<PAGE>1
LNB BANCORP, INC.
LORAIN, OHIO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
LNB BANCORP, INC. March 17, 1997
The Annual Meeting of Shareholders of LNB Bancorp, Inc. will be held at
521 Broadway, Lorain, Ohio 44052, on Tuesday, April 15, 1997, at 10:00
a.m., Eastern Daylight Savings Time, for the purpose of considering and
voting upon the following matters as more fully described in the Proxy
Statement.
PROPOSALS:
1. ELECTION OF DIRECTORS - To elect five (5) directors to hold
office until their term expires (April 18, 2000) or until their
successors are elected and qualified.
2. STOCK DIVIDEND - Increase the outstanding common stock of LNB
Bancorp, Inc. by declaration of a stock dividend consisting of
approximately 82,771 shares of common stock of $1.00 par value each,
and the terms and conditions thereof.
3. OTHER BUSINESS - To transact such other business as may properly
come before the meeting.
Shareholders of record at the close of business on March 7, 1997 will be
entitled to vote the number of shares held of record in their names on
that date. The transfer books will not be closed.
We urge you to sign and return the enclosed proxy as promptly as
possible, whether or not you plan to attend the meeting in person. This
proxy may be revoked prior to its exercise.
By Order of the Board of Directors
/s/ Thomas P. Ryan
Thomas P. Ryan
Executive Vice President
and Secretary/Treasurer
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED
PROXY FORM(S) WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A
RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
-1-
<PAGE>2
THIS PAGE LEFT INTENTIONALLY BLANK
-2-
<PAGE>3
LNB BANCORP, INC.
457 BROADWAY
LORAIN, OHIO 44052
PROXY STATEMENT
MARCH 17, 1997
This proxy solicitation is made on behalf of the Board of Directors of
LNB Bancorp, Inc., (hereinafter called the "Corporation") being a One Bank
Holding Company owning all of the stock of The Lorain National Bank
(hereinafter called the "Bank"). As of this date, the number of shares of
Common Stock outstanding and entitled to vote at the Annual Meeting of
Shareholders to be held on April 15, 1997, is 4,138,533. Only those
shareholders of record at the close of business on March 7, 1997 shall be
entitled to vote. This proxy may be revoked prior to its exercise. The
cost of this solicitation is being paid by the Corporation.
VOTING
Each shareholder shall be entitled to one vote for each share of stock
standing in their name on the books of the Corporation. No holder of
shares of any class shall have the right to vote cumulatively in the
election of directors.
Shares held in accounts by the Bank's Trust and Investment Management
Division will be voted by the trustee in accordance with written
instructions from account administrators or account plan participants, and
where no instructions are received, as the trustee deems proper.
Shares of Common Stock represented by proxies in the accompanying form
which are properly executed and returned to the Corporation will be voted
at the Annual Meeting of Shareholders in accordance with the shareholders'
instruction contained in such proxies. Where no such instructions are
given, the shares will be voted for the election of directors as described
herein; in support of the increase in the number of authorized shares; and
at the discretion of the proxy holders on such other matters as may come
before the meeting. The Board of Directors has no reason to believe that
any of the nominees will be unable to serve as a director. In the event,
however, of the death or unavailability of any nominee or nominees, the
proxy to that extent will be voted for such other person or persons as the
Board of Directors may recommend.
The results of votes taken at the Annual Meeting will be disclosed in
the Corporation's First Quarterly Report for 1997 on Form 10-Q, as filed
with the Securities and Exchange Commission (SEC). The disclosure will
include for each proposal, the number of votes for, the number of votes
against and the number of abstentions. In addition, the disclosure will
set forth the number of votes received by each candidate running for a
directorship and the percentage of these votes as to the total shares
outstanding.
ELECTION OF DIRECTORS
Article III of the Code of Regulations of the Corporation provides that
directors are to be divided into three (3) classes. Each class serves a
term of three (3) years, or until their respective successors are elected
and qualified. In that the term of office for five (5) members of the
present Board of Directors will expire on April 15, 1997, the management
has nominated the hereinafter named five (5) individuals for election to
serve until April 18, 2000, or until their successors are elected and
qualified.
The affirmative vote of the holders of at least a majority of a quorum
is required in order to elect each director. Under the Code of Regulations
of the Corporation, a quorum is constituted by the presence, in person or
by proxy, of a majority of the voting power of the Corporation.
-3-
<PAGE>4
Other nominations may be made only in accordance with the notice
procedures set forth in Article III of the Code of Regulations of the
Corporation. The procedure states that nominations for election to the
Board of Directors may be made by the Board of Directors or by any
shareholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of directors. Nominations, other than
those made by or on behalf of the existing management of the Corporation,
shall be made in writing and shall be delivered or mailed to the President
of the Corporation not less than fourteen (14) days nor more than fifty
(50) days prior to any meeting of shareholders called for the election of
directors, provided however, that if less than twenty-one (21) days notice
of the meeting is given to shareholders, such nomination shall be mailed
or delivered to the President of the Corporation no later than the close
of business on the seventh (7th) day following the day on which the notice
of the meeting was mailed. Such notification shall contain the following
information as to the extent known to the notifying shareholder: (a) the
name and address of each proposed nominee; (b) the principal occupation of
each proposed nominee; (c) the total number of shares of capital stock of the
Corporation that will be voted for each proposed nominee; (d) the name and
resident address of the notifying shareholder; and (e) the number of
shares of capital stock of the Corporation owned by the notifying
shareholder. Nominations not made in accordance herewith may, at his
discretion, be disregarded by the Chairman of the meeting, and upon his
instructions, the vote teller may disregard all votes cast for each such
nominee. Unless otherwise instructed, it is the intention of the persons
named in the proxy to vote for the election of the following five(5)
nominees:
1) James F. Kidd
2) Jeffrey F. Riddell
3) Thomas P. Ryan
4) Paul T. Stack
5) Robert M. Campana
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
NOMINEE.
The following individuals are directors whose term of office is
scheduled to expire on April 21, 1998:
1) Daniel P. Batista
2) David M. Koethe
3) Stanley G. Pijor
4) Eugene M. Sofranko
5) Leo Weingarten
The following individuals are directors whose term of office is
scheduled to expire on April 20, 1999:
1) James L. Bardoner
2) Wellsey O. Gray
3) Benjamin G. Norton
4) T.L. Smith, M.D.
-4-
<PAGE>5
DIRECTOR'S COMMITTEES
The Bank has six (6) standing committees upon which members of the Board
of Directors serve. They are:
1) The Audit Committee 4) The Pension/Fringe Benefit Committee
2) The Executive Committee 5) The Incentive Stock Option Committee
3) The Trust Committee 6) The Compensation Committee
Membership of each of these committees is indicated by footnote on page 7.
The Audit Committee met three (3) times during the last fiscal year.
It establishes policies for the administration of the Bank's Audit
Division. The Executive Committee met thirteen (13) times during the last
fiscal year. This committee is authorized to approve matters relating to
loans, the purchase of bills, notes, and other evidence of debt. The Trust
Committee reviews the various trusts accepted by the Bank's Trust and
Investment Management Division. It held six (6) meetings during the last
fiscal year. The Pension/Fringe Benefit Committee reviews indirect
compensation of officers and employees. It did not meet during the last
fiscal year. The Incentive Stock Option Committee determines who will
receive stock options and the number of shares to be granted under the
terms of the Incentive Stock Option Plan. The actions of the Incentive
Stock Option Committee are subject to the approval of the Compensation
Committee. It did not meet during the last fiscal year. The Compensation
Committee meets to review all officers' salaries. It held one (1) meeting
during the last fiscal year. The Bank has no designated Nominating
Committee. Nominees for the Board of Directors are determined by a vote of
the total Board of Directors.
The Bank held thirteen (13) Board of Directors meetings during the last
fiscal year. Of the directors who served during 1996, Leo Weingarten
attended fewer than 75% of the total number of meetings of the Board of
Directors and all committee meetings of which the aforementioned director
was a member.
The Corporation held twelve (12) Board of Directors meetings during the
last fiscal year. Of the directors who served during 1996, no one attended
fewer than 75% of the total of twelve (12) meetings held.
DIRECTOR'S COMPENSATION
Each outside director of the Bank is entitled to receive an annual
retainer fee of $2,500. Bank officers, who are also directors of the
Bank, do not receive an annual retainer fee.
All of the directors of the Corporation are also directors of the Bank.
A director's fee of $500 is paid to outside directors for each meeting
attended. Directors, who are also officers of the Corporation, receive a
fee of $250 for their attendance at the Corporation's board meetings and
receive no director's fees for their attendance at the meetings of the
Bank's board.
Mr. Stanley G. Pijor entered into a Consulting Agreement (The Agreement)
with the Bank and the Corporation dated March 15, 1994. The Agreement
provides that Mr. Pijor shall receive a consulting fee of $85,000 each
year for a period of five (5) years commencing January 1, 1996. The
Agreement also stipulates that Mr. Pijor will be provided with an
automobile and will be reimbursed for reasonable expenses relative to his
duties as a consultant during the term of the Agreement. Termination of
the Agreement (by either party) would not prejudice Mr. Pijor's right to
receive the benefits referred to above for a period of up to two (2)
years.
-5-
<PAGE>6
LORAIN
NATIONAL
BANK LNB BANCORP,
PRINCIPAL OCCUPATION DIRECTOR INC. DIRECTOR
NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE
JAMES L. BARDONER RETIRED, FORMER PRESIDENT 1974 1983
Age 78 Dorn Industries, Inc.
(1-2-4-5-6) (Manufacturing Company)
DANIEL P. BATISTA ATTORNEY/PARTNER 1976 1983
Age 62 Cook & Batista Co.,L.P.A.(A)
(2-3-5-6)
ROBERT M. CAMPANA MANAGING DIRECTOR 1996 1996
Age 37 P.C.Campana, Inc.
(3)
WELLSLEY O. GRAY SALES CONSULTANT 1973 1983
Age 63 Smith Dairy Company
(1-3)
JAMES F. KIDD PRESIDENT AND CHIEF 1989 1989
Age 57 EXECUTIVE OFFICER
(2-3-4) LNB Bancorp, Inc. and
The Lorain National Bank
DAVID M. KOETHE CHAIRMAN OF THE BOARD 1975 1983
Age 61 The Lorain Printing Company(B)
(2-3-4-5-6)
BENJAMIN G. NORTON EMPLOYEE AND 1983 1983
Age 57 COMMUNITY RELATIONS MANAGER
(3-7) RELTEC Corporation
STANLEY G. PIJOR CHAIRMAN OF THE BOARD 1969 1983
Age 66 LNB Bancorp, Inc. and
(2-3-4-6) The Lorain National Bank
JEFFREY F. RIDDELL PRESIDENT 1995 1995
Age 45 Consumers Builders Supply
(1) Company
VICE PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Consumeracq, Inc.
THOMAS P. RYAN EXECUTIVE VICE PRESIDENT 1989 1989
Age 58 AND SECRETARY/TREASURER
LNB Bancorp, Inc.
EXECUTIVE VICE PRESIDENT
AND SECRETARY
The Lorain National Bank
-6-
<PAGE>7
LORAIN
NATIONAL
BANK LNB BANCORP,
PRINCIPAL OCCUPATION DIRECTOR INC. DIRECTOR
NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE
T.L. SMITH, M.D RETIRED PHYSICIAN 1968 1983
Age 83
(1-2-4-5-6)
EUGENE M. SOFRANKO PRESIDENT AND CHIEF 1974 1983
Age 66 EXECUTIVE OFFICER
(1-2-4-5-6) Lorain Glass Company, Inc.
PAUL T. STACK RETIRED MANUFACTURER'S 1974 1983
Age 67 REPRESENTATIVE
(1-2-3-6) Coley's Inc.
LEO WEINGARTEN RETIRED 1964 1983
Age 77
(2-4-5-6)
(1) Member of Audit Committee (5) Member of Incentive Stock Option
(2) Member of Executive Committee Committee
(3) Member of Trust Committee (6) Member of Compensation Committee
(4) Member of Pension/Fringe Benefit(7) Alternate Member of Executive
Committee and Compensation Committees
(A) The Bank has retained the law firm of Cook & Batista Co., L.P.A. as
legal counsel for the last several years. During the last fiscal
year, The Lorain National Bank has paid to Cook & Batista, Co.,
L.P.A. an amount of $115,634. It is anticipated that this
relationship will continue during the current fiscal year.
(B) During the last fiscal year, The Lorain National Bank has paid to
The Lorain Printing Company an amount of $62,503 for printing
services and supplies. It is anticipated that such business
relationship will continue during the current fiscal year.
(C) During the last fiscal year the Bank paid to Stanley G. Pijor the
sum of $1,031,574 which constituted the lump sum distribution of his
retirement benefits payable under the provisions of the Lorain
National Bank Retirement Pension Plan. Mr. Pijor was also a party
to a Consulting Agreement with the Bank dated March 15, 1994, which
provides Mr. Pijor shall receive a consulting fee of $85,000 each
year for a period of five (5) years commencing on January 1, 1996.
The Agreement also stipulates that Mr. Pijor will be provided with
an automobile and will be reimbursed for reasonable expenses
relative to his duties as a consultant during the term of the
Agreement. Termination of the Agreement (by either party) would not
prejudice Mr. Pijor's rights to receive the benefits referred to
above for a period of up to two (2) years. Mr. Pijor was also a
party to a Supplemental Retirement Agreement entered into with the
Bank on December 31, 1987. Under the terms of this Agreement, Mr.
Pijor shall receive an annual supplemental retirement benefit in the
amount of $50,000 for a period on ten (10) years. The payment of
these supplemental retirement benefits commenced in January of 1996.
-7-
<PAGE>8
EXECUTIVE COMPENSATION
LNB Bancorp, Inc. did not pay any separate compensation, other than
Corporation director fees, to its executive officers during 1996, 1995,
and 1994. All executive compensation was paid by Lorain National Bank.
The information which follows discloses the annual and long term
compensation for services in all capacities to the Corporation and the
Bank for the fiscal years ended December 31, 1996, 1995 and 1994, for all
persons who were, during 1996, (i) the chief executive officer and (ii)
the other most highly compensated Officers of the Bank who made in excess
of $100,000 during 1996 (the Named Executive Officers).
SUMMARY COMPENSATION TABLE
The named executive officers disclosure requirements affect the Chief
Executive Officer and those executive officers earning more than $100,000
in salary and bonuses. In 1996, 1995 and 1994, Mr. James F. Kidd,
President and Chief Executive Officer, and Mr. Thomas P. Ryan, Executive
Vice President and Secretary/Treasurer, met the criteria for disclosure.
The following table discloses the annual salary, bonuses and all other
compensation awards and payouts for services in all capacities to the
Corporation and the Bank for the fiscal years ended December 31, 1996,
1995 and 1994.
Compensation (1)
-----------------------------------------------
Annual
Name and -------------------------------- All
Principal Position Year Salary Bonuses Other (2)
----------------------------------------------------------------------
James F. Kidd 1996 $151,154 $32,500 $20,600
President and Chief 1995 $124,000 $15,000 $18,427
Executive Officer 1994 $104,556 $15,000 $15,646
Thomas P. Ryan 1996 $104,050 $15,375 $18,755
Executive Vice President 1995 $ 99,375 $15,000 $15,693
and Secretary/Treasurer 1994 $ 92,323 $15,000 $14,450
(1) The aggregate of Other Annual Compensation is less than 10% of the
total of annual salary and bonus for all individuals for all years
presented and therefore is not required to be reported under the
SEC rules.
(2) All Other Compensation consisted of the following:
James F. Kidd: 1996 1995 1994
Contribution, in Mr. Kidd's behalf to:
The Bank's Stock Purchase Plan $ 4,500 $ 4,176 $ 3,909
The Bank's Employee Stock Ownership Plan $10,925 $10,236 $ 8,860
Mr. Kidd's Supplemental Life Insurance $ 2,250 $ 2,239 $ 2,077
Corporation director's fees $ 2,925 $ 1,775 $ 800
Thomas P. Ryan: 1996 1995 1994
Contribution, in Mr. Ryan's behalf to:
The Bank's Stock Purchase Plan $ 3,583 $ 3,431 $ 3,508
The Bank's Employee Stock Ownership Plan $ 8,698 $ 8,518 $ 7,993
Mr. Ryan's Supplemental Life Insurance $ 2,079 $ 1,969 $ 1,949
Corporation director's fees $ 2,700 $ 1,775 $ 1,000
Anniversary Stock Award $ 1,695 $ 0 $ 0
OPTION GRANTS TABLE (last fiscal year)
There were no stock options granted by the Corporation or the Bank in 1996.
LONG TERM INCENTIVE PLAN AWARD TABLE (last fiscal year)
There were no long term incentive plans or plan awards in 1996.
-8-
<PAGE>9
OPTION EXERCISES AND YEAR END VALUE TABLE (last fiscal year)
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE(1)
Value of
Number of Unexercised
Unexercised In-the-Money
Option Option
Shares Shares Shares
Acquired Value at FY-End(#) at FY-End ($)
on Realized Exercisable/ Exercisable/
Name Exercise(#) ($)(2) Unexercisable Unexercisable(2)
--------------------------------------------------------------------------
James F. Kidd 0 $0 2,101/0 $18,933/$0
Thomas P. Ryan 0 $0 2,101/0 $18,933/$0
(1) All amounts reflect the 2% stock dividend in April of 1996.
(2) Market value of underlying securities at exercise date or year end, as
the case may be, minus the exercise or price of "in-the-money" options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of: James L. Bardoner, Daniel P.
Batista, David M. Koethe, Stanley G. Pijor, T.L. Smith, Eugene M.
Sofranko, Paul T. Stack and Leo Weingarten. Mr. Batista is a shareholder
of the law firm of Cook and Batista Co., L.P.A., which performs legal
services for the Bank. During 1996, the Bank paid to Cook and Batista
Co., L.P.A. legal fees in the amount of $115,634. The amount of Mr.
Batista's interest in such fees cannot be practicably determined. Mr.
Koethe is the Chairman of The Board of The Lorain Printing Company.
During 1996, the Bank paid to The Lorain Printing Company an amount of
$62,530 for printing services and supplies. The amount of Mr. Koethe's
interest in such payments cannot be practicably determined. During 1996,
the Bank paid to Stanley G. Pijor the sum of $1,031,574 which constituted
the lump sum distribution for his retirement benefits payable under the
provisions of the Lorain National Bank Retirement Pension Plan. Mr. Pijor
was also a party to a Consulting Agreement with the Bank dated March 15,
1994, which provides Mr. Pijor shall receive a consulting fee of $85,000
each year for a period of five (5) years, said payments having commenced
on January 1, 1996. This Consulting Agreement also stipulates that Mr.
Pijor will be provided with an automobile and will be reimbursed for
reasonable expenses relative to his duties as a consultant during the term
of the Agreement. Mr. Pijor was also a party to a Supplemental Retirement
Agreement entered into with the Bank on December 31, 1987. Under the
terms of this supplemental Retirement Agreement, Mr. Pijor is to receive
supplemental retirement benefits in the amount of $50,000 per year, for a
period of ten (10) years. The payment of these supplemental retirement
benefits commenced in January of 1996.
COMPENSATION COMMITTEE REPORT
The Lorain National Bank's Compensation Committee has the responsibility of
evaluating and recommending to the Board of Directors, for its approval, the
amount of compensation, including salary, bonus, and other benefits, for all
officers of the Bank, including the named Executive Officers and the Chief
Executive Officer.
It is the philosophy and policy of the Compensation Committee to
establish a compensation program for Bank officers to attract, motivate
and retain a highly qualified management team. The criteria used to
determine the recommended compensation of Bank officers includes their
level of responsibility, performance, experience, the Committee's
<PAGE>10
judgment as to the past performance and expected further contribution.
-9-
A comparison to the industry peer group as well as national and regional
surveys are also used. In addition, Mr. James F. Kidd, as the Bank's Chief
Executive Officer, evaluates the performance of other officers and presents
his evaluations and salary recommendations for all officers, other than
himself, to the Compensation Committee. The Committee is also advised by
independent compensation consultants, concerning compensation of Bank
officers. Based upon the foregoing, the Compensation Committee prepares
a report on recommended base salaries for all officers. In addition, in
some cases, the Compensation Committee recommends bonuses for certain
officers of the Bank, based upon the attainment of preestablished
performace goals. The recommendations of the Compensation Committee
regarding base salaries and bonuses for all officers are sublect to
approval by the Board of Directors.
As to the Chief Executive Officer, Mr. James F. Kidd's compensation,
including salary, bonus, and other benefits is also based upon a
recommendation of the Compensation Committee, which is then approved by the
Board of Directors. The factors and criteria considered by the Compensation
Committee included the pay level for CEOs of comparable banks, the financial
performance of the Bank, and the individual performance and leadership of Mr.
Kidd. Based upon the foregoing, and based upon the attainment of
preestablished performance goals established by the Compensation Committee,
the Compensation Committee recommended a base salary and bonus for Mr. Kidd
for 1996, in the amounts set forth in the Summary Compensation Table, which
amounts were approved by the Board of Directors.
The members of the Compensation Committee are:
James L. Bardoner T.L. Smith, M.D.
Daniel P. Batista Eugene M. Sofranko
David M. Koethe Paul T. Stack
Stanley G. Pijor Leo Weingarten
EMPLOYMENT AGREEMENTS
As of September 1, 1995, Mr. James F. Kidd entered into an Employment
Agreement with LNB Bancorp, Inc. and The Lorain National Bank. The
Agreement provides for Mr. Kidd's employment until he reaches the age of
65 as President. Mr. Kidd shall be compensated at the initial rate of One
Hundred and Twenty Four Thousand Dollars ($124,000) with an annual
compensation review each year thereafter. Mr. Kidd will continue to
receive his present fringe benefits and such additional benefits as are
set forth in the Bank's Employee Benefit Program. If the Agreement is
terminated earlier, other than for just cause, or by Mr. Kidd, then he
will be entitled to the salary and benefits described above for a period
of up to two (2) years.
As of September 1, 1995, Mr. Thomas P. Ryan entered into an Employment
Agreement with LNB Bancorp, Inc. and The Lorain National Bank. The
Agreement provides for Mr. Ryan's employment until he reaches the age of
65 as Executive Vice President. Mr. Ryan shall be compensated at the
initial rate of Ninety Seven Thousand Five Hundred Dollars ($97,500) with
an annual compensation review each year thereafter. Mr. Ryan will
continue to receive his present fringe benefits and such additional
benefits as are set forth in the Bank's Employee Benefit Program. If the
Agreement is terminated earlier, other than for just cause, or by Mr.
Ryan, then he will be entitled to the salary and benefits described above
for a period of up to two (2) years.
PENSION PLAN
The Bank sponsors The Lorain National Bank Retirement Pension Plan
(the Plan) covering substantially all employees of the Bank. An
employee is eligible to participate on January 1 or July 1 after the
<PAGE>11
attainment of age twenty-one (21) and completion of one year of service,
as defined in the Plan. The Bank's 1996 contribution to the Plan was
$249,461. The amount of contributions with respect to a specific person is
not and cannot readily be calculated on an individual basis.
-10-
Participants are eligible for normal retirement upon reaching age
sixty-five (65). Annual benefit payments are determined as a percentage
for the five (5) consecutive plan years that yield the highest average
salary. Participants in the Plan prior to January 1, 1989 will have
annual benefit payments reduced if they have less than fifteen (15) years
of continuous employment upon retirement. Participants who join the Plan
after January 1, 1989 will have benefit payments reduced if they have less
than twenty-five (25) years of continuous employment upon retirement. The
normal form of benefit payment is a joint and survivor annuity. Benefits
become fully vested after a participant has completed five (5) years of
service. The Plan also provides for the payment of early retirement,
death, disability, and deferred vested benefits in the form of a lump sum
distribution, or monthly annuity.
Annual benefit payments under the provisions of the Plan are computed
by a formula, the factors of which include annual compensation, years of
service and the social security taxable wage base.
The Plan was amended, effective January 1, 1995, to allow the payment
of accrued benefits in the form of a lump sum distribution upon retirement
at normal retirement age. The estimated present value of the accrued
benefit using the Plan's actuarial equivalence assumptions for the Named
Executive Officers ranged from $308,000 to $315,000 as of December 31,
1996.
Assuming the participant selects the benefit payable in a ten (10) year
Certain and Life Annuity at normal retirement date, the following table
reflects annual benefits payable to the employee based upon average annual
compensation levels and twenty-five (25) years of service.
Employee's Annual Estimated Pension
Final Average Payments Assuming Minimum of
Annual Compensation 25 Years of Service
$250,000* $76,144
200,000* 76,144
150,000 76,144
100,000 49,269
*The current annual compensation limit with respect to determining an
employee's annual pension payment is currently limited by the Internal
Revenue Code to $150,000. The Plan reflects the annual compensation limit
and this results in a maximum annual pension payment of $76,144.
Therefore, an employee's annual estimated pension payment for final
average compensation levels of $150,000 and above remains at the $76,144
level. Pension benefits accrued prior to 1995 are grand fathered, if
their calculated benefit is greater than $76,144. These pension payments
do not reflect any additional retirement benefits which the
employee may receive in the form of Social Security and other forms of
supplemental retirement benefits. Messrs. Kidd and Ryan have thirty-two
(32) and thirty-five (35) credited years of service respectively, under
the provisions of the Plan.
Benefit payments under the provisions of the Plan are computed using
formulas, the factors of which include annual compensation, years of
<PAGE>12
service, social security taxable wage base, and, in the case of a lump sum
distribution, current interest rates are also taken into consideration.
On July 30, 1996, the Bank entered into Supplemental Retirement
Agreements (SRA) with Mr. James F. Kidd and Mr. Thomas P. Ryan. The
purpose of the SRA is to provide supplemental retirement benefits to
Messrs. Kidd and Ryan in addition to the benefits provided by the Bank's
qualified retirement plan, to assist the Bank in retaining their services
through their normal retirement dates.
The SRA provides for payments, monthly or annually, at Messrs. Kidd and
Ryan's election, in the event of: (a) normal retirement; **(b) reduced
supplemental retirement benefits in the event of early retirement;
(c)disability prior to retirement; (d) death; or (e) discharge "without
cause."
-11-
<PAGE>13
Under the terms of their SRA, Messrs. Kidd and Ryan will receive
supplemental retirement benefits for a period of ten (10) years. The full
benefit amount is equal to seventy percent (70%) of the compensation paid
in the final year of employment, minus the Bank's pension benefit and
Social Security benefits. Mr. Kidd and Mr. Ryan are entitled to the full
benefit amount if they retire on their normal retirement date;** 75% of the
full benefit amount if they retire at age 64; 50% of the full benefit
amount if they retire at age 63; 25% of the full benefit amount if they
retire at age 62; and no SRA benefit if they retire prior to age 62.
In the event of disability prior to retirement, the disabled individual
would receive their full SRA benefit amount beginning at age 65. In the event
of death prior to retirement, after meeting the eligibility and employment
requirements, the applicable benefit (based upon the decedent's age) is
payable to his designated beneficiary. In the event of discharge "without
cause", the discharged individual would receive their full SRA benefit amount,
as if he retired at age 65, commencing at the recipient's discretion.
The SRA is a non-qualified defined benefit agreement. As of December 31,
1996, the monthly benefits that would be paid at normal retirement age,
would be $8,287 and $2,151 for Mr. Kidd and Mr. Ryan respectively.
**Mr. Kidd's normal retirement date is November 1, 2004
**Mr. Ryan's normal retirement date will be April 1, 2003
PERFORMANCE GRAPH
The graph which follows compares the five (5) year cumulative total
return from investing $100 on December 31, 1991 in each of LNB Bancorp, Inc.
common stock, the Standard & Poor's 500 index (S&P 500 Index) of companies and
the National Association of Securities Dealers Association Quotation System
Bank Index (NASDAQ Bank Index) of companies, with dividends assumed to be
reinvested when received.
Comparison of Five Year Cumulative Total Return*
AMONG LNB BANCORP, INC, THE S&P 500 INDEX AND NASDAQ BANK INDEX
(PERFORMANCE GRAPH FOLLOWS IN PRINTED VERSION WITH YEARS 1991 THROUGH
1996 ON THE X-AXIS AND CUMULATIVE INVESTMENT ON THE Y-AXIS IN $100
INCREMENTS RANGING FROM $0 TO $400. THE CO-ORDINATES, BY YEAR, WHICH
ARE PRESENTED IN THE TABLE BELOW ARE PLOTTED ON THE PREVIOUSLY DESCRIBED
GRID ALONG WITH AN ACCOMPANYING LEGEND FOR IDENTIFICATION PURPOSES.)
* $100 INVESTED ON 12/31/91 IN STOCK OR INDEX - INCLUDING REINVESTMENT
OF DIVIDENDS.
DECEMBER 31,
---------------------------------------------------------------------------
1991 1992 1993 1994 1995 1996
---------------------------------------------------------------------------
LNB Bancorp, Inc. $100 $115 $141 $187 $200 $218
---------------------------------------------------------------------------
S&P 500 Index $100 $108 $118 $120 $165 $203
---------------------------------------------------------------------------
NASDAQ Bank Index $100 $146 $166 $165 $246 $326
---------------------------------------------------------------------------
-12-
<PAGE>14
BENEFICIAL OWNERSHIP OF SHARES
The following table reflects as of December 31, 1996, any person known
to the Corporation to be the beneficial owner of more than five percent (5%)
of any class of the Corporation's voting securities, consisting of common
stock only, as well as the total number of shares of common stock beneficially
owned by each director, nominee, and the director and executive officers of
the Corporation as a group.
Five Percent Beneficial Ownership
Amount and Nature Percent
Name and Address of of Beneficial of
Beneficial Owner Ownership Class
Standen and Co. as nominee for
The Lorain National Bank 613,091(1) 14.81%
457 Broadway
Lorain, Ohio 44052
(1) The Bank, a wholly owned subsidiary of LNB Bancorp, Inc. (a U. S.
Corporation) disclaims beneficial ownership of all shares. The shares
were held by the Bank in various accounts administered by it, as
fiduciary, for the benefit of beneficiaries, donors, or principals of
such accounts. The Bank, as fiduciary, had (a) sole power to vote
111,583 shares; (b) sole investment power to purchase/sell, but no
power to vote on 243,748 shares; (c)shared investment power with sole
power to vote with respect to 33,446 shares; and (d) no investment
power and no power to vote on 224,314 shares. Shares of the
Corporation held by the Bank in various fiduciary capacities will be
voted only in accordance with directions, approvals or instructions
where called by the governing instruments or by law, and in the
absence of special factors affecting any individual account, will be
voted in accordance with management's recommendations where the Bank
as fiduciary has authority to determine the manner of voting.
BENEFICIAL OWNERSHIP OF MANAGEMENT (As of December 31, 1996)
Sole Shared Total Amount
Investment and Investment and of Beneficial Percent
Name Voting Power Voting Power Ownership of Class
James L. Bardoner 8,326 609 8,935 .22%
Daniel P. Batista 22,882 44,474 67,356 1.63%
Robert M. Campana 4,361 0 4,361 .11%
Wellsley O. Gray 8,073 4,642 12,715 .31%
James F. Kidd 47,215 0 47,215 1.14%
David M. Koethe 53,500 180 53,680 1.30%
Benjamin G. Norton 44,072 45,461 89,533 2.16%
Stanley G. Pijor 61,550 32,507 94,057 2.27%
Jeffrey F. Riddell 11,117 26,747 37,864 .91%
Thomas P. Ryan 32,473 1,244 33,717 .81%
T. L. Smith, M.D. 12,997 8,932 21,929 .53%
Eugene M. Sofranko 6,560 21,422 27,982 .68%
Paul T. Stack 8,801 1,220 10,021 .24%
Leo Weingarten 103,553 8,519 112,072 2.71%
Executive Officers
who are not
Directors 109,736 385 110,121 2.66%
------- -------- ------- ------
All Directors and
Executive Officers
as a Group 535,216 196,342 731,558 17.68%
======= ======== ======= ======
-13-
<PAGE>15
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Some of the directors of the Corporation and the companies with which they
are associated, are customers of and had banking transactions with the Bank
in the ordinary course of the Bank's business during 1996. Loans and
commitments to loans included in such transactions were made on
substantially the same terms, including interest rates and collateral, as were
those prevailing at the time for comparable transactions with other persons,
and in the opinion of the management of the Bank, do not involve more than a
normal risk of collectibility or present other unfavorable features.
STOCK DIVIDEND
The Board of Directors has the authority to declare and implement common
stock dividends without shareholder approval. However, as it has in prior
years, the Board has elected to seek shareholder approval for the proposed
stock dividend.
A stock dividend of approximately 82,771 shares of common stock (2%) is
recommended by the Board of Directors. THE BOARD HAS STIPULATED THAT THE
PROPOSED 2% STOCK DIVIDEND WOULD REQUIRE APPROVAL, IN THE FORM OF AN
AFFIRMATIVE VOTE BY SHAREHOLDERS OWNING TWO-THIRDS OR MORE OF THE STOCK OF THE
CORPORATION. The stock dividend will be payable to shareholders of record
April 15, 1997. This stock dividend is recommended as a distribution of
earnings of the Corporation and to conserve the cash assets.
The stock dividend will consist of approximately 82,771 shares which will
increase the total number of shares outstanding to approximately 4,221,304.
As a result of the stock dividend, a transfer of approximately $82,771 will be
made from retained earnings increasing the common stock of the Corporation to
approximately $4,221,000. An additional amount of approximately $2,348,000
will be transferred from retained earnings to surplus. The stock dividend
will not change the common stock par value or the total equity capital of the
Corporation.
The number of shares to be issued and the dollar amounts discussed above
are based upon shares outstanding and stock bid prices as of March 3, 1997.
The actual stock dividend will be calculated based upon shares outstanding and
stock bid prices on the record date.
No fractional shares will be issued. The Corporation will sell full shares
representing all the fractions to the highest bidder after having solicited
sealed bids from at least three (3) licensed stockbrokers. The proceeds of
the sale shall be distributed pro rata to shareholders who otherwise would be
entitled to fractional shares.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL OF THE DECLARATION
OF A 2% STOCK DIVIDEND.
PRINCIPAL ACCOUNTANTS
The independent accounting firm of KPMG Peat Marwick LLP has served
as the principal accountants for the Bank since 1972. A representative
of the firm will be present at the Annual Meeting and will be available to
respond to questions.
-14-
<PAGE>16
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders may submit proposals appropriate for shareholder action
at the Corporation's Annual Meeting consistent with the regulations of
the Securities and Exchange Commission. For proposals to be considered
for inclusion in the Proxy Statement for the 1998 Annual Meeting, they
must be received by the Corporation no later than December 1, 1997.
Such proposals should be directed to LNB Bancorp, Inc., Attention:
Shareholder Relations, 457 Broadway, Lorain, Ohio 44052.
OTHER BUSINESS
Management is not aware of any other matter which may be presented
for action at the meeting other than the matters set forth herein.
Should any matter other than those set forth herein be presented for a
vote of the shareholders, the proxy in the enclosed form directs the
persons voting such proxy to vote in accordance with their judgement.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Corporation's
officers and directors to file reports of ownership and changes of ownership
of the Corporation's registered securities on Forms 3, 4 and 5 with the
Securities and Exchange Commission (SEC).
The Corporation believes that all officers and directors complied with all
filing requirements applicable to them with respect to transactions during
fiscal year 1996.
ANNUAL REPORT
A copy of the Corporation's Annual Report has been mailed to shareholders
prior to the meeting. The Annual Report is not intended to be part of this
Proxy Statement. A report of the operations of the Corporation and the Bank
for the fiscal year ended December 31, 1996 will be presented at the meeting.
A copy of the Corporation's Annual Report on Form 10-K under the Securities
Exchange Act of 1934 is available to shareholders without charge upon request
to Thomas P. Ryan, Executive Vice President and Secretary/Treasurer, LNB
Bancorp, Inc., 457 Broadway, Lorain, Ohio 44052.
By Order of the Board of Directors
/s/ Thomas P. Ryan
Thomas P. Ryan
Executive Vice President
and Secretary/Treasurer
-15-
<PAGE>17
PROXY ANNUAL MEETING LNB BANCORP, INC., LORAIN, OHIO
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoint JAMES L. BARDONER, DAVID M. KOETHE
and DANIEL P. BATISTA, as Proxies, each with the power to appoint
his substitute, and hereby authorize them to represent and to
vote, as designated below, all the shares of Common Stock of the
LNB Bancorp, Inc. held on record by the undersigned on March 7,
1997, at the Annual Meeting of Shareholders to be held on April
15, 1997 or any adjournment thereof.
1. ELECTION OF DIRECTORS
[ ] FOR all nominees listed below (except as marked to the
contrary below)
[ ] WITHHOLD AUTHORITY to vote for all nominees listed below
James F. Kidd, Jeffrey F. Riddell, Thomas P. Ryan, Paul T. Stack,
Robert M. Campana
(Instruction: To withhold authority to vote for any individual nominee
write that nominee's name on the space provided below.)
-----------------------------------------------------------------
2. STOCK DIVIDEND - Increase the outstanding common stock of LNB Bancorp,
Inc. by declaration of a stock dividend consisting of approximately 82,771
shares of common stock of $1.00 par value each, and the terms and
conditions thereof.
[ ] FOR [ ] AGAINST [ ] ABSTAIN
END PUBLISHED PROXY CARD FRONT SIDE
In their discretion, the Proxies are authorized to vote upon such other
business as may properly come before the meeting.
<PAGE>18
This proxy when properly executed will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this proxy
will be voted for proposals 1 and 2.
Dated -----------, 1997 Number of shares in my/our name ---------
-------------------------- (L.S.)
-------------------------- (L.S.)
NOTE: Please sign exactly as name appears above. When signing
as attorney, executor, administrator, trustee or guardian, please
give full title as such. If a corporation, please sign in full
corporate name by President or other authorized officer. If a
partnership, please sign in partnership name by authorized
person.
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THIS
PROXY FORM WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING.
A RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
Please read and vote on other side.
