<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 September 30, 1999
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 in 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)
(440) 244 - 6000
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months, and (2) has been subject to such
requirements for the past 90 days.
YES 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 October 25, 1999: 4,122,775 shares
Class of Common Stock: $1.00 par value
<PAGE>2
LNB Bancorp, Inc.
Quarterly Report on Form 10-Q
Quarter Ended September 30, 1999
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Regulation 210.01-01 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 9
of Cash Flows
Notes to the Condensed Consolidated Financial
Statements 11
Item 2 - Management's Discussion and Analysis 16
of Financial Condition and Results of
Operations
Item 3 - Quantitative and Qualitative Disclosures 22
About Market Risk
Part II - Other Information
Item 1 - Legal Proceedings 23
Item 2 - Changes in Securities 23
Item 3 - Defaults upon Senior Securities 23
Item 4 - Submission of matters to a Vote of 23
Security Holders
Item 5 - Other Information 23
Item 6 - Exhibits and Reports on Form 8-K 23
Signatures 23
Exhibit Index 24
<PAGE>3
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SEPTEMBER 30, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 1999 1998
------------- -------------
(Unaudited)
ASSETS:
Cash and due from banks $ 19,937,000 $ 26,177,000
Federal funds sold and short-term
investments 12,926,000 6,624,000
Federal Home Loan Bank and Federal Reserve
Bank Stock, at cost 2,670,000 2,189,000
Securities:
Available for sale, at fair value 75,756,000 78,128,000
Held to maturity, at cost (fair value
$42,033,000 and $40,253,000, respectively) 44,415,000 38,202,000
------------- -------------
Total Securities 122,841,000 118,519,000
------------- -------------
Loans:
Portfolio Loans 402,223,000 359,475,000
Loans available for sale 11,321,000 10,391,000
------------- -------------
Total loans 413,544,000 369,866,000
Reserve for loan losses (4,108,000) (3,483,000)
------------- -------------
Net loans 409,436,000 366,383,000
------------- -------------
Bank premises and equipment, net 10,796,000 10,989,000
Intangible assets 4,350,000 4,666,000
Accrued interest receivable 3,701,000 3,685,000
Other assets 3,549,000 3,303,000
Other real estate owned -0- 1,400,000
------------- -------------
TOTAL ASSETS $587,536,000 $541,746,000
============= =============
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>4
STATEMENT CONTINUED FROM PREVIOUS PAGE
LIABILITIES AND SHAREHOLDERS' EQUITY:
Noninterest-bearing deposits $ 79,861,000 $ 85,558,000
Interest-bearing deposits 395,280,000 358,290,000
------------- -------------
Total deposits 475,141,000 443,848,000
------------- -------------
Securities sold under repurchase agreements
and other short-term borrowings 22,710,000 22,960,000
Federal Home Loan Bank advances 34,345,000 22,045,000
Accrued interest payable 1,559,000 1,487,000
Accrued taxes, expenses and
other liabilities 3,250,000 2,730,000
------------- -------------
Total Liabilities 537,005,000 493,070,000
------------- -------------
Shareholders' equity:
Common stock $1.00 par: Shares authorized 5,000,000
Shares issued 4,222,775 and 4,222,575, respectively and
Shares outstanding 4,122,775 and 4,122,575,
respectively 4,223,000 4,223,000
Additional capital 22,604,000 22,602,000
Retained earnings 27,233,000 24,210,000
Accumulated other comprehensive income(loss) (629,000) 541,000
Treasury Stock at cost, 100,000 shares (2,900,000) (2,900,000)
------------- -------------
Total Shareholders' Equity 50,531,000 48,676,000
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $587,536,000 $541,746,000
============= =============
See notes to unaudited condensed consolidated financial statements.
<PAGE>5
FORM 10-Q LNB BANCORP, INC.
PART 1 - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NINE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS SEPTEMBER 30,
OF INCOME (UNAUDITED) -------------------------
1999 1998
INTEREST INCOME: ------------ ------------
Interest and fees on loans:
Taxable $25,169,000 $22,720,000
Tax-exempt 20,000 32,000
Interest and dividends on securities:
Taxable 5,169,000 5,317,000
Tax-exempt 162,000 151,000
Interest on Federal funds sold and short-term
investments 250,000 113,000
------------ ------------
TOTAL INTEREST INCOME 30,770,000 28,333,000
------------ ------------
INTEREST EXPENSE:
Interest on Certificates of Deposit
of $100,000 and over 1,967,000 1,742,000
Interest on other deposits 7,486,000 7,706,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 870,000 882,000
Interest on Federal Home Loan Bank advances 1,067,000 98,000
------------ ------------
TOTAL INTEREST EXPENSE 11,390,000 10,428,000
------------ ------------
NET INTEREST INCOME 19,380,000 17,905,000
Provision for loan losses 1,250,000 1,263,000
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 18,130,000 16,642,000
------------ ------------
OTHER INCOME:
Investment and trust services income 1,587,000 1,358,000
Service charges on deposit accounts 2,175,000 1,848,000
Other charges, fees and exchanges 2,071,000 1,856,000
Gains on sales of loans, securities and buildings 158,000 -0-
Other operating income 72,000 49,000
------------ ------------
TOTAL OTHER INCOME 6,063,000 5,111,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>6
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 7,481,000 6,576,000
Net occupancy expense 1,136,000 1,005,000
Furniture and equipment expenses 1,627,000 1,617,000
Supplies and postage 727,000 790,000
Credit card and merchant expenses 703,000 564,000
Ohio franchise tax 414,000 353,000
Amortization of intangible assets 316,000 355,000
Other operating expenses 3,001,000 2,545,000
------------ ------------
TOTAL OTHER EXPENSES 15,405,000 13,805,000
------------ ------------
INCOME BEFORE INCOME TAXES 8,788,000 7,948,000
INCOME TAXES 3,001,000 2,690,000
------------ ------------
NET INCOME $ 5,787,000 $ 5,258,000
============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ 1.40 $ 1.27
====== ======
DILUTED EARNINGS PER SHARE $ 1.40 $ 1.27
====== ======
DIVIDENDS DECLARED PER SHARE $ .67 $ .61
====== ======
See notes to unaudited condensed consolidated financial statements.
<PAGE>7
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THREE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS SEPTEMBER 30,
OF INCOME (UNAUDITED) --------------------------
1999 1998
INTEREST INCOME ------------ ------------
Interest and fees on loans:
Taxable $ 8,740,000 $ 7,945,000
Tax-Exempt 4,000 10,000
Interest and dividends on securities:
Taxable 1,748,000 1,808,000
Tax-Exempt 54,000 49,000
Interest on Federal funds sold and
short-term investments 165,000 18,000
------------ -----------
TOTAL INTEREST INCOME 10,711,000 9,830,000
------------ -----------
INTEREST EXPENSE:
Interest on Certificates of Deposit
of $100,000 and over 718,000 664,000
Interest on other deposits 2,566,000 2,551,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 342,000 330,000
Interest on Federal Home Loan Bank advances 450,000 33,000
------------ -----------
TOTAL INTEREST EXPENSE 4,076,000 3,578,000
------------ -----------
NET INTEREST INCOME 6,635,000 6,252,000
Provision for possible loan losses 550,000 838,000
NET INTEREST INCOME AFTER PROVISION ------------ -----------
FOR POSSIBLE LOAN LOSSES 6,085,000 5,414,000
------------ -----------
OTHER INCOME:
Investment and trust services income 513,000 332,000
Service charges on deposit accounts 773,000 699,000
Other charges, fees and exchanges 754,000 602,000
Other operating income 12,000 25,000
------------ -----------
TOTAL OTHER INCOME 2,052,000 1,658,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>8
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 2,566,000 2,073,000
Net occupancy expense 346,000 334,000
Furniture and equipment expenses 426,000 439,000
Supplies and postage 218,000 247,000
Credit card and merchant expenses 276,000 185,000
Ohio franchise tax 121,000 84,000
Amortization of intangible assets 106,000 131,000
Other operating expenses 1,040,000 821,000
------------ ------------
TOTAL OTHER EXPENSES 5,099,000 4,314,000
------------ ------------
INCOME BEFORE FEDERAL INCOME TAXES 3,038,000 2,758,000
FEDERAL INCOME TAXES 1,047,000 932,000
------------ ------------
NET INCOME $ 1,991,000 $ 1,826,000
============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .48 $ .44
====== ======
DILUTED EARNINGS PER SHARE $ .48 $ .44
====== ======
DIVIDENDS DECLARED PER SHARE $ .23 $ .21
====== ======
See notes to unaudited condensed consolidated financial statements.
<PAGE>9
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NINE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS SEPTEMBER 30,
OF CASH FLOWS (UNAUDITED) -------------------------
1999 1998
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------
Interest received $31,063,000 $27,947,000
Other income received 5,926,000 4,883,000
Interest paid (11,392,000) (10,277,000)
Cash paid for salaries and
employee benefits (7,131,000) (6,320,000)
Net occupancy expense of premises paid (876,000) (744,000)
Furniture and equipment expenses paid (626,000) (597,000)
Cash paid for supplies and postage (727,000) (790,000)
Cash paid for other operating expenses (3,401,000) (2,011,000)
Federal income taxes paid (2,498,000) (2,798,000)
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES: 10,338,000 9,293,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 19,500,000 9,278,000
Proceeds from maturities of securities
Held to maturity 181,000 27,366,000
Purchase of securities held to maturity (7,080,000) (155,000)
Purchase of securities available
for sale (18,333,000) (38,938,000)
Net decrease in credit card loans 333,000 600,000
Net (increase) in long-term loans (44,599,000) (32,427,000)
Purchases of bank premises and equipment (1,052,000) (756,000)
Proceeds from sales of bank premises
and equipment -0- 7,000
Proceeds from liquidation of Other Real
Estate Owned 1,400,000 -0-
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (49,650,000) (35,025,000)
------------ -----------
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>10
STATEMENT CONTINUED FROM PREVIOUS PAGE
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase in demand and other
noninterest-bearing deposits (6,823,000) 5,978,000
Net increase (decrease) in savings
and passbook deposits 734,000 (3,168,000)
Net increase in time deposits 36,256,000 19,843,000
Net increase in securities sold
under repurchase agreements and other
short-term borrowings (250,000) 7,872,000
Proceeds from Federal Home Loan
Bank advances 12,300,000 -0-
Cash paid on line of credit -0- (600,000)
Purchase of Treasury Stock -0- (57,000)
Proceeds from exercise of stock options 2,000 3,000
Dividends paid (2,845,000) (2,556,000)
------------ -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 39,374,000 27,315,000
------------ ------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 62,000 1,583,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 32,801,000 24,407,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $32,863,000 $25,990,000
============ ============
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $5,787,000 $5,258,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,261,000 1,281,000
Amortization of deferred loan fees
and costs, net (218,000) 796,000
Provision for loan losses 1,250,000 1,263,000
Amortization of intangible assets 316,000 355,000
(Increase)in accrued interest receivable (16,000) (371,000)
Decrease in other assets 54,000 537,000
Increase in accrued interest payable 72,000 151,000
Increase (decrease) in accrued taxes,
expenses and other liabilities 1,729,000 161,000
Others, net 103,000 (138,000)
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $10,338,000 $9,293,000
============ ============
See notes to unaudited condensed consolidated financial statements.
<PAGE>11
Form 10-Q LNB Bancorp, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTRODUCTION
The following areas of discussion pertain to the unaudited condensed
consolidated financial statements of LNB Bancorp, Inc. (The Parent
Company) and its wholly-owned subsidiary, Lorain National Bank (The Bank)
at September 30, 1999, compared to December 31, 1998, and the results of
its operations for the three and nine months ended September 30, 1999
and cash flows for the nine months ended September 30, 1999 compared to
the same periods in 1998. The term "the Corporation" refers to LNB
Bancorp, Inc. and its wholly-owned subsidiary. It is the intent of this
discussion to provide the reader with a more thorough understanding of the
unaudited condensed consolidated financial statements and supporting
schedules, and should be read in conjunction with those unaudited
condensed consolidated financial statements and schedules.
This report contains statements that constitute forward-looking statements
and are subject to certain risks and uncertainties that could cause actual
facts to differ materially from those presented in this report. Readers
are cautioned not to place undue reliance on these forward-looking
statements which speak only as of the date of this report.
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 September 30,
1999, the unaudited condensed consolidated statements of income for the
three and nine months ended September 30, 1999 and the unaudited
condensed consolidated statements of cash flows for the nine months ended
September 30, 1999 and 1998 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 operations 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. The consolidated
balance sheet at December 31, 1998 has been taken from the audited
Financial Statements and condensed. It is suggested that these unaudited
condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Corporation's
December 31, 1998 Annual Report to Shareholders.
The results of operations for the period ended September 30, 1999 are not
necessarily indicative of the operating results for the full year.
<PAGE>12
RESERVE FOR LOAN LOSSES
Because some loans may not be repaid in full, a reserve for 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 probable
loan losses inherent in the loan portfolio 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 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 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.
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 loan losses or by a provision for loan losses,
depending upon the adequacy of the reserve for loan losses.
RECLASSIFICATIONS
Certain 1998 amounts have been reclassified to conform to the 1999
presentation.
<PAGE>13
2. EARNINGS PER SHARE
Earnings per share is calculated as follows:
For the 9 Months ended September 30, 1999
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $5,787,000
Basic EPS
Income available to
common stockholders $5,787,000 4,122,717 $1.40
Effect of Dilutive Securities
Incentive Stock Options -0- 8,216 -0-
---------- --------- -----
Dilutive EPS
Income available to common
stockholders + assumed
conversions $5,787,000 4,130,933 $1.40
========== ========= =====
For the 9 Months ended September 30, 1998
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $5,258,000
Basic EPS
Income available to
common stockholders $5,258,000 4,122,952 $1.27
Effect of Dilutive Securities
Incentive Stock Options -0- 9,648 -0-
---------- --------- -----
Dilutive EPS
Income available to common
stockholders + assumed
conversions $5,258,000 4,132,600 $1.27
========== ========= =====
For the 3 Months ended September 30, 1999
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $1,991,000
Basic EPS
Income available to
common stockholders $1,991,000 4,122,775 $ .48
Effect of Dilutive Securities
Incentive Stock Options -0- 7,767 -0-
---------- --------- -----
Dilutive EPS
Income available to common
stockholders + assumed
conversions $1,991,000 4,130,542 $ .48
========== ========= =====
<PAGE>14
For the 3 Months ended September 30, 1998
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $1,826,000
Basic EPS
Income available to
common stockholders $1,826,000 4,122,525 $ .44
Effect of Dilutive Securities
Incentive Stock Options -0- 9,648 -0-
---------- --------- -----
Dilutive EPS
Income available to common
stockholders + assumed
conversions $1,826,000 4,132,173 $ .44
========== ========= =====
3. COMPREHENSIVE INCOME
The Corporation adopted SFAS No. 130 "Reporting Comprehensive Income" on
January 1, 1998. This statement requires companies to report all items
that are recognized as components of comprehensive income under accounting
standards. As required, the Corporation displays the accumulated balance
of other comprehensive income as a separate component of shareholders'
equity. The Corporation's comprehensive income for the nine months ended
September 30, 1999 and 1998 are as follows:
For the nine months ended September 30,
1999 1998
--------------------------------
Net income $5,787,000 $5,258,000
Other comprehensive income(loss):
Unrealized gain (loss) on
securities available for sale,
net of tax (benefit) of
($324,000) and $290,000 (629,000) 563,000
----------- -----------
Comprehensive Income $5,158,000 $5,821,000
The Corporation's comprehensive income for the three months ended
September 30, 1999 and 1998 are as follows:
For the three months ended September 30
1999 1998
------------------------------------
Net income $1,991,000 $1,826,000
Other comprehensive income(loss):
Unrealized gain (loss) on
securities available for sale,
net of tax (benefit) of
($78,000) and $241,000 (152,000) 467,000
----------- ------------
Comprehensive Income $1,839,000 $2,293,000
4. DIVIDEND REINVESTMENT AND CASH STOCK PURCHASE PLAN
The Board of Directors adopted a dividend reinvestment and cash stock
<PAGE>15
purchase plan on November 18, 1997. Under the plan, the first dividend
reinvestment and cash stock purchase date was April 1, 1998. The plan
allows shareholders to elect to use their quarterly cash dividends to
purchase shares of LNB Bancorp, Inc. common stock. Additionally, cash can
be contributed directly to the plan for the purchase of shares of common
stock with a quarterly limit of $5,000.
The dividend reinvestment plan authorized the sale of 150,000 shares of
the Corporation's authorized but previously unissued common shares to
shareholders who choose to invest all or a portion of their cash dividends
plus additional cash payments. No shares were issued by the Corporation
pursuant to the plan in the first three quarters of 1999. In the first
three quarters of 1999, stock was purchased in the open market at the
current market price.
<PAGE>16
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets of the Corporation increased $45,790,000 during the first
nine months in 1999, to $587,536,000. This growth was funded by increases
in demand deposits, savings deposits and certificates of deposit.
Total earning assets increased 11.0% to $549,311,000 at September 30, 1999
from December 31, 1998. The ratio of earning assets to total assets
increased from 91.4% at December 31, 1998 to 93.5% at September 30, 1999.
The loan to deposit ratio has increased from 83.33% at 1998 year-end to
87.04% at September 30, 1999.
Federal funds sold and short-term investments increased by $6,302,000
during the first nine months of 1999, to $12.9 million, with $10.0 million
designated for potential Y2K liquidity purposes.
Total securities increased $4,322,000 ending the third quarter at
$122,841,000. At September 30, 1999 gross unrealized gains (losses)in the
investment securities portfolio were approximately $67,000 and
($1,105,000), respectively.
Net loans grew by $43,053,000 during the first nine months to $409,436,000
at September 30, 1999 for a 12% growth rate. Commercial and consumer loan
growth was strong accounting for 53% and 36% of total loan growth while
mortgage loans accounted for 11% of total loan growth during the nine
months ended September 30, 1999. Loan increase was supported by spring and
summer home equity loan sale programs which resulted in new loans totaling
over $2 million. Also, the increase in consumer loans is attributable to
an increase in indirect automobile loans. The reserve for loan losses
ended the quarter at $4,108,000. Activity for the nine months ended
September 30, 1999 included provision for loan losses of $1,250,000,
recoveries of $185,000 and loan charge-offs of $810,000. The reserve for
loan losses as a percentage of ending loans increased .05% from .94% at
December 31, 1998 to .99% at September 30, 1999. Corporate management
believes that the reserve for loan losses as a percentage of ending loans
at September 30, 1999 remains at an appropriate level. The ratio of the
reserve for loan losses to nonperforming assets remained at an adequate
level even though it decreased to 413.3% at September 30, 1999. Corporate
management believes that the current level of the reserve for loan losses
is adequate based upon an analysis of identified risks and analysis of
historical trends.
The level of nonperforming assets decreased by $1,493,000 during the first
nine months of 1999. This decrease is the result of a decrease in non-
accrual loans of $93,000 as well as by a decrease in other real estate
owned in the amount of $1,400,000. The decrease in Other Real Estate
Owned results from the liquidation of assets. The decrease in nonaccrual
loans is due to decreases in nonaccrual principal balances of $373,000
which have been paid off and brought current, loans charged-off in the
amount of $260,000, liquidation of non-accrual loans of $588,000 and
increases in nonaccrual principal balances of $1,128,000. The increase in
nonaccrual loans in the first nine months of 1999 was due primarily to
nine commercial loan customers, one mortgage loan customer and several
personal loans. Management does not believe that this increase in
non-accrual loans is indicative of a failing local economy and that this
<PAGE>17
change did not result from any change in underwriting standards.
Nonperforming assets at September 30, 1999 totaled $994,000, up from
$494,000 at June 30, 1999. The third quarter increase in nonperforming
assets of $500,000 resulted from loans being brought current in the
amount of $37,000, loans charged-off in the amount of $79,000, liquidation
of non-accrual loans of $115,000, decreases in Other Real Estate Owned of
$209,000 and increases in nonaccrual loans of $940,000. The increase in
nonaccrual loans in the third quarter of 1999 was due primarily to three
commercial loan customers and twenty five consumer loan customers.
The level of nonperforming assets at September 30, 1999 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 09/30/99 06/30/99 03/31/99 12/31/98
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual loans $ 994 $ 285 $ 848 $1,087
Restructured loans 0 0 0 0
Other Real Estate Owned 0 209 633 1,400
-------- -------- -------- --------
Total Nonperforming Assets $ 994 $ 494 $1,481 $2,487
======== ======== ======== ========
Reserve for possible
loan losses to total
nonperforming assets 413.3% 764.0% 235.2% 140.1%
======== ======== ======== ========
Accruing loans past due 90 days $ 505 $ 494 $ 479 $ 213
======== ======== ======== ========
Potential problem loans are those loans identified on Management's watch
list in which Management has some doubt as to the borrower's ability to
comply with the present repayment terms and loans which Management is
actively monitoring due to changes in the borrower's financial condition.
At September 30, 1999, potential problem loans totaled $4,434,000, an
increase of $1,493,000 from the December 31, 1998 balance of $2,941,000.
The increase in potential problem loans during 1999 is primarily due to
increases from the consumer loans portfolio.
The Corporation's credit policies are reviewed and modified on an on-going
basis in order to remain suitable for the management of credit risk within
the loan portfolio as conditions change. At September 30, 1999, there are
no significant concentrations of credit in the loan portfolio.
The Corporation had outstanding loan and credit commitments to make loans
totaling $105,278,000 and $76,927,000 at September 30, 1999 and December
31,1998, respectively. The increase in outstanding loan commitments
results in part from an increase in the unused portion of home equity
lines of credits from a home equity loan sale program in the second and
third quarters of 1999. Mortgage and commercial construction loan demand
increased in the second and third quarters of 1999 as seasonal weather
conditions improved and the construction season moved forward. Consumer
loan demand increased in the first and second quarters and leveled off in
the third quarter as demand for home improvement and automobile loans
increased.
Total deposits increased $31,293,000 during the first nine months to
<PAGE>18
$475,141,000. Noninterest-bearing deposits decreased to $79,861,000, at
September 30, 1999 for a decrease of $5,697,000, while interest-bearing
deposits climbed to $395,280,000 for an increase of $36,990,000. Federal
funds purchased and securities sold under agreements to repurchase
decreased $250,000 during the first nine months of 1999. Due to the
volatility of customer repurchase agreements, most funds generated by
repurchase activity enter the Corporation's earning assets as short-term
investments. Federal Home Loan Bank (FHLB) advances increased to $34.3
million at September 30, 1999, up $12.3 million from 1998 year end. Of
this increase, $20.0 million and $2.3 million in FHLB advances were used
to fund a portion of the growth in consumer and commercial loans,
respectively. The remaining $10.0 million in FHLB advances are designated
for potential Y2K liquidity purposes.
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 September
30, 1999, short-term security investments with maturities of one year or
less totalled $14,296,000 which represented 11.6% of total securities.
Adding cash and due from banks of $19,937,000 and Federal funds sold and
short-term investments of $12,926,000, total liquid assets represented
8.0% of total assets. The Corporation's subsidiary bank has established
short-term lines of credit at correspondent banks and the Federal Home
Loan Bank in the amount of $37,800,000.
CAPITAL RESOURCES
LNB Bancorp, Inc. continues to maintain a strong capital position. Total
shareholders' equity reached an all time high of $50,531,000, at September
30, 1999, an increase of $2,363,000, or 5% from one year ago. The
increase resulted primarily from $5,787,000 of net income generated from
the first nine months of operations less a cash dividend payable to
shareholders of $2,762,000. The increase in interest rates experienced in
the first three quarters of 1999 has caused a decrease in the market value
of available for sale securities which resulted in a decrease in
shareholders' equity within accumulated other comprehensive income of
$1,170,000 for the nine months ended September 30, 1999. As of September
30, 1999, the LNB Bancorp, Inc. held 100,000 shares of common stock as
treasury stock. LNB Bancorp, Inc. purchased 2,004 of these shares in the
first quarter of 1998 and 97,996 shares in 1997 for a total cost of
$2,900,000.
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
<PAGE>19
institution for all periods presented. The Corporation's capital and
leverage ratios as of September 30, 1999 and 1998 follow together with
those ratios required for the Corporation to be considered adequately
capitalized .
September 30
-----------------
1999 1998
------ ------
Tier I capital ratio 11.77% 12.44%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 12.81% 13.66%
Required total capital ratio 8.00% 8.00%
Leverage ratio 8.26% 8.66%
Required leverage ratio 3.00% 3.00%
The Corporation regularly evaluates acquisition opportunities and conducts
due diligence activities in connection with possible acquisitions in
markets near or within the Corporation's current geographic market. As a
result, acquisition discussions and, in some cases negotiations, take
place and future acquisitions could occur. 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 was $25,189,000 for the first nine months of
1999 for an increase of $2,437,000 when compared to the first nine months
of 1998. Increased loan income was the result of the net increase in the
loan portfolio of $43,678,000 offset slightly by decreases in interest
rates. Interest and dividends on securities was $5,331,000 for the first
nine months of 1999 for a decrease of $137,000 over the same period in
1998. Decreased security income results from a net increase in the volume
of securities which was offset by decreases in yields on those securities.
Interest and dividends on securities represented 17.3% of total interest
income at September 30, 1999 compared to 19.3% at September 30, 1998.
Interest on Federal funds sold and short-term investments was $250,000 at
September 30, 1999 compared to $112,000 at September 30, 1998. The
increase resulted from increases in the average balances invested in these
forms of financial instruments plus increases in interest rates.
Total interest expense increased by $962,000 when compared to the first
nine months of 1998. The interest expense increase was fueled by an
increase in interest expense from Federal Home Loan Bank advances of
$969,000, offset by decreases in deposit account interest of $5,000 and
repurchase agreement interest of $12,000. Also, total interest expense
for the first nine months of 1999 was impacted by a net increase in
deposits of $31,293,000, partially offset by decreases in interest rates
paid on savings and certificate of deposit accounts when compared to the
first nine months of 1998.
Total other income increased by $952,000 when compared to the first nine
months of 1998. This increase resulted from increases in income from
investment and trust services fees of $229,000, increases in service
charges of $327,000 and increases in other charges, exchanges and fees of
$215,000. The increase in investment and trust services fees results from
increases in the volume of assets under management of $50,000,000 from
1998 year end. The increase in service charges is due, in part, to
reevaluating the assessment of transaction account charges plus increases
in the volume of accounts. The increase in other charges, exchanges and
<PAGE>20
fees is the result of pricing increases in credit card and merchant fees.
The Corporation reported a non-recurring gain on sale of a building in the
second quarter of 1999. Other operating income increased by $23,000.
The Corporation continuously monitors noninterest expenses for greater
profitability. The entire staff is geared to improving productivity at
all levels. Noninterest expense for the nine months ended September 30,
1999 was $15,405,000, 11.6% above the first nine months of 1998. This
increase was due primarily to certain loan collection expenses incurred in
1999, increases in salaries and benefits, increases in credit card and
merchant expenses plus the operating expenses of one additional branch
office which was placed into service in June of 1998.
The effective tax rate remained constant at 34.1% during the first nine
months of 1999 and 1998. Net income was $5,787,000 and $5,258,000 for the
nine months ended September 30, 1999 and 1998, respectively. Net income
per basic and diluted share was $1.40 and $1.27 for the nine months ended
September 1999 and 1998, respectively.
4. YEAR 2000 ISSUE
Several of the Corporation's and Bank's regulators including the
Securities and Exchange Commission, Federal Reserve Board, and the Office
of the Comptroller of Currency have issued guidance relative to the
management and disclosures for year 2000 issues. A discussion of the year
2000 issue as it relates to the Corporation, the Bank and their customers,
suppliers and vendors follows.
The Corporation has formed a strategic task force to perform a
comprehensive review of its computer systems to identify the systems that
could be affected by the "Year 2000" issue and has developed an
implementation plan to resolve the issue. The Year 2000 problem is the
result of computer programs being written using two digits rather than
four to define the applicable year. Any of the Corporation's programs
that have time sensitive software may recognize a date using "00" as the
year 1900 rather than the year 2000.
The Corporation expects to incur internal staff costs, consulting, and
other expenses to identify, correct or reprogram, and test the systems for
the year 2000 compliance issue. The Corporation estimates that compliance
costs for the year 2000 issue through 1999 will not exceed $250,000. The
Corporation does not expect that year 2000 compliance costs to be expensed
over the next year to have a material effect on the financial position,
liquidity or results of operations.
Financial institutions may experience increases in problem loans and
credit losses in the event that borrowers fail to properly respond to the
"Year 2000" issue. Cost of funds may become greater, if customers react
to publicity about this issue by withdrawing deposits. Accordingly, the
Corporation has formed an internal task force to assess potential problems
relating to credit, liquidity, and third party risk, and where
appropriate, develop contingency plans. This task force has conducted a
survey of significant credit and deposit relationships to determine their
"Year 2000" readiness and to evaluate the potential of credit and
liquidity risk to the Corporation. Also, the "Year 2000" issue creates
risk for the Corporation from unforeseen problems in its own computer
systems and from third parties' with whom the Corporation deals on
financial transactions. Such failures of the Corporation, and/or third
parties' computer systems could have a material impact on the
<PAGE>21
Corporation's ability to conduct its business, and especially to process
and account for the transfer of funds electronically.
The Corporation set June 1999 as the date it should be substantially
compliant with the Year 2000 readiness process. As of that date, the
Corporation had successfully completed upgrades, testing and validation of
its internal mission critical systems. The Corporation has and will
continue to work extensively in the area of consumer awareness and
customer risk assessment. Furthermore, the Corporation continues to work
with regulatory agencies and other third party providers to ensure Year
2000 compliance. Also, the Corporation completed its liquidity plan and
designed its Year 2000 contingency plan. With the extensive testing, work
and planning that has gone into the Y2K project, the Corporation is
confident that there should be no interruption in service relating to Year
2000 issues. Although the Corporation successfully completed its Year
2000 readiness on schedule in June, the Corporation will continue to work
on the Year 2000 project through the remainder of 1999 and into the Year
2000. For the remainder of 1999, customer confidence and employee
awareness issues will be extremely important as well as testing and
validating contingency plans. Year 2000 preparedness will continue to be
a top priority through the remainder of 1999 and into 2000.
Based upon successful testing of mission critical hardware and software,
the Corporation does not anticipate that it will have to rely on a
contingency plan relating to these areas. However, the Corporation has
developed a contingency plan that would cover the failure of mission
critical hardware and software. The contingency plan also covers Y2K
failure(s) that might result from a failure(s) outside of the control of
the Corporation; such as a utility company failure. The Corporation's
contingency plan for Y2K failure of its core processing systems will be to
handle and process customer transactions manually until the system failure
is corrected. In the most reasonably likely worst case scenario where any
of the Corporation's mission critical systems, either internal or
external, would fail, the Corporation will be operating in a manual mode.
In preparation for the unlikely event of the most reasonably likely worst
case scenario, the Corporation is in the process of planning and training
all of its' employees and will have all customer records backed up to
ensure the accuracy of our customer records.
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>22
PART I - OTHER INFORMATION
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Market risk is the risk of loss in a financial instrument arising from
adverse changes in market indices such as interest rates, foreign exchange
rates and equity prices. The Corporation's principal market risk exposure
is interest rate risk, with no material impact on earnings from changes in
foreign exchange rates or equity prices. There have been no material
changes in the asset and liability mix of the Corporation since December
31, 1998, which would impact the Corporation's level of market risk.
Interest rate risk is the exposure to changes in market interest rates.
Interest rate sensitivity is the relationship between market interest
rates and net interest income due to the repricing characteristics of
assets and liabilities. The Corporation monitors the interest rate
sensitivity of its on - and - off balance sheet positions by examining its
near-term sensitivity and its longer term gap position. Corporate
management has determined no significant changes in the Corporation's
interest rate risk profile since December 31, 1998.
With the Federal Reserve Board's recent announcement to increase the
federal funds rate to 5.25% on June 29, 1999, the Corporation does not
anticipate any changes in net interest margin. Also, Corporate management
dose not anticipate any significant changes in the Corporation's market
risk of interest rate risk portfolio.
<PAGE>23
Part II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
None
ITEM 2 - Changes in Securities
None
ITEM 3 - Defaults Upon Senior Securities
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
None
ITEM 5 - Other Information
None
ITEM 6 - Exhibits and Reports on Form 8-K:
(a) Exhibit (3)(i) - LNB Bancorp, Inc. Articles of Incorporation
(b) Exhibit (3)(ii) - LNB Bancorp, Inc. Code of Regulations
(c) Exhibit (11) - Computation of Shares Used for Earnings Per Share
Calculation.
Exhibit (19) - Third Quarter Report to Shareholders of LNB
Bancorp, Inc., September 30, 1999 - EDGAR Version.
(d) Exhibit (27) - Financial Data Schedule.
(e) Reports on Form 8-K
There were no reports on Form 8-K filed for the nine months
ended September 30, 1999.
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LNB BANCORP, INC.
(registrant)
Date: November 9, 1999 /s/ Gregory D. Friedman
_________________________
Gregory D. Friedman, CPA
Senior Vice President,
Chief Operating Officer and
Chief Financial Officer
Date: November 9, 1999 /s/ Mitchell J. Fallis
_________________________
Mitchell J. Fallis, CPA
Vice President and
Chief Accounting Officer
<PAGE>24
LNB Bancorp, Inc.
Form 10-Q
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K
S-K Reference Exhibit
Number
(3)(i) LNB Bancorp, Inc. Articles of Incorporation.
(3)(ii) LNB Bancorp, Inc. Code of Regulations.
(11) Computation of Shares Used for Earnings Per Share
Calculations Footnote 2 Earnings Per Share on pages 12-
13 of this Form 10Q is incorporated by reference.
(13) Third Quarter Report to Shareholders of LNB Bancorp,
Inc. September 30, 1999 - EDGAR Version.
(27) Financial Data Schedule.
<PAGE>25
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the nine months ended September 30, 1999)
S - K Reference Number (3)(i)
LNB Bancorp, Inc.
Articles of Incorporation
<PAGE>26
F0881-0730
ARTICLES OF INCORPORATION
OF
LNB BANCORP, INC.
The undersigned incorporators, acting as the incorporators of LNB Bancorp,
Inc. under the Ohio General Corporation Law (ORC 1701.01.99), hereby adopt
the following Articles of Incorporation for such corporation:
ARTICLE I
The name of the corporation is LNB Bancorp, Inc.
ARTICLE II
The place in the State of Ohio where the principal office of the
corporation is to be located in the city of Lorain, county of Lorain.
ARTICLE III
The purpose for which the corporation is formed is to engage in any
lawful act or activity for which corporations may be formed under the Ohio
General Corporation Law (ORC Sections 1701.01 et. seg.).
ARTICLE IV
The aggregate number of Common Shares which the Corporation shall
have the authority to issue is 5,000,000 shares, each of $1.00 par value.
Shares of the authorized and outstanding Common Stock shall be subject to
redemption be the Corporation at the direction of the vote of a majority
of the Board if Directors meeting at a regular or specifically called
meeting for said purpose.
Furthermore, the Corporation, through its Board of Directors, shall
have the power to purchase, hold, sell and transfer the shares of its own
capital stock provided that it does not use its funds or property for the
purchase of its own shares of capital stock when such use will cause any
impairment of its capital, except when otherwise permitted by law, and
provided further that shares of its own capital stock belonging to it are
not voted upon directly or indirectly.
ARTICLE V
The amount of stated capital with which the corporation will commence
business is at least five hundred dollars ($500.00).
ARTICLE VI
The Board of Directors of the corporation is hereby authorized to fix
and determine and to vary the amount of working capital of the
corporation, to determine whether any and, if any, what part of its
surplus, however created or arising, shall be used or disposed of or
declared in dividends or paid to shareholders, and without action by the
shareholders, to use and apply such surplus or any part thereof at any
time or from time to time in the purchase or acquisition of shares of any
class, voting trust certificates for shares, bonds, debentures, notes,
script, warrants, obligations, evidences of indebtedness of the
corporation or other securities of the corporation, to such extent or
amount and in such manner and upon such terms as the Board of Directors of
the corporation shall deem expedient to the extent not prohibited by law.
ARTICLE VII
Each officer, director or member of any committee designated by the
Board of Directors of the corporation shall, in the performance of his
duties, be fully protected in relying in good faith upon the books of
<PAGE>27
accounts or reports made to the corporation by any of its officers of
employees or by an independent public accountant or be an appraiser
selected with reasonable care be the Board of Directors of the corporation
or by any such committee or in relying in good faith upon other records of
the corporation.
ARTICLE VIII
The names and addresses of the incorporators of LNB Bancorp, Inc.
are:
Daniel P. Batista
209 Sixth Street
Lorain, OH 44052
David M. Koethe
1310 Colorado Ave.
Lorain, OH 44052
Stanley G. Pijor
457 Broadway
Lorain, OH 44052
George L. Roth
5466 Willow Lane
Vermilion, OH 44089
Leo Weingarten
2803 Toledo Ave.
Lorain, OH 44055
ARTICLE IX
In the absence of fraud, no contract or other transaction between the
corporation and any other person, corporation, firm, syndicate,
association, partnership, or joint venture shall be wholly or partially
invalidated or otherwise affected by reason of the fact that one or more
of the directors of the corporation, firm, syndicate or association, or
member of such partnership or joint venture, of transaction, provided,
that the fact such director or directors of the corporation are so
situated or so interested or both, shall be disclosed or shall have been
known to the Board of Directors of the corporation. Any director or
directors of the corporation who is (are) also a director or officer of
such other corporation, firm syndicate or association, or a member of such
partnership, or joint venture, or is pecuniarily or otherwise interested
in such contract or transaction, may be counted for the purpose of
determining the existence of a quorum above provided (unless ordered by a
court) shall be made by the corporation only as authorized upon a
determination that indemnification is proper in the circumstances because
the standard of conduct set forth above has been met. Such determination
shall be made (a) by the Board of Directors by a majority vote of a quorum
consisting of directors who were not parties to such action suit or
proceeding; or (b) if such quorum is not attainable, or even if
obtainable, if a majority vote of a quorum of disinterested directors so
directs, by independent legal counsel in a written opinion, or (c) by a
majority of a quorum of the shareholders of the corporation consisting of
shareholders who were not parties to such action, suit or proceeding.
ARTICLE X
The Board of Directors, by resolution adopted by a majority of the
full Board of Directors, may designate from among its members an Executive
Committee, which committee shall have and may exercise, to the extent
<PAGE>28
provided by law, all of the authority of the Board of Directors in the
management of the corporation. The designation of such committee and the
delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed upon it or
him by law.
ARTICLE XI
Each shareholder shall be entitled to one vote for each share of
stock standing in his 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.
ARTICLE XII
Upon the offering of sale for cash of shares of stock of the
corporation, each shareholder shall have the right, during a reasonable
time, and on reasonable terms fixed by the directors, to purchase such
shares in proportion to their respective holdings of shares of the
corporation, unless the shares offered or sold are: (a) treasury shares;
(b) issued as a share dividend; (c) issued or agreed to be issued for
consideration other than money; (d) issued by the Board of Directors; (e)
issued or agreed to be issued upon conversion of convertible shares
authorized in the Articles, or upon exercise of the conversion rights
conferred and authorized by the Board of Directors; (f) offered to
shareholders in satisfaction of their pre-emptive rights and not purchased
by such shareholders, and thereupon issued and agreed to be issued for a
consideration no less than that at which such shares were so offered to
such shareholders, less reasonable expenses, compensation, or discount
paid or allowed for sale, underwriting, or purchase of such shares, unless
by the affirmative vote or written order of the holders of two-thirds of
the shares otherwise entitled to such pre-emptive rights, if pre-emptive
rights are restored as to any of such shares not theretofore issued or
agreed to be issued; (g) released from pre-emptive rights by the
affirmative vote or written consent of the holders of two thirds of the
shares entitled to such pre-emptive rights. Any such vote or consent
shall be entered into the records of the corporation and shall be binding
on all shareholders and their transferee for the time specified in such
note or consent up to but not exceeding one year, and shall protect all
persons who within such time acquire the shares or options on or
conversion or other rights with respect to the share so released; (h)
released form pre-emptive rights by the affirmative note or written
consent of the holders of a majority of the shares entitled to such
pre-emptive rights, for offering and sale, or the grant of options with
respect thereto, to any or all employees of the corporation or its
subsidiary corporations or to a trustee on their behalf, under a plan
adopted or to be adopted by the directors for that purpose.
The above paragraph notwithstanding, there are no pre-emptive rights
when this corporation issues or offers securities in exchange for the
outstanding securities of another corporation. Pre-emptive rights apply
only to when this corporation sells, or offers for sale, securities for
cash securities of another corporation. Pre-emptive rights apply only to
when this corporation sells, or offers for sale, securities for cash.
ARTICLE XIII
(THIRTEENTH: FAIR PRICE AND SUPER VOTE REQUIREMENT)
A. Definitions as used in this Article Thirteenth
1. "Affiliate" or "associate" shall have the respective meanings given
to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1,
1989.
<PAGE>29
2. A person shall be a "beneficial owner" of any Voting Stock:
a) which such person or any of its Affiliates or Associates
beneficially owns, directly or indirectly; or
b) which such person or any of its Affiliates or Associates has be
itself or with others (a) the right to acquire (whether such right
is exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or upon
the exercise of conversion rights, exchange rights, warrants or
options, or otherwise, or (b) the right to vote pursuant to any
agreement, arrangement or understanding; or
c) which is beneficially owned, directly or indirectly, by any other
person with which such person or any of its Affiliates or
Associates has an agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of any shares
of Voting Stock.
3. Business Combination" shall include:
a) Any merger or consolidation of the Corporation or any of its
subsidiaries with or into an Interested Shareholder, regardless of
which person is the surviving entity;
b) any sale, lease, exchange, mortgage, pledge, or other disposition
(in one transaction or a series of transactions) from the
Corporation or any of its subsidiaries to an Interested
Shareholder, or from an Interested Shareholder to the Corporation
or any of its subsidiaries, of assets having an aggregate Fair
Market Value of ten percent (10%) or more of the Corporations
total stockholders equity;
c) the issuance, sale or other transfer by the Corporation or any
subsidiary thereof of any securities of the Corporation of any
subsidiary thereof to an Interested Shareholder (other than an
issuance or transfer of securities which is effected on a pro rata
basis to all shareholders of the Corporation):
d) the acquisition by the Corporation of any of its subsidiaries of
any securities of an Interested Shareholder;
e) the adoption of any plan or proposal for the liquidation or
dissolution of the Corporation proposed by or on behalf of an
Interested Shareholder;
f) any reclassification or recapitalization of securities of the
Corporation if the effect, directly or indirectly, of such
transaction is to increase the relative voting poser of an
Interested Shareholder; or
g) any agreement, contract or other arrangement providing for or
resulting in any of the transaction described in this definition
of Business Combination.
4. "Continuing Director" shall mean any member of the Board of Directors
of the Corporation which is unaffiliated with the Interested
Shareholder and was a member of the Board of Directors prior to the
time that the Interested Shareholder became and Interested
Shareholder; any successor of a Continuing Director which is
unaffiliated with the Interested Shareholder and is approved to
succeed a Continuing Director by the Continuing Directors; any member
of the Board of Directors who is appointed to fill a vacancy on the
Board of Directors who is unaffiliated with the Interested
Shareholder and is approved by the Continuing Directors.
5. "Fair Market Value" shall mean:
a) in the case of securities listed on a national securities
exchange or quoted in the National Association of Securities
<PAGE>30
Dealers Automated Quotations System (or any successor thereof),
the highest sales price or bid quotation, as the case may be,
reported for securities of the same class or series traded on the
national securities exchange or in the over-the-counter market
during the 30-day period immediately prior to the date in
question, or if no such report or quotation is available, the fair
market value as determined by the Continuing Directors; and
b) in the case of other securities and of other property or
consideration(other than cash), the Fair Market Value as
determined by the Continuing Directors; provided, however, in the
event of the power and authority of the Continuing Directors
ceases and terminated pursuant to Subdivision F of this Article
THIRTEENTH as a result of there being less than five Continuing
Directors at any time, then (a) for purposes of clause (ii) of the
definition of "Business Combination," any sale, lease, exchange,
mortgage, pledge, or other disposition of assets form the
Corporation or any of its subsidiaries to an Interested
Shareholder or from an Interested Shareholders to the Corporation
or any of its subsidiaries, regardless of the Fair Market Value
thereof, shall constitute a Business Combination, and (b) for
purposes of paragraph 1 of Subdivision D of this Article
Thirteenth, in determining the amount of consideration received or
to be received per share by the Independent Shareholders in a
Business Combination, there shall be excluded all consideration
other than cash and the Fair Market Value of securities listed on
a national securities exchange or quoted in the National
Association of Securities Dealers Automated Quotations System (of
any successor thereof) for which there is a reported sales price
or bid quotation, as the case may be, during the 30-day period
immediately prior to the date in question.
6. "Independent Shareholder" shall mean shareholders of the Corporation
other than the Interested Shareholder engaged on or proposing the
Business Combination.
7. "Interested Shareholder" shall mean: (a) any person (other than the
Corporation or any of its subsidiaries), and (b) the Affiliates and
Associated of such person, who, or which together, are:
a) the beneficial owner, directly or indirectly, of 10% or more of
the then outstanding Voting Stock; or
b) an assignee of or other person who has succeeded to any shares of
the Voting Stock which were at any time within the two-year period
immediately prior to the date in question beneficially owned by an
Interested Shareholder, if such assignment or succession shall
have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of
the Securities Act of 1933.
Notwithstanding the foregoing, no Trust Department, or designated
fiduciary or other trustee of such Trust Department of the Corporation or
a subsidiary of the Corporation, or similar fiduciary capacity of the
Corporation with direct voting control of the outstanding Voting Stock
shall be included or considered as an Interested Shareholder. Further, no
profit sharing, employee stock ownership, employee stock purchase and
savings, employee pension, or other employee benefit plan of the
Corporation or any of its subsidiaries, and no trustee of any such plan in
its capacity as such trustee, shall be included or considered as an
Interested Shareholder.
<PAGE>31
8. A "Person" shall mean an individual, partnership, trust, corporation,
or other entity and includes any two or more of the foregoing acting
in concert.
9. "Voting Stock" shall mean all outstanding common shares of capital
stock of the Corporation.
B. Supermajority Vote to Effect Business Combination. No Business
Combination shall be effected or consummated unless:
1. authorized and approved by Continuing Directors and, if otherwise
required by law to authorize or approve the transaction, the approval
or authorization of shareholders of the Corporation, by the
affirmative vote of holders of shares mandated by the Ohio Revised
Code: or
2. authorized and approved by the affirmative vote of holders of not
less than 75% of the outstanding Voting Stock voting together as a
single class.
The authorization and approval required by this Subdivision B is in
addition to any authorization and approval required by Subdivision C of
this Article THIRTEENTH.
C. Fair Price Required to Effect Business Combination. No Business
Combination shall be effected or consummated unless:
1. all the conditions and requirements set forth in Subdivision D of
this Article THIRTEENTH have been satisfied; or
2. authorized and approved by the Continuing Directors; or
3. authorized and approved by the affirmative vote of holders of not
less than 66 2/3% of the outstanding Voting Stock held be all
Independent Shareholders voting together as a single class.
Any authorization and approval required by this Subdivision C is an
addition to any authorization and approval required by Subdivision B of
this Article THIRTEENTH.
D. Conditions and Requirements to Fair Price. All the following
conditions and requirements must be satisfied in order for clause (1) of
Subdivision C of this Article THIRTEENTH to be applicable.
1. The cash and Fair Market Value of the property, securities or other
consideration to be received by the Independent Shareholders in the
Business Combination per share for each share of capital stock of the
Corporation must not be less than the sum of:
a) the highest per share price (including brokerage commissions,
transfer taxes, soliciting dealer's fees and similar payments)
paid by the Interested Shareholder in acquiring any shares; and
b) the amount, if any, by which interest on the per share price,
calculated at the Treasury Bill rate form time to time in effect,
from the date the Interested Shareholder first became an
Interested Shareholder until the Business Combination has been
consummated, exceeds the per share amount of cash dividends
received by the Independent Shareholders during such period. The
"Treasury Bill Rate" means for each calendar quarter, or part
thereof, the interest rate of the last auction in the preceding
calendar of 91-day United States Treasury Bills expressed as a
bond equivalent yield.
For purposes of this paragraph (1), per share amounts shall be
appropriately adjusted for any recapitalization, reclassification, stock
dividend, stock split, reverse split, or other similar transaction. Any
<PAGE>32
Business Combination which does not result in the Independent Shareholders
receiving consideration for or in respect of their shares of capital stock
of the Corporation shall not be treated as complying with the requirements
of this paragraph (1).
2. The form of the consideration to be received by the Independent
Shareholders owning the Corporation's shares must be the same as was
previously paid by the Interested Shareholder(s); provided, however,
if the Interested Shareholder previously paid for such shares with
different forms of consideration, the form of the consideration to be
received by the Independent Shareholders must be in the form as was
previously paid by the Interested Shareholder in acquiring the
largest number of shares. The provisions of this paragraph (2) are
not intended to diminish the aggregate amount of cash and Fair Market
Value of any other consideration that any holder of the Corporation's
shares is otherwise entitled to receive upon the liquidation or
dissolution of the Corporation, under the terms of any contract with
the Corporation or an Interested Shareholder, or otherwise.
3. From the date the Interested Shareholder first becomes an Interested
Shareholder until the Business Combination has been consummated, the
following requirements must be complied with unless the Continuing
Directors otherwise approve:
a) the Interested Shareholder has not received, directly or
indirectly, the benefit (except proportionately as a shareholder)
of any loan, advance, guaranty, pledge, or other financial
assistance, tax credit or deduction, or other benefit form the
Corporation or any of its subsidiaries:
b) there shall have been no failure to declare and pay in full, when
and as due or scheduled, any dividends required to be paid on any
class or series of the Corporation's shares.
c) there shall have been (a) no reduction in the annual rate of
dividends paid on Common Shares of the Corporation (except as
necessary to reflect any split of such shares), and (b) an
increase in the annual rate of dividends as necessary to reflect
reclassification (including a reverse split), recapitalization or
any similar transaction which has the effect of reducing the
number of outstanding Common Shares; and
d) there shall have been no amendment other modification to any
profit-sharing, employee stock ownership, employee stock purchase
and savings, employee pension or other employee benefit plan of
the Corporation or any of its subsidiaries the effect of which is
to change in any manner the provisions governing the voting of any
shares of capital stock of the Corporation in or covered by such
plan.
4. A proxy or information statement describing the Business Combination
and complying with the requirements of the Securities Exchange Act of
1934, as amended, and the rules and regulations under it (or any
subsequent provisions replacing the Act and the rules and regulations
under it) has been mailed at least 30 days prior to the completion of
the Business Combination to the holders of all outstanding Voting
Stock. If deemed advisable by the Continuing Directors, the proxy
or information statement shall contain a recommendation by the
Continuing Directors as to the advisability (or inadvisability) of
the Business Combination and/or an opinion by an investment banking
firm, selected by the Continuing Directors and retained at the
expense of the Corporation, as to the fairness (or unfairness) of the
Business Combination to the Independent Shareholders.
<PAGE>33
E. Other Applicable Voting Requirements. The affirmative votes or
approvals required to be received from shareholders of the Corporation
under Subdivisions B, C, and H of this Article THIRTEENTH shall apply even
though no vote of a lesser percentage vote, may be required by law, or by
other provisions of these Articles of Incorporation, or otherwise. Any
authorization, approval or other action of the Continuing Directors under
this Article Thirteenth is in addition to any required authorization,
approval or other action of the Board of Directors.
F. Continuing Directors. All actions required or permitted to be taken
by the Continuing Directors shall be taken with or without a meeting by
the vote or written consent of two-thirds of the Continuing Directors,
regardless of whether the Continuing Directors constitute a quorum of the
members of the Board of Directors then in office. In the event that the
number of Continuing Directors is at any time less than five, all power
and authority of the Continuing Directors under this Article THIRTEENTH
shall thereupon cease and terminate, including, without limitation, the
authority of the Continuing Directors to authorize and approve a Business
Combination under Subdivisions B and C of this Article THIRTEENTH and to
approve a successor Continuing Director. Two thirds of the Continuing
Directors shall have the power and duty, consistent with their fiduciary
obligations, to determine for the purpose of the Article THIRTEENTH, on
the basis of information known to them:
1. whether any person is an Interested Shareholder;
2. whether any person in an Affiliate or Associate of another;
3. whether any person has an agreement, arrangement, or understanding
with another or is acting in concert with another; and
4. the Fair Market Value of property, securities or other considerations
(other than cash).
The good faith determination of the Continuing Directors on such good
matters shall be binding and conclusive for purposes of the Article
THIRTEENTH.
G. Effects on Fiduciary Obligations of Interested Shareholders. Nothing
contained in this Article THIRTEENTH shall be construed to relieve any
Interested Shareholder from any fiduciary obligations imposed by law.
H. Repeal. Notwithstanding any other provisions of these Articles of
Incorporation (and notwithstanding the fact that a lesser percentage vote
may be required by law or other provision of these Articles of
Incorporation), the provisions of this Article Thirteenth may not be
repealed, amended, supplemented or otherwise modified, unless:
1. the Continuing Directors (or, if there is no Interested Shareholder,
a majority vote of the whole Board of Directors of the Corporation)
recommend such appeal, amendment, supplement or modification and such
repeal, amendment, supplement or modification is approved by the
affirmative vote of the holders of not less than 66-2/3% of the
outstanding Voting Stock; or
2. such repeal, amendment, supplement or modification is approved by the
affirmative vote of holders of (a) not less than 75% of the
outstanding Voting Stock voting together as a single class, and (b)
not less than 66-2/3% of the outstanding Voting Stock held by all
shareholders other than Interested Shareholders voting together as a
single class.
<PAGE>34
Article XIV
(FOURTEENTH: FURTHER CONSIDERATION TO EFFECT BUSINESS COMBINATION)
No Business Combination (as defined in Article Thirteenth) shall be
effected or consummated unless, in addition to the consideration set
forth in Subdivisions B, C, D and E of Article THIRTEENTH, the Board of
Directors of the Corporation, including the Continuing Directors shall
consider all of the following factors and any other factors which it
(they) deem relevant:
1. the social and economic effects of the transaction on the Corporation
and its subsidiaries, employees depositors, loan and other customers,
creditors and other elements of the communities in which the
Corporation and its subsidiaries operate or are located;
2. the business and financial conditions and earnings prospects of the
Interested Shareholder, including, but not limited to, debt services
another existing or likely financial obligations of the Interested
Shareholder, and the possible effect on other elements of the
communities in which the Corporation aud its subsidiaries operate or
are located, and
3. the competence, experience and integrity of the Interested
Shareholder and his (its) or their management.
<PAGE>35
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the nine months ended September 30, 1999)
S - K Reference Number (3)(ii)
LNB Bancorp, Inc.
Code of Regulations
<PAGE>36
CODE OF REGULATIONS
OF
LNB BANCORP, INC.
ARTICLE I
Offices
Section 1. Principal Office. The principal office of the corporation shall
be at such place in the City of Lorain, Ohio, as may be designated from
time to time by the Board of Directors.
Section 2. Other Offices. The corporation shall also have offices at such
other place without, as well as within, the State of Ohio, as the Board of
Directors may from time to time determine.
ARTICLE II
Meeting of Shareholders
Section 1. Annual Meeting. The annual meeting of the shareholders of this
corporation for the purpose of fixing or changing the number of directors
of the corporation, electing directors and transacting such other business
as may come before the meeting, shall be held on the 3rd Tuesday in April
of each year, but if a legal holiday, then on the next business day
following, or at such time as may be fixed by the Board of Directors.
Section 2. Special Meetings. Special meetings of the shareholders may be
called at any time by the Chairman of the Board of Directors, President,
or a Vice President, or a majority of the Board of Directors acting with
or without a meeting, or the holder or holders of one-fourth of all shares
outstanding and entitled to vote thereat.
Section 3. Place of Meetings. Meetings of shareholders shall be held at
the main office of the corporation unless the Board of Directors decides
that a meeting shall be held at some other place within or without the
State of Ohio and causes the notice thereof to so state.
Section 4. Notice of Meetings. Unless waived, a written, printed or
typewritten notice of each annual or special meeting stating the day, hour
and place and purpose or purposes thereof shall be served upon or mailed
to each shareholder of record (a) as of the day next preceding the day on
which notice is given or (b) if a record date therefore is duly fixed, or
record as of said date. Such notice shall he given not more than sixty
(60) days, nor less than ten (10) days before any such meeting. If mailed,
it shall be directed to a shareholder at his address as the name appears
upon the records of the corporation.
All notices with respect to any shares of record in the names of two
or more persons may be given to whichever of such persons is named on the
hooks of the corporation and notice so given shall be effective as to all
the holders of record of such shares.
Every person who by operation of law, transfer, or otherwise shall
become entitled to any share or right or interest therein shall be bound
by every notice in respect of such share which, prior to his name and
address being entered upon the books of the corporation as the registered
holder of such share, shall have been given to the person in whose name
such share appeared of record.
Section 5. Waiver of Notice. Any shareholder, either before or after any
meeting, may waive any notice required to be given by law or under these
Regulations; and whenever all of the shareholders entitled to vote shall
<PAGE>37
meet in person or by proxy and consent to holding a meeting, it shall be
valid for all purposes without call or notice, and at such meeting any
action may be taken.
Section 6. Quorum. The shareholders present in person or by proxy at any
meeting for the determination of the number of directors, or the election
of directors, or for the consideration and action upon reports, required
to be laid before such meeting, shall constitute a quorum.
At any meeting called for any other purpose, the holders of shares
entitling them to exercise a majority of the voting power of the
corporation, present in person or represented by proxy, shall constitute a
quorum, except when a greater proportion is required by law, the Articles
of Incorporation or this Code of Regulations.
At any meeting at which a quorum is present, all questions and
business which shall come before the meeting shall be determined by the
vote of the holders of a majority of such voting shares as are represented
in person or by proxy, except when a greater proportion is required by law
or the Articles of Incorporation.
At any meeting, whether a quorum is present or not, the holders of a
majority of the voting shares represented by shareholders present in
person or by proxy may adjourn from time to time and from place to place
without notice other than by announcement at the meeting. At any such
adjourned meeting at which a quorum is present, any business may be
transacted which might be transacted at the meeting as originally notified
or held.
Section 7. Proxies. Any shareholder of record who is entitled to attend a
shareholders' meeting, or to vote thereat or to assent or give consents in
writing, shall be entitled to be represented at such meetings or to vote
thereat or to assent or give consents in writing, as the case may be, or
to exercise any other of his rights, by proxy or proxies appointed by a
writing signed by such shareholder, which need not be sealed, witnessed or
acknowledged.
A telegram, cablegram, wireless message or photogram appearing to
have been transmitted by a shareholder, or a photograph, photostatic or
equivalent reproduction of a writing appointing a proxy or proxies shall
be a sufficient writing.
No appointment of a proxy shall be valid after the expiration of
eleven (11) months after it is made, unless the writing specifies the date
on which it is to expire or the length of time it is to continue in force.
Unless the writing appointing a proxy or proxies otherwise provides:
1. Each and every proxy shall have the power of substitution, and when
three (3) or more persons are appointed, a majority of them or
their respective substitutes may appoint a substitute or
substitutes to act for all;
2. If more than one proxy is appointed, then (a) with respect to
voting or giving consents at a shareholders' meeting, a majority of
such proxies as attend the meeting, or if only one attends then
that one may exercise all the voting and consenting authority
thereat; and if an even number attend and a majority do not agree
on any particular issue, each proxy so attending shall be entitled
to exercise such authority with respect to an equal number of
shares; (b) with respect to exercising any other authority, a
majority may act for all;
3. A writing appointing a proxy shall not be revoked by the death or
incapacity of the maker unless before the vote is taken or the
authority granted is otherwise exercised, written notice of such
death or incapacity is given to the corporation by the executor or
the administrator of the estate of such maker or by the fiduciary
<PAGE>38
having control of the shares in respect of which the proxy was appointed;
4. The presence of a shareholder at a meeting shall not operate to
revoke a writing appointing a proxy. A shareholder, without
affecting any vote previously taken, may revoke such writing not
otherwise revoked by giving notice to the corporation in writing or
in open meeting.
Section 8. Voting. At any meeting of shareholders, each shareholder of
the corporation shall, except as otherwise provided by law or by the
Articles of Incorporation or by these Regulations be entitled to one vote
in person or by proxy for each share of the corporation registered in his
name on the books of the corporation (1) on the date fixed pursuant to
subparagraph (f) of Section 2 of Article IV of these Regulations as to the
record date for the determination of shareholders entitled to vote at such
meeting, notwithstanding the prior or subsequent sale, or other disposal
of such share or shares or transfer of the same on the books of the
corporation on or after the date so fixed, or (2) if no such record date
shall have been fixed, then at the time of such meeting.
Section 9. Financial Reports. At the annual meeting of shareholders, or
the meeting held in lieu thereof, there shall be laid before the
shareholders a financial statement consisting of: (1) a balance sheet
containing a summary of the assets, liabilities, stated capital, and
surplus (showing separately any capital surplus arising from unrealized
appreciation of assets, other capital surplus, and earned surplus) of the
corporation as of a date not more than four (4) months before such
meeting; if such meeting is an adjourned meeting, said balance sheet may
be as of a date riot more than four (4) months before the date of the
meeting as originally convened; and (2) a statement of profit and loss and
surplus, including a summary of profits, dividends paid, and other changes
in the surplus accounts of the corporation for the period commencing with
the date marking the end of the period for which the last preceding
statement of profit and loss under this section was made and ending with
the date of said balance sheet.
An opinion signed by the President or a Vice President or the
Treasurer or an Assistant Treasurer, or by a public accountant or firm of
public accountants, shall be appended to such financial statement, stating
that the financial statement presents fairly the corporation's financial
position and the results of its operations in conformity with generally
accepted accounting principles applied on a basis consistent with that of
the preceding period, or such other opinion as is in accordance with sound
accounting practice.
Section 10. Action Without Meeting. Any action which may be authorized or
taken at any meeting of shareholders may be authorized or taken without a
meeting in a writing or writings signed by all of the holders of shares
who would be entitled to notice of a meeting of the shareholders held for
such purpose. Such writing or writings shall be filed with or entered upon
the records of the corporation.
ARTICLE III
Directors
Section 1. Number of Directors. The election of directors shall take place
at the Annual Meeting of Shareholders, or at a special meeting called for
the purpose, and shall be by ballot. Directors shall be elected for one
term and shall continue office until their successors are elected and
qualified. The number of members of the Board of Directors constituting
<PAGE>39
the entire Board shall be determined by a two-thirds majority vote of the
Continuing Directors (or, if there is no Interested Shareholder, a
majority vote of the whole Board of Directors of the Corporation), and
such exact numbers hall be fifteen (15) until otherwise so determined,
provided, however, that in no event shall a change be made to the number
of directors elected greater than one position in any one year.
Section 2. Election and Term of Directors. The directors shall be divided
into three classes: Class I, Class II, and Class III. Such classes shall
be as nearly equal in number as possible. The term of office of the
initial Class I directors shall expire at the Annual Meeting of
Shareholders in 1984, the term of office of the initial Class II directors
shall expire at the Annual Meeting of Shareholders in 1985, and the term
of office of the initial Class III directors shall expire at the Annual
Meeting of Shareholders in 1986, or thereafter in each case when their
respective successors are elected and have qualified. At each annual
election held after classification of directors, the directors chosen to
succeed those whose terms then expire shall be identified as being of the
same class as the directors they succeed and shall be elected for a term
expiring at the third succeeding annual meeting of thereafter when their
respective successors in each case are elected and have qualified. If the
number of directors is changed, any increase or decrease in directors
shall be apportioned among the classes so as to maintain all classes as
nearly equal in number as possible, and any additional director elected to
any class shall hold office for a term which shall coincide with the terms
of such class. Upon the effectiveness of this provision, the Board of
Directors is authorized to take such steps as are necessary to implement
these provisions.
Section 3. Vacancies. Vacancies in the Board of Directors may be filled by
a majority vote of the remaining Directors. In the event the remaining
Directors see fit to fill such a vacancy, the individual so elected shall
serve the unexpired term of the vacated Director whom said individual is
replacing, or until such time as a successor is elected and qualified.
Section 4. Nomination of Directors. Nomination for election to the Board
of Directors may be made by the Board of Directors or by any stockholder
of any outstanding class of capital stock of the Bank entitled to vote for
the election of Directors. Nominations, other than those made by or on
behalf of the existing management of the Bank, shall be made in writing
and shall be delivered or mailed to the President of the Bank, not less
than fourteen (14) days nor more than fifty (50) days prior to any meeting
of stockholders 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 nominations shall be mailed or delivered to the
President of the Bank not later than the close of business on the 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) principal occupation of each proposed nominee;
c) the total number of shares of capital stock of the Bank that will be
voted for each proposed nominee;
d) the name and resident address of the notifying shareholders; and
e) the number of shares of capital stock of the bank 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 tellers may disregard all votes cast for each such nominee.
<PAGE>40
Section 5. Removal of Directors. A Director shall be removed from the
Board of Directors only by the affirmative vote of the holders of 75% of
the outstanding voting stock qualified to vote at a meeting for the
election of Directors.
Section 6. Amendments. Amendments to any provision of Article III of these
Regulations shall require the affirmative vote of the holders of 75% of
the outstanding voting stock of the Corporation, unless such amendments
are approved by a two-thirds majority of the Continuing Directors (or, if
there is no Interested Shareholder, such amendment is approved by a
majority vote of the whole Board of Directors), then such amendment
procedure shall meet the requirements of Article X, Amendments.
For purposes of this Article 111, the terms "Continuing Directors(s)"
and "Interested Shareholder(s)" are defined in Article XIII of the
Articles of Incorporation.
ARTICLE IV
Powers, Meeting and Compensation of Directors
Section 1. Director's Qualifying Shares. The Board of Directors of The
Lorain National Bank may hold as directors' qualifying shares a minimum of
One Thousand Dollars ($1,000.00) of value (market value) of the shares of
the registered bank holding company, which is the parent corporation of
the wholly owned subsidiary bank, and in so doing, act as directors duly
qualified to serve as directors of the subsidiary bank.
Section 2. Meetings of the Board. A meetings of the Board of Directors
shall be held immediately following the adjournment of each shareholders'
meeting at which directors are elected, and notice of such meeting need
not be given.
The Board of Directors may, by by-laws or resolution, provide for
other meetings of the Board.
Special meetings of the Board of Directors may be held at any time
upon call of the Chairman of the Board of Directors, President, a Vice
President, Treasurer, Secretary or any two members of the Board.
Notice of any special meeting of the Board of Directors shall he
mailed to each director, addressed to him at his residence or usual place
of business, at least two (2) days before the day on which the meeting is
to be held. If the purpose of the meeting, or other exigent events
requires the Board of Directors to meet in a more timely manner, in the
discretion of the individual(s) calling the meeting, such notice of the
meeting may be given by telephone or in person as soon as practicable
before the meeting, up to the start of such meeting called. If less than
two (2) days notice is given, the purpose of the meeting must be specified
in the notice. Every notice shall state the time and place of the meeting.
Notice of any meeting of the hoard need not he given to any director,
however, if waived by him in writing or by telegraph, cable, radio,
wireless, or telephonic communication whether before or after such meeting
is held, or if he shall be present at such meeting; and any meeting of the
Board shall be a legal meeting without any notice thereof having been
given, if all the directors shall be present thereat. Meetings of the
Board shall be held at the office of the Corporation in the City of
Lorain, Ohio, or at such other place, within or without the State of Ohio,
as the Board may determine from time to time and as may be specified in
the notice thereof. Meetings of the Board of Directors may also be held by
the utilization of simultaneous telephonic communications linking all
directors present at such meetings, and all such business conducted via
such telephonic communication shall be considered legally enforceable by
the Corporation.
<PAGE>41
Section 3. Quorum. A majority of the Board of Directors shall constitute a
quorum for the transaction of business, provided that whenever less than a
quorum is present at the time and place appointed for any meeting of the
Board, a majority of those present may adjourn the meeting from time to
time, without notice other than by announcement at the meeting, until a
quorum shall be present.
Section 4. Action Without Meeting. Any action which may be authorized or
taken without a meeting in a writing or writings signed by all the
directors, which writing or writings shall be filed with or entered upon
the records of the corporation.
Section 5. Compensation. The directors, as such, shall not receive any
salary for their services, but by resolution of the Board, a fixed sum and
expenses of attendance, if any, may be allowed for attendance at each
regular or special meeting of the Board; provided that nothing herein
contained shall be construed to preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
Members of the executive committee or of any standing or special committee
may by resolution of the Board be allowed such compensation for their
services as the Board may deem reasonable, and additional compensation may
be allowed to directors for special services rendered.
Section 6. By-Laws. For the government of its actions, the Board of
Directors may adopt by-laws consistent with the Articles of Incorporation
and these Regulations.
Section 7. Amendment of Article IV. Amendment to any provision of Article
IV of these Regulations shall require the affirmative vote of the holders
of 75% of the outstanding voting stock of the Corporation, unless such
amendment is approved by a two-thirds of the Continuing Directors (or, if
there is no Interested Shareholder, such amendment is approved by a
majority vote of the whole Board of the Corporation), then such amendment
procedure shall meet the requirements of Article X, Amendments.
For purposes of this Article IV, the terms "Continuing Directors(s)"
and "Interested Shareholders(s)" are (refined in Article XIII of the
Articles of Incorporation.
ARTICLE V
Committees
Section 1. Committees. The Board of Directors may by resolution provide
for such standing or special committees as it deems desirable, and
discontinue the same at pleasure. Each such committee shall have such
power and perform such duties, not inconsistent with law, as may be
delegated to it by the Board of Directors. Vacancies in such committees
shall he filled by the Board of Directors or as it may provide.
ARTICLE VI
Officers
Section 1. General Provisions. The Board of Directors shall elect a
President, such number of Vice Presidents as the Board may from time to
time determine, a Secretary, and Treasurer, and, in its discretion, a
Chairman of the Board of Directors and a Vice Chairman of the Board of
Directors. The President or the Chairman of the Board of Directors shall
be the Chief Executive Officer of the Corporation, as the Board of
Directors, from time to time, determines. The Board of Directors may from
time to time create such other officers, subordinate officers and
<PAGE>42
assistant officers as may determine. The President and the Chairman of the
Board shall be, but the other officers need not be, chosen from among the
members of the Board of Directors.
Section 2. Term of Office. The officers of the corporation shall hold
office at the pleasure of the Board of Directors and, unless sooner
removed by the Board of Directors, until the reorganization meeting of the
Board of Directors following the date of their election and until their
successors are chosen and qualified.
The Board of Directors may remove any officer at any time, with or
without cause, by a majority vote.
A vacancy in any office, however created, shall be filled by the
Board of Directors.
ARTICLE VII
Duties of Officers
Section 1. Chairman of the Board. The Chairman of the Board, if one be
elected, shall preside at all meetings of the shareholders and Board of
Directors and shall have such other powers and duties, including those of
the Chief Executive officer of the corporation, as may be prescribed by
the Board of Directors or prescribed by Ohio's General Corporate Act.
Section 2. Vice Chairman of the Board. The Vice Chairman of the Board, if
one be elected, shall preside at all meetings of the shareholders and
Board of Directors, in the absence of the Chairman of the Board, and shall
have such other powers and duties, as may be prescribed by the Board of
Directors or prescribed by Ohio's General Corporate Act.
Section 3. President. The President shall have the authority to sign all
certificates for shares and all deeds, mortgages, bonds, contracts, notes
and other instruments requiring his signature; and shall have such other
powers and duties, including those of the Chief Executive Officer of the
corporation, as may be prescribed by the Board of Directors or prescribed
by Ohio's General Corporate Act. In the absence of, or if a Chairman of
the Board shall not have been elected or a Vice Chairman of the Board
shall not have been elected, the President shall preside at the meetings
of the shareholders and the meetings of the Board of Directors.
Section 4. Vice Presidents. The Vice Presidents shall perform such duties
as are conferred upon them by these regulations or as may from time to
time be assigned to them by the Board of Directors, the Chairman of the
Board, or the President. The authority of the Vice Presidents to sign in
the name of the corporation all certificates for shares and authorized
deeds, mortgages, bonds, contracts, notes and other instruments, shall be
coordinated, by appropriate resolution by the Board of Directors, with
like authority of the President. Any one or more of the Vice Presidents
may be designated as a "Executive Vice President" or Senior Vice
President."
Section 5. Secretary. The Secretary shall keep minutes of all the
proceedings of the shareholders and Board of Directors, and shall make
proper record of the same, which shall be attested by him, sign all
certificates for shares, and all deeds, mortgages, bonds, contracts,
notes, and other instruments executed by the corporation requiring his
signature; give notice of meetings of shareholders and directors; produce
upon request at each meeting of shareholders for the election of directors
a certified list of shareholders arranged in alphabetical order; keep such
books as may be required by the Board of Directors and file all reports to
<PAGE>43
States, to the Federal Government, and to foreign countries; and perform
such other and further duties as may from time to time be assigned to him
by the Board of Directors, the Chairman of the Board, or by the President.
Section 6. Treasurer. The Treasurer shall have general supervision of all
finances; he shall receive and have in charge all money, bills, notes,
deeds, leases, mortgages and similar property belonging to the
corporation, and shall do with the same as may from time to time be
required by the Board of Directors. He shall cause to be kept adequate and
correct accounts of the business transactions of the corporation,
including accounts of its assets, liabilities, receipts, disbursements,
gains, losses, stated capital, and shares, together with such other
accounts as may be required, and, upon the expiration of his term of
office, shall turn over to his successor or the Board of Directors all
property, books, papers and money of the corporation in his hands; and he
shall perform such other duties as from time to time may be assigned to
him by the Board of Directors.
Section 7. Assistant and Subordinate Officers. The Board of Directors may
appoint such assistant and subordinate officers as it may deem desirable.
Each such officer shall hold office during the pleasure of the Board of
Directors, and perform such duties as the Board of Directors may
prescribe.
Section 8. Director Emeritus-Consultant. An individual who was formerly a
Director of this corporation may be appointed to the position of Director
Emeritus-Consultant, after he has retired from being an active member of
the Board of Directors. The Board of Directors may appoint a retired
Director of LNB Bancorp, Inc., Director Emeritus-Consultant, as it may
deem desirable. Each such Director Emeritus-Consultant shall hold office
during the pleasure of the Board of Directors and perform such duties as
the Board of Directors may prescribe. This position is further qualified
as follows:
a) A Director Emeritus-Consultant may attend meetings of the Board of
Directors.
b) A Director Emeritus-Consultant will be paid at the same rate a
Director is paid, for those meetings he attends.
c) A Director Emeritus-Consultant will have no vote at said Board
meetings.
Section 9. Duties of Officers May Be Delegated. In the absence of any
officer of the corporation, or for any other reason the Board of Directors
may deem sufficient, the Board of Directors may delegate, for the time
being, the powers or duties, or any of them, of such officer to any other
officer, or to any other Director.
ARTICLE VIII
Certificates for Shares
Section 1. Form and Execution. Certificates for share shall be issued to
each shareholder in such form as shall be approved by the Board of
Directors. Such certificates shall be signed by the Chairman of the Board
of Directors or the President or a Vice President or by the Secretary or
an Assistant Secretary or the Treasurer or an Assistant Treasurer of the
corporation, which certificates shall certify the number and class of
shares held by the shareholder in the corporation, but no certificates for
shares shall be delivered until such shares are fully paid. When such a
certificate is countersigned by an incorporated transfer agent or
registrar, the signature of any said officers of the corporation may be
<PAGE>44
facsimile, engraved, stamped or printed. Although any officer of the
corporation whose manual or facsimile signature is affixed to a shares
certificate shall cease to be such officer before the certificate
delivered, such certificate, nevertheless, shall be effective in all
respects when delivered.
Such certificates for shares shall be transferable in person or by
attorney, but, except as hereinafter provided in the case of lost,
mutilated or destroyed certificates, no transfer of shares shall be
entered upon the records of the corporation until the previous
certificates, if any, given for the same shall have been surrendered and
canceled.
Section 2. Lost, Mutilated or Destroyed Certificates. If any certificate
for shares is lost, mutilated or destroyed, the Board of Directors may
authorize the issuance of a new certificate in place thereof upon such
terms and conditions as it may deem advisable. The Board of Directors in
its discretion may refuse to issue such new certificates until the
corporation has been identified by a final order or decree of a court of
competent Jurisdiction.
Section 3. Registered Shareholders. A person in whose name shares are of
record on the books of the corporation shall conclusively be deemed the
unqualified owner thereof for all purposes and to have capacity to
exercise all rights of ownership. Neither the corporation nor any transfer
agent of the corporation shall be bound to recognize any equitable
interest in or claim to such shares on the part of any other person,
whether disclosed upon such certificate or otherwise, nor shall they be
obliged to see to the execution of any trust or obligation.
ARTICLE IX
Fiscal Year
The fiscal year of the corporation shall end on the 31st day of
December in each year, or on such other day as may be fixed from time to
time by the Board of Directors.
ARTICLE X
Amendments
These Regulations may be amended or repealed at any meeting of
shareholders called for that purpose by the affirmative vote of the
holders or record of shares entitled them to exercise a majority of the
voting power on such proposal or, without a meeting, by the written
consent of the holders of record of shares entitling them to exercise a
Majority of the voting power on such proposal.
<PAGE>45
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the nine months ended September 30, 1999)
S - K Reference Number (13)
Third Quarter Report to Shareholders of
LNB Bancorp, Inc. (dated September 30, 1999)
EDGAR Version
DESCRIPTION:
Three sided pamphlet:
Outside cover: tan with white stripe
Third Quarter Report
LNB Bancorp, Inc. Logo on right hand side
LNB Bancorp, Inc.
September 30, 1999
Inside contains:
Message to shareholders,
Unaudited EDGAR version Consolidated Balance Sheets for period ending
September 30, 1999 and September 30, 1998, respectively,
Unaudited EDGAR version Consolidated Statements of Income for the Nine
Months ended September 30, 1999 and September 30, 1998, respectively,
Investment and Trust Services Division
Banking Offices and ATMS
<PAGE>46
Message to Our Shareholders
It's a pleasure to report that we are well on our way to another
successful year of operations at LNB Bancorp, Inc. and its wholly owned
subsidiary, The Lorain National Bank. As of September 30, 1999, we have
achieved significant growth in earnings, dividends, assets, loans,
deposits and shareholders' equity.
We are pleased to announce that earnings increased 10% in the first nine
months ended September 30, 1999 compared with the same period one year
ago. Earnings for the first nine months of 1999 reached $5,787,000, up
from $5,258,000 during the first nine months of 1998. Earnings for the
third quarter of 1999 were strong, at $1,991,000 compared with $1,826,000
for the third quarter of 1998.
Basic earnings per share for the first nine months of 1999 reached $1.40,
a 10% increase from the $1.27 per basic share reported for the same period
in 1998. Earnings thus far in 1999 were higher than a year ago because of
higher net interest income and other noninterest income, offset in part by
higher loan loss provision and operating expenses. Increases in net
interest income for the nine months were fueled by strong loan growth.
Cash dividends declared per share for the first nine months of 1999
increased 10% compared with the same period last year. The year-to-
date cash dividends declared per share in 1999 increased by $.06 to $.67
per share, up from $.61 per share in 1998.
Asset growth improved substantially. Total assets climbed 12% to $587.5
million at September 30, 1999, up $63.9 million from September 30, 1998.
Net loans grew by $52.3 million from one year ago to $409.4 million at
September 30, 1999, for a 14% increase. Consumer and commercial loan
growth accounted for 50% and 39% of total loan growth, respectively,
while mortgage loans accounted for 11% of total loan growth during the 12
months ended September 30, 1999.
Total deposits climbed 10% to $475.1 million, up $41.8 million from one
year ago. Increases in demand, savings and certificates of deposit
accounted for the deposit increase. Federal Home Loan Bank (FHLB)
advances increased to $34.3 million at September 30, 1999, up $32.3
million from one year ago. Of this increase, $20.0 million and $2.3
million in FHLB advances were used to fund a portion of the growth in
consumer and commercial loans, respectively. The remainder of the FHLB
advances are designated for potential Y2K liquidity purposes.
Total shareholders' equity increased by $2.3 million during the 12 months
ended September 30, 1999, for a 5.% increase. Total shareholders' equity
amounted to $50.5 million or $12.26 per share at September 30, 1999
compared with $48.2 million or $11.55 per share at September 30, 1998.
The annualized return on average shareholders' equity rose to 15.58% for
the nine months ended September 30, 1999, from 15.09 for the same period
one year ago.
We appreciate and thank you for your continuing support and look forward
to addressing you after the completion of another year of successful
operations.
<PAGE>47
Sincerely,
/s/ James F. Kidd /s/ Stanley G. Pijor
James F. Kidd Stanley G. Pijor
President and Chairman of the Board
Chief Executive Officer
NET INCOME millions of dollars
(A Net Income graph follows in printed version with net income on the y-
axis and years 1995 through 1999 on the x-axis. The graph is a vertical
bar graph. The co-ordinates, by year, which are presented in the table
below are plotted on the previously described grid.)
BASIC EARNINGS PER SHARE dollars*
(A Basic Earnings Per Share graph follows in printed version with
earnings per share on the y-axis and years 1995 through 1999 on the
x-axis. The graph is a vertical bar graph. The co-ordinates, by year,
which are presented in the table below are plotted on the previously
described grid.)
DIVIDENDS PER SHARE dollars*
(A Dividends Per Share graph follows in printed version with dividends per
share on the y-axis and years 1995 through 1999 on the x-axis. The graph
is a vertical bar graph. The co-ordinates, by year, which are presented
in the table below are plotted on the previously described grid.)
Basic Earnings Dividends
Net Income Per Share Per Share
Year Millions of Dollars Dollars* Dollars*
1999 $5,782 $ 1.40 $ .67
1998 $5,258 $ 1.27 $ .61
1997 $4,780 $ 1.14 $ .49
1996 $4,280 $ 1.02 $ .43
1995 $3,574 $ 0.86 $ .37
*Adjusted for stock dividends and splits
<PAGE>48
Consolidated Balance Sheets
September 30 1999 1998
- --------------------------------------------------------------------------
ASSETS:
Cash and Due from Banks $ 19,937,000 $ 22,054,000
Federal Funds Sold and
Short-Term Investments 12,926,000 3,936,000
Federal Home Loan Bank and Federal Reserve
Bank Stock, at Cost 2,670,000 2,155,000
Securities Held to Maturity, at Cost 44,415,000 68,848,000
Securities Available for Sale, at Fair Value 75,756,000 46,914,000
Loans 413,544,000 361,799,000
Reserve for Possible Loan Losses (4,108,000) (4,675,000)
- --------------------------------------------------------------------------
NET LOANS 409,436,000 357,124,000
- --------------------------------------------------------------------------
Premises, Equipment and Intangible
Assets, (net) 15,146,000 15,562,000
Accrued Interest Receivable and
Other Assets 7,250,000 7,018,000
- --------------------------------------------------------------------------
TOTAL ASSETS $587,536,000 $523,611,000
- --------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Noninterest-Bearing Deposits $ 79,861,000 $ 74,543,000
Interest-Bearing Deposits 395,280,000 358,765,000
- --------------------------------------------------------------------------
TOTAL DEPOSITS 475,141,000 433,308,000
- --------------------------------------------------------------------------
Securities Sold under Repurchase Agreements
and Other Short-Term Borrowings 22,710,000 36,222,000
Federal Home Loan Bank Advances 34,345,000 2,045,000
Accrued Interest, Taxes, Expenses and
Other Liabilities 4,809,000 3,868,000
- --------------------------------------------------------------------------
TOTAL LIABILITIES 537,005,000 475,443,000
- --------------------------------------------------------------------------
Common Stock 4,223,000 4,222,000
Additional Capital 22,604,000 22,602,000
Retained Earnings 27,233,000 23,681,000
Accumulated Other Comprehensive Income(Loss) (629,000) 563,000
Treasury Stock, at Cost (2,900,000) (2,900,000)
- --------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 50,531,000 48,168,000
- --------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $587,536,000 $523,611,000
- --------------------------------------------------------------------------
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
TOTAL ASSETS millions of dollars
(A Total Assets graph follows in printed version with earnings per share
on the y-axis and years 1995 through 1999 on the x-axis. The graph is a
vertical bar graph. The co-ordinates, by year, which are presented in the
table below are plotted on the previously described grid.)
<PAGE>49
TOTAL SHAREHOLDERS' EQUITY millions of dollars
(A Total Shareholders' Equity graph follows in printed version with
dividends per share on the y-axis and years 1995 through 1999 on the
x-axis. The graph is a vertical bar graph. The co-ordinates, by year,
which are presented in the table below are plotted on the previously
described grid.)
Total Shareholders
Total Assets Equity
Year Millions of Dollars Millions of Dollars
1999 $587.5 $ 50.5
1998 $523.6 $ 48.2
1997 $496.8 $ 44.4
1996 $433.6 $ 43.3
1995 $413.5 $ 40.0
<PAGE>50
Consolidated Statements of Income
Nine Months Ended September 30, 1999 1998
- -------------------------------------------------------------------------
INTEREST INCOME:
Interest and Fees on Loans $25,189,000 $22,752,000
Interest and Dividends on Securities 5,331,000 5,468,000
Interest on Federal Funds Sold and
Short-term Investments 250,000 113,000
- --------------------------------------------------------------------------
TOTAL INTEREST INCOME 30,770,000 28,333,000
- --------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits 9,453,000 9,448,000
Interest on Securities Sold Under Repurchase
Agreements and Other Short-term Borrowings 870,000 882,000
Interest on Federal Home Loan Bank Advances 1,067,000 98,000
- --------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 11,390,000 10,428,000
- --------------------------------------------------------------------------
NET INTEREST INCOME 19,380,000 17,905,000
Provision for Loan Losses 1,250,000 1,263,000
- --------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 18,130,000 16,642,000
- --------------------------------------------------------------------------
OTHER INCOME:
Investment and Trust Services
Division Income 1,587,000 1,358,000
Fees and Service Charges 4,246,000 3,704,000
Gains From Sales of Loans,
Securities, and Buildings 158,000 -0-
Other Operating Income 72,000 49,000
- --------------------------------------------------------------------------
TOTAL OTHER INCOME 6,063,000 5,111,000
- --------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and Employee Benefits 7,481,000 6,576,000
Net Occupancy Expense of Premises 1,136,000 1,005,000
Furniture and Equipment Expenses 1,627,000 1,617,000
Supplies and Postage 727,000 790,000
Ohio Franchise Tax 414,000 353,000
Other Operating Expenses 4,020,000 3,464,000
- --------------------------------------------------------------------------
TOTAL OTHER EXPENSES 15,405,000 13,805,000
- --------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 8,788,000 7,948,000
- --------------------------------------------------------------------------
Income Taxes 3,001,000 2,690,000
- --------------------------------------------------------------------------
NET INCOME $5,787,000 $5,258,000
- --------------------------------------------------------------------------
- --------------------------------------------------------------------------
PER SHARE DATA:
- --------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $ 1.40 $ 1.27
DILUTED EARNINGS PER SHARE $ 1.40 $ 1.27
- --------------------------------------------------------------------------
DIVIDENDS DECLARED PER SHARE $ .67 $ .61
==========================================================================
<PAGE>51
Logos FDIC Insured, Federal Home Loan Bank System, Equal Housing Lender
<PAGE>52
Investment and Trust Services Division
The Investment and Trust Services Division of Lorain National Bank
continues rapid growth with assets under management climbing to $369.2
million as of September 30, 1999. Up $83.7 million from one year ago,
this represents a 29% increase. The Division's fee income increased 17%
for the first nine months of 1999 to $1,587,000. Lorain National Bank's
Investment and Trust Services Division serves more than 1,000 individual
and corporate clients.
The Investment and Trust Services Division offers a comprehensive range of
high quality products and investment services designed to satisfy a wide
range of customer needs. The major areas of services and products include
investment agencies, employee benefit plans, personal trust services and
non-profit agency accounts. Personal attention and prompt response are
the hallmarks of the service provided to our clients.
As one of the areas largest providers of investment management services
and trust services, the Division is able to serve the investment needs of
a variety of clients. With the addition of an investment and trust office
at the Ely Square branch office, we now have the following two convenient
locations to serve you.
Main Office Ely Square Office
457 Broadway 124 Middle Avenue
Lorain, Ohio 44052 Elyria, Ohio 44035
Telephone:(440) 244-7226 Telephone:(440) 244-7133 or 323-2374
We invite you to meet our investment and trust professionals.
Collectively, they have more than 130 years of experience. They would be
pleased to work with you, your attorney, your accountant, and/or other
business consultants to develop the optimum plan for the management of
your assets. If you would like to arrange an appointment with one of our
officers to discuss your specific needs, you may contact any of the
officers listed below:
Emma N. Mason Gerald S. Falcon Neal Conger
Senior Vice President and Vice President and Vice President and
Senior Trust Officer Trust Operations Officer Trust Officer
(440)244-7226 (440)244-7263 (440)244-7350
Edward J. Baker Brian D. Morgan
Vice President and Vice President and
Employee Benefits Officer Trust Officer
(440)244-7262 (440)244-7369
We appreciate and thank our existing clients for their continuing support
and look forward to establishing and serving new client relationships.
Sincerely,
/s/Emma N. Mason
Emma N. Mason
Senior Vice President and
Senior Trust Officer
ASSETS UNDER MANAGEMENT million of dollars
(An Assets Under Management graph follows in printed version with assets
on the y-axis and years 1995 through 1999 on the x-axis. The graph is a
<PAGE>53
vertical bar graph. The co-ordinates, by year, which are presented in the
table below are plotted on the previously described grid.)
NET INCOME thousands of dollars
(A Net Income graph follows in printed version with income on the y-axis
and years 1995 through 1999 on the x-axis. The graph is a vertical bar
graph. The co-ordinates, by year, which are presented in the table below
are plotted on the previously described grid.)
Assets Under
Management Net Income
Year Millions of Dollars Thousands of Dollars
1999 $369.2 $1,587
1998 $285.5 $1,358
1997 $253.3 $ 955
1996 $185.1 $ 801
1995 $189.0 $ 756
<PAGE>54
Back Cover:
White background with tan along top of page and black lettering
Four column format
Banking Offices and ATMS
ATM service available wherever you see this symbol **
Lorain Banking Offices Elyria Banking Offices
Main Office **Ely Square Office
457 Broadway 124 Middle Avenue
Lorain, Ohio 44052 Elyria, Ohio 44035
(440) 244-7185 (440) 323-4621
**Sixth Street Drive-In Office **Cleveland Street Office
200 Sixth Street 801 Cleveland Street
Lorain, Ohio 44052 Elyria, Ohio 44035
(440) 244-7242 (440) 365-8397
**Cooper-Foster Park **Lake Avenue Office
Road Office 42935 North Ridge Road
1920 Cooper-Foster Park Road Elyria Township, Ohio 44035
Lorain, Ohio 44053 (440) 233-7196
(440) 282-1252
**Midway Mall Office
**Kansas Avenue Office 6395 Midway Mall Blvd.
1604 Kansas Avenue Elyria, Ohio 44035
Lorain, Ohio 44052 (440) 324-6530
(440) 288-9151
**Oberlin Avenue Office
3660 Oberlin Avenue
Lorain, Ohio 44053
(440) 282-9196
Village of LaGrange
**Pearl Avenue Office Banking Office
2850 Pearl Avenue **Village of LaGrange Office
Lorain, Ohio 44055 546 North Center Street
(440) 277-1103 Village of LaGrange,
Ohio 44050
**West Park Drive Office (440) 355-6734
2130 West Park Drive
Lorain, Ohio 44053 Oberlin Banking Offices
(440) 989-3131 Kendal at Oberlin Office
600 Kendal Drive
Amherst Banking Office Oberlin, Ohio 44074
**Amherst Office (440) 774-5400
1175 Cleveland Avenue
Amherst, Ohio 44001 **Oberlin Office
(440) 988-4423 40 East College Street
Oberlin, Ohio 44074
Avon Lake Banking Office (440) 775-1361
**Avon Lake Office
240 Miller Road Olmsted Township
Avon Lake, Ohio 44012 Banking Offices
(440) 933-2186 **Olmsted Township Office
27095 Bagley Road
Olmsted Township, Ohio 44138
(440) 235-4600
<PAGE>55
The Renaissance Office Other Offices
26376 John Road Executive Offices
Olmsted Township, Ohio 44138 457 Broadway
(440) 427-0041 Lorain, Ohio 44052
(440) 244-7123
Vermilion Banking Office
**Vermilion Office Branch Administration
4455 East Liberty Avenue 457 Broadway
Vermilion, Ohio 44089 Lorain, Ohio 44052
(440) 967-3124 (440) 244-7253
Westlake Banking Offices Commercial, Consumer
**Crossings of Westlake Ohio and Mortgage Loans
30210 Detroit Road 457 Broadway
Westlake, Ohio 44145 Lorain, Ohio 44052
(440) 892-9696 (440) 244-7220
(440) 244-7272
Westlake Village Office (440) 244-7216
28550 Westlake Village Drive
Westlake, Ohio 44145 Credit Cards
(440) 808-0229 2130 West Park Drive
Lorain, Ohio 44053
Community-Based (440) 989-3308
Automated Teller
Machine Locations Customer Service
**Captain Larry's Marathon 2130 West Park Drive
1317 State Route 60 Lorain, Ohio 44053
Vermilion, Ohio (440) 989-3348
**Convenient Food Mart Human Resources
5375 West Erie Avenue 2130 West Park Drive
Lorain, Ohio Lorain, Ohio 44053
(440) 989-3139
**Dad's Sunoco
7580 Leavitt Road Operations
State Route 58 2130 West Park Drive
Amherst, Ohio Lorain, Ohio 44053
(440) 989-3315
**Gateway Plaza Convenient
3451 Colorado Avenue Purchasing
Lorain, Ohio 2150 West Park Drive
Lorain, Ohio 44053
**Lakeland Medical Center (440) 989-3260
3700 Kolbe Road
Lorain, Ohio Trust and Investment
Management Services
**Lorain County 457 Broadway
Community College Lorain, Ohio 44052
1005 North Abbe Road (440) 244-7226
Elyria, Ohio
All Other Departments &
**Lowe's Home Information Not Listed
Improvement Warehouse Telebanker (440) 245-4562
620 Midway Boulevard Telebanker (800) 610-9033
Elyria, Ohio Toll Free (800) 860-1007
Lorain (440) 244-6000
**Midway Mall Food Court Elyria (440) 236-5047
3343 Midway Mall Blvd.
Elyria, Ohio Internet www.4LNB.com
<PAGE>56
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
<PAGE>57
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the nine months ended September 30, 1999)
S - K Reference Number (27)
Financial Data Schedule
(Follows as a separate document)
<TABLE> <S> <C>
<ARTICLE> 9
<CIK> 0000737210
<NAME> LNB BANCORP, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> SEP-30-1999
<CASH> 19,937
<INT-BEARING-DEPOSITS> 12,926
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 75,756
<INVESTMENTS-CARRYING> 47,085
<INVESTMENTS-MARKET> 44,703
<LOANS> 413,544
<ALLOWANCE> 4,108
<TOTAL-ASSETS> 587,536
<DEPOSITS> 475,141
<SHORT-TERM> 32,710
<LIABILITIES-OTHER> 4,809
<LONG-TERM> 24,345
<COMMON> 4,223
0
0
<OTHER-SE> 46,308
<TOTAL-LIABILITIES-AND-EQUITY> 587,536
<INTEREST-LOAN> 25,169
<INTEREST-INVEST> 5,331
<INTEREST-OTHER> 250
<INTEREST-TOTAL> 30,770
<INTEREST-DEPOSIT> 9,453
<INTEREST-EXPENSE> 11,390
<INTEREST-INCOME-NET> 19,380
<LOAN-LOSSES> 1,250
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 15,405
<INCOME-PRETAX> 8,788
<INCOME-PRE-EXTRAORDINARY> 5,787
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,787
<EPS-BASIC> 1.40
<EPS-DILUTED> 1.40
<YIELD-ACTUAL> 4.77
<LOANS-NON> 994
<LOANS-PAST> 505
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 4,434
<ALLOWANCE-OPEN> 3,483
<CHARGE-OFFS> 810
<RECOVERIES> 185
<ALLOWANCE-CLOSE> 4,108
<ALLOWANCE-DOMESTIC> 2,839
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 1,269
</TABLE>
