596,000
Purchase of securities available
for sale -0- (1,742,000)
Purchases of investment securities (6,071,000) (5,297,000)
Net decrease in credit card loans 568,000 233,000
Net (increase) in long-term
loans (4,518,000) (2,443,000)
Purchases of bank premises, equipment
and software (620,000) (316,000)
Proceeds from sales of bank premises,
and equipment 1,000 -0-
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (4,867,000) (1,630,000)
------------- -------------
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>8
STATEMENT CONTINUED FROM PREVIOUS PAGE
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in demand and other
on interest-bearing deposits (2,859,000) (2,062,000)
Net increase (decrease) in savings and
passbook deposits 1,028,000 20,000
Net increase (decrease) in time deposit 6,455,000 (367,000)
Net increase in federal funds
purchased and other interest
bearing instruments 960,000 46,000
Proceeds from exercise of stock options -0- 33,000
Dividends paid (662,000) (647,000)
------------- -------------
NET CASH PROVIDED (USED) BY FINANCING
ACTIVITIES 4,922,000 (2,977,000)
------------- -------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 2,879,000 (2,459,000)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 18,993,000 27,530,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $21,872,000 $25,071,000
============= =============
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, 1997, compared to
December 31, 1996 and the results of operations for the three months
ending March 31, 1997 compared to the same period in 1996. 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, 1997,
the condensed consolidated statements of income and the condensed
consolidated statement of cash flows for the three months ended March 31,
1997 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, 1996 Annual Report to Shareholders.
The results of operations for the period ended March 31, 1997 are not
necessarily indicative of the operating results for the full year.
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
<PAGE>10
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.
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 1996 amounts have been reclassified to conform to 1997
presentation.
<PAGE>11
2. EARNINGS PER SHARE
The Corporation adopted SFAS No. 128 "Earnings Per Share" on January 1,
1997. This Statement specifies the computation, presentation and
disclosure requirements for earnings per share, for entities with
publicly held common stock or potential common stock. The per share data
has been adjusted to reflect the two percent stock dividend in 1996.
In accordance with SFAS No. 128, Earnings per share is calculated as
follows:
For the Quarter ended March 31, 1997
Income Shares Per-Share
(Numerator) (Denominator) Amount
Income before extraordinary
Item and accounting change $1,525,000
Basic EPS
Income available to
common stockholders $1,525,000 4,138,533 $ .37
=====
Effect of Dilutive Securities 10,704
Incentive Stock Options -0- -0-
---------- ---------
Dilutive EPS
Income available to common
stockholders + assumed
conversions $1,525,000 4,149,239 $ .37
========== ========= =====
3. DISCLOSURE OF INFORMATION ABOUT CAPITAL STUCTURE
The Corporation adopted SFAS No. 129 "Disclosure of Information about
Capital Structure" on January 1, 1997. This statement requires in summary
form within the financial statements, the pertinent rights and privileges
of the various securities outstanding. Corporate Management has
determined that the adoption of SFAS No. 129 will increase year-end
disclosure requirements for capital.
4. CONTINGENCY
On April 14, 1997, LNB Bancorp, Inc. (the "Corporation"), the holding
company for Lorain National Bank (the "Bank"), issued a news release
announcing that the Bank had entered into a Branch Purchase and Assumption
Agreement to acquire three branch offices located in Lorain County, Ohio,
and approximately $55 million of deposits and consumer loans totaling
nearly $18 million from KeyBank National Association, Cleveland, Ohio
("Seller"). Consummation of the transaction is subject to, among other
conditions, regulatory approval.
A copy of the press release issued by the Corporation on April 14, 1997,
is attached hereto as Exhibit 19, and incorporated herein by reference in
its entirety.
<PAGE>12
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATION
FINANCIAL CONDITION
Total assets of the Corporation increased $7,205,000 during the first
quarter, to $445,448,000. The increase in assets is attributable to
increases in savings deposits and time deposits and securities sold under
agreements to repurchase.
Federal funds sold and other interest-bearing investments increased by
$2,402,000 during the first quarter of 1997.
The total securities portfolio increased $275,000 ending the first quarter
at $105,235,000. At March 31,1997 unrealized gains (losses) in the
securities portfolio were approximately $442,000 and ($571,000),
respectively. The decrease in the market value of the security portfolio
is due to market interest rate fluctuations and not due to the
deterioration of the credit worthiness of debt issuers.
The level of nonperforming assets decreased $207,000 during the first
quarter 1997. The first quarter decrease is the result of a net decrease
in nonaccrual loans plus an decrease in other real estate owned in the
amount of $39,000. The decrease in nonaccrual loans is due to decreases in
nonaccrual principal balances of $243,000 which have been paid off and
brought current and increases in nonaccrual principal balances of $75,000.
The decrease in nonaccrual loans in the first quarter of 1997 was due
primarily to two commercial loan charge-offs which included recoveries
from the Small Business Administration. 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.
Amounts in thousands 03/31/97 12/31/96 09/30/96 06/30/96
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual $ 597 $ 765 $ 941 $ 69
Restructured 0 0 0 0
Other Real Estate Owned 0 39 39 39
------ ------ ------ ------
Total Nonperforming Assets $ 597 $ 804 $ 980 $ 108
====== ====== ====== ======
Reserve for possible
loan losses to
nonperforming assets 684.4% 511.9% 419.6% 3,699.1%
====== ====== ====== ======
Accruing loans past due
90 days 180 357 396 243
====== ====== ====== ======
<PAGE>13
Net loans increased $3,713,000 during the first quarter to $301,697,000 at
March 31, 1997. The reserve for possible loan losses ended the quarter at
$4,089,000 supported by a provision for loan losses of $125,000,
recoveries of $22,000 and loan charge-offs of $174,000. The reserve for
possible loan losses as a percentage of ending loans was 1.36% at December
31, 1996 and 1.34% at March 31, 1997. Corporate Management believes that
the reserve for possible loan losses as a percentage of ending loans at
March 31, 1997 remains at an appropriate level as the ratio of the reserve
for possible loan losses to nonperforming assets remains strong at 684.4%
as of March 31, 1997. 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, 1997 there are no
significant concentrations of credit in the loan portfolio.
The Corporation had outstanding loan and credit commitments to make loans
totaling $63,001,000 and $67,920,000 at March 31, 1997 and 1996,
respectively. The decrease in outstanding loan commitments results in part
from decreased loan demand in the first quarter of 1997. Mortgage and
commercial construction loan demand is expected to increase in the second
quarter of 1997 as seasonal weather conditions improve and the
construction season begins.
Total deposits increased $4,624,000 during the first quarter to
$371,004,000. Noninterest-bearing deposits decreased to $60,943,000, at
March 31, 1997 for a decrease of $2,859,000, while interest-bearing
deposits increased to $310,061,000 for an increase of $7,483,000.
Federal funds purchased and securities sold under agreements to repurchase
increased $960,000 during the first quarter of 1997. Due to the
volatility of customer repurchase agreements, most funds generated by
repurchase activity enter the Corporation's earning assets as short-term
investments.
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, 1997 short-term security investments with maturities of one year or
less totaled $25,518,000 which represented 24.2% of total securities.
Adding cash and due from banks of $19,369,000 and Federal Funds sold of
$2,505,000, total liquid assets represented 10.6% of total assets.
<PAGE>14
CAPITAL RESOURCES
Total shareholders' equity increased to $45,029,000, at March 31, 1997.
The increase resulted primarily from $1,525,000 of net income generated
from the first quarter of operations less a cash dividend payable to
shareholders of $662,000. 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 slight increase in interest rates
experienced in the first quarter of 1997 has caused a decrease in the
market value of these securities which resulted in a reduction of
shareholders' equity by $33,000 for the quarter ended March 31, 1997.
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, 1997 and 1996
follow.
MARCH 31,
--------------------
1997 1996
------ -------
Tier I capital ratio 17.02% 16.86%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 18.28% 18.11%
Required total capital ratio 8.00% 8.00%
Leverage ratio 10.24% 9.93%
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.
RESULTS OF OPERATIONS
Interest and fees on loans increased $397,000 when compared to the first
quarter of 1996. This was the result of the impact of slight increases
in rates combined with loan portfolio growth. Interest and dividends on
securities was $1,593,000 for the first quarter of 1997 for a increase
of $18,000 over the same period in 1996. Interest and dividends on
securities represented 19.3% of total interest income at March 31, 1997
compared to 20.0% at March 31, 1996. Interest on Federal funds sold and
other interest bearing instruments was $8,000 at March 31, 1997 compared
to $59,000 at March 31, 1996. The decrease resulted from lower average
balances invested in this form of financial instrument along with lower
interest rates.
<PAGE>15
Total interest expense increased by $121,000 when compared to the first
quarter of 1996. The impact of increases in the volume of Federal Funds
purchased and statement savings and certificates of deposit contributed to
the increase in total interest expense. Also, total interest expense
for the first quarter of 1997 was impacted by decreases in interest
rates paid on certificate of deposit accounts when compared to the first
quarter of 1996.
Total other income increased by $72,000 when compared to the first quarter
of 1996. This increase resulted from decreases in other operating income
of $25,000, increases in service charges of $61,000 and increases in other
charges of $37,000. 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, 1997
was $4,113,000, 0.4% less than the first quarter of 1996. This decrease
was due primarily to certain one-time consulting expenses incurred in
the first quarter of 1996 and a $16,000 reduction in Ohio franchise tax.
The effective tax rate increased from 33.1% during the first quarter of
1996 to 34.0% during the first quarter of 1997. The increase in the
effective rate is primarily due to changes of the proportion of nontaxable
to taxable interest income. Net income was $1,525,000 and $1,326,000 for
the quarters ended March 31, 1997 and 1996, respectively. Net income per
share after adjusting for the two percent stock dividend in 1996 was $.37
and $.32 for the quarters ended March 31, 1997 and 1996, respectively.
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.
<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 1997 Annual Meeting of Shareholders
was held on April 15, 1997.
(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,
(1) Election of directors to serve as Class II Directors
until April 18, 2000 Annual Meeting of Shareholders as
follows:
ABSTAIN/ BROKER
FOR AGAINST WITHHELD NON-VOTES
James F. Kidd 3,514,431 -0- 19,748 604,354
Jeffrey F. Riddell 3,527,827 -0- 6,262 604,444
Thomas P. Ryan 3,494,771 -0- 39,318 604,444
Paul T. Stack 3,529,564 -0- 4,522 604,447
Robert M. Campana 3,515,743 -0- 18,346 604,444
The total number of shares of LNB Bancorp, Inc. Common Stock,
$1.00 par value, outstanding as of March 17, 1997, the record
date of the Annual Meeting, was 4,138,533.
(2) A proposed two percent (2%) common stock dividend
(totaling 82,790 shares) payable to shareholders of
record April 15, 1997 was approved: increasing the total
number of shares outstanding to 4,222,275. The vote on
Item 4, (c), (2):
ABSTAIN/ BROKER
FOR AGAINST WITHHELD NON-VOTES
3,489,432 4,672 33,673 610,756
<PAGE>17
ITEM 5 - Other Information
(a) The Notice of the Annual Meeting to Shareholders and Proxy
Statement (dated March 17, 1997) was previously filed as
Exhibit 22 to the Bancorp's 1996 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, 1997 - EDGAR Version.
(c) Exhibit 19 - News Release to Shareholders of LNB Bancorp, Inc. -
April 14, 1997
(d) Exhibit (27) - Financial Data Schedule
(e) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended March 31, 1997.
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, 1997 --------------------------
Gregory D. Friedman,
Senior Vice President,
Chief Operating Officer and
Chief Financial Officer
Date: May 10, 1997 --------------------------
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, 1997 - EDGAR Version
(19) News Release to Shareholders of LNB Bancorp, Inc. -
April 14, 1997
(27) Financial Data Schedule
<PAGE>19
LNB Bancorp, Inc.
Exhibit to Form 10-Q
(For the three months ended March 31, 1997)
S - K Reference Number (11)
Computation of Shares Used for Earnings Per Share Calculations.
Three Months Ended March 31
1997 1996
--------- ---------
Weighted-Average Shares Outstanding 4,138,533 4,121,876
Common Stock Equivalents
(Stock Options) 10,704 16,676
--------- ---------
4,149,237 4,138,552
========= =========
<PAGE>20
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the three months ended March 31, 1997)
S - K Reference Number (13)
First Quarter Report to Shareholders of
LNB Bancorp, Inc. - March 31, 1997
EDGAR Version
DESCRIPTION:
Two sided pamphlet: Outside beige cover with brown lettering.
Inside contains: List of Officers of LNB Bancorp, Inc., Unaudited
Consolidated Balance Sheets for period ending March 31, 1997 and March 31,
1996, respectively, unaudited EDGAR version Consolidated Statements
of Income for the Three Months Ended March 31, 1997 and March 31, 1996,
respectively, and the list of Customer Service Locations.
<PAGE>21
Outside cover description:
Beige background, brown lettering.
Front Cover:
LNB BANCORP, INC.
Quarterly Report
Picture of five hands pulling down on a rope with a hoist.
March 31, 1997
(lower middle of cover)
Back Cover:
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
457 Broadway
Lorain, Ohio 44052-1739
(216) 244-6000 or (800) 860-1007
(lower middle of back cover)
<PAGE>22
Officers of LNB Bancorp, Inc.
James F. Kidd
President and
Chief Executive Officer
Thomas P. Ryan
Executive Vice President
and Secretary/Treasurer
Gregory D. Friedman
Senior Vice President,
Chief Operating Officer and
Chief Financial Officer
Michael D. Ireland
Senior Vice President
Emma N. Mason
Senior Vice President
James H. Weber
Senior Vice President
Mitchell J. Fallis
Vice President and
Chief Accounting Officer
Sandra L. Kotradi
Vice President and
Chief Lending Officer
<PAGE>23
Consolidated Balance Sheets
March 31
--------------------------
1997 1996
------------ ------------
ASSETS:
Cash and Due from Banks $ 19,369,000 $ 21,869,000
Federal Funds Sold and 2,505,000 3,202,000
Other Interest Bearing
Instruments
Securities Available for Sale 16,077,000 15,650,000
Investment Securities 89,158,000 87,920,000
Loans 305,786,000 278,483,000
Reserve for Possible Loan Losses (4,089,000) (3,945,000)
- -----------------------------------------------------------------
NET LOANS 301,697,000 274,538,000
- -----------------------------------------------------------------
Premises and Equipment (net) 10,726,000 10,918,000
Other Assets 5,916,000 6,430,000
- -----------------------------------------------------------------
TOTAL ASSETS $445,448,000 $420,527,000
- -----------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Non-Interest Bearing Deposits $ 60,943,000 $ 58,101,000
Interest Bearing Deposits 310,061,000 292,945,000
- -----------------------------------------------------------------
TOTAL DEPOSITS 371,004,000 351,046,000
- -----------------------------------------------------------------
Securities Sold under Repurchase
Agreements 24,346,000 24,214,000
Federal Home Loan Bank Advances 1,095,000 -0-
Other Liabilities 3,974,000 3,734,000
- -----------------------------------------------------------------
TOTAL LIABILITIES 400,419,000 378,994,000
- -----------------------------------------------------------------
Common stock 4,138,000 4,044,000
Additional capital 20,178,000 17,882,000
Retained Earnings 20,737,000 19,621,000
Net Unrealized Security (Losses) (24,000) (14,000)
- -----------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 45,029,000 41,533,000
- -----------------------------------------------------------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $445,448,000 $420,527,000
- -----------------------------------------------------------------
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
<PAGE>24
Consolidated Statements of Income
Three Months Ended
March 31
------------------------
1997 1996
------------ -----------
INTEREST INCOME:
Interest and Fees on Loans $6,655,000 $6,258,000
Interest and Dividends on Securities: 1,593,000 1,575,000
Interest on Federal Funds Sold 8,000 59,000
- ----------------------------------------------------------------
TOTAL INTEREST INCOME 8,256,000 7,892,000
- ----------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits 2,730,000 2,640,000
Interest on Federal Funds Purchased and
Securities Sold under Repurchase Agreements 252,000 238,000
Federal Home Loan Bank Interest 17,000 -0-
- ----------------------------------------------------------------
TOTAL INTEREST EXPENSE 2,999,000 2,878,000
- ----------------------------------------------------------------
NET INTEREST INCOME 5,257,000 5,014,000
Provision for Loan Losses 125,000 125,000
- ----------------------------------------------------------------
NET INTEREST INCOME AFTER
PROVISION FOR LOAN LOSSES 5,132,000 4,889,000
- ----------------------------------------------------------------
OTHER INCOME:
Trust Department Income 278,000 278,000
Fees and Service Charges 1,005,000 908,000
Gains from Sales of Loans and Securities -0- -0-
Other Operating Income 10,000 35,000
- ----------------------------------------------------------------
TOTAL OTHER INCOME 1,293,000 1,221,000
- ----------------------------------------------------------------
OTHER EXPENSES:
Salaries and Employee Benefits 2,008,000 1,986,000
Net Occupancy Expense of Premises 329,000 328,000
Furniture and Equipment Expenses 561,000 541,000
Supplies and Postage 247,000 245,000
Ohio Franchise Tax 129,000 147,000
Other Operating Expenses 839,000 881,000
- ----------------------------------------------------------------
TOTAL OTHER EXPENSES 4,113,000 4,128,000
- ----------------------------------------------------------------
INCOME BEFORE FEDERAL INCOME TAXES 2,312,000 1,982,000
Federal Income Taxes 787,000 656,000
- ----------------------------------------------------------------
NET INCOME $1,525,000 $1,326,000
- ----------------------------------------------------------------
PER SHARE DATA:
NET INCOME $ .37 $ .32
- ----------------------------------------------------------------
DIVIDENDS DECLARED $ .16 $ .14
================================================================
The per share data has been adjusted to reflect the two percent
stock dividend in 1996. Net income per share is based on weighted
average common and common equivalent shares outstanding.
<PAGE>25
Three column format
Customer Service Locations
Bank Offices Oberlin Avenue Office
3660 Oberlin Avenue
Amherst Office Lorain, Ohio
1175 Cleveland Avenue (216) 282-9196
Amherst, Ohio
(216) 988-4423 Olmsted Office
27095 Bagley Road
Avon Lake Office Olmsted Township, Ohio
240 Miller Road (216) 235-4600
Avon Lake, Ohio
(216) 933-2186 Pearl Avenue Office
2850 Pearl Avenue
Cleveland Street Office Lorain, Ohio
801 Cleveland Street (216) 277-1103
Elyria, Ohio
(216) 365-8397 The Renaissance Office
26376 John Road
Kansas Avenue Office Olmsted Township, Ohio
1604 Kansas Avenue (216) 427-0041
Lorain, Ohio
(216) 288-9151 Second Street Office
221 Second Street
Lake Avenue Office Elyria, Ohio
42935 E. North Ridge Road (216) 323-4621
Elyria, Ohio
(216) 233-7196 Vermilion Office
4455 Liberty Avenue
Main Office* Vermilion, Ohio
457 Broadway (216) 967-3124
Lorain, Ohio
(216) 244-7185 West Park Drive Office
2130 West Park Drive
Sixth Street Drive-In Lorain, Ohio
200 Sixth Street (216) 988-3131
Lorain, Ohio
(216) 244-7242 The Crossings of Westlake Office
30210 Detroit Road
Oberlin Office Westlake, Ohio
40 East College Street (216) 892-9696
Oberlin, Ohio
(216) 775-1361 Westlake Village Office
28550 Westlake Village Drive
Kendal at Oberlin Office Westlake, Ohio
600 Kendal Drive (216) 808-0229
Oberlin, Ohio
(216) 774-5400
<PAGE>26
Community-Based Automated
Teller Machine Locations
Convenient Food Mart
Cash Machine
5375 West Erie Avenue
Lorain, Ohio
Lakeland Medical Center
3700 Kolbe Road
Lorain, Ohio
Lorain Community/St Joseph
Regional Health Center
205 W. 20th Street
Lorain, Ohio
Lorain County Community College
1005 N. Abbe Road
Elyria, Ohio
Lorain Plaza
1147 Meister Road
Lorain, Ohio
Lowe's Home Improvement
Warehouse
620 Midway Boulevard
Elyria, Ohio
Midway Mall Food Court
3343 Midway Mall Boulevard
Elyria, Ohio
Route 60 and Sailorway Drive
1317 State Route 60
Vermilion, Ohio
*Drive-up ATM is available at
Sixth Street Drive-In. All other
Bank offices feature ATMs, except
Westlake Village Office and The
Renaissance Office.
<PAGE>27
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the three months ended March 31, 1997)
S - K Reference Number (19)
News Release to Shareholders of LNB Bancorp, Inc. - April 14, 1997
<PAGE>28
FOR IMMEDIATE RELEASE
(216) 244-6000 FAX 244-4815 Steven F. Cooper
Assistant Vice President
April 14, 1997
LORAIN NATIONAL TO ACQUIRE THREE BRANCH OFFICES FROM KEYCORP
James F. Kidd, President and Chief Executive Officer of Lorain
National Bank, has announced the signing of an agreement to acquire three
KeyBank branches in Lorain County, with total deposits of approximately
$55 million and consumer loans totaling nearly $18 million.
The branches are located at 383 Broadway, 1920 Cooper-Foster Park
Road in Lorain and 6395 Midway Boulevard at the Midway Mall in Elyria.
Approximately 20 employees associated with the branches will be offered
employment by Lorain National Bank. The transaction is subject to
regulatory approval and is scheduled to close in the third quarter of this
year. "As a locally owned, independent bank, we are very pleased with this
opportunity to increase our presence within Lorain County, our core
market," Kidd said. "This acquisition allows us to broaden our customer
base and support our vision to become recognized as the most progressive
and dynamic provider of financial services in our market."
"Our new customers will immediately enjoy the benefits of our
county-wide banking locations, conveniently located ATMs and
community-oriented service culture," Kidd added.
"By adding new branches to our system, our existing customers will
benefit from added convenience, particularly those who frequent the Midway
Mall area," Kidd said. "The new mall banking office will dovetail nicely
with our ATM already located in the Midway Mall food court."
The acquisition of the three banking offices will give Lorain
National a deposit market share of approximately 15% of all bank, savings
& loan and credit union deposits in Lorain County, according to published
sources.
"This will give us additional liquidity and allow us to retain these
deposits to lend locally in our market area," Kidd stated.
Once the acquisition is complete, Lorain National Bank will operate 21
banking facilities and 26 ATMs in Lorain, Cuyahoga and Erie counties. The
bank's offices are located in Lorain, Elyria, Amherst, Avon Lake, Oberlin,
Olmsted Township, Vermilion and Westlake. Lorain National Bank, a bank
with local roots dating back to 1905, is a wholly-owned subsidiary of LNB
Bancorp, Inc., with assets totaling $445.5 million as of March 31, 1997.
The Bancorp recorded its highest ever first quarter consolidated net
income, $1,525,000, up from $1,326,000 for the comparative period in 1996.
LNB Bancorp, Inc. and Lorain National Bank significantly exceed all
applicable regulatory capital requirements. Under Federal Deposit
Insurance Corporation (FDIC) guidelines, Lorain National Bank is
categorized as "well capitalized" - the highest rating category available.
Lorain National Bank currently employs approximately 275 employees
at its community bank branches and administrative offices and computer
operations center in Lorain. The full-service bank offers a complete line
of consumer, mortgage, commercial and trust & investment products and
services.
<PAGE>29
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the three months ended March 31, 1997)
S - K Reference Number (27)
Financial Data Schedule
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