<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, 2000
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, 2000: 4,210,847 shares
Class of Common Stock: $1.00 par value
<PAGE>2
LNB Bancorp, Inc.
Quarterly Report on Form 10-Q
Quarter Ended September 30, 2000
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 17
of Financial Condition and Results of
Operations
Item 3 - Quantitative and Qualitative Disclosures 23
About Market Risk
Part II - Other Information
Item 1 - Legal Proceedings 24
Item 2 - Changes in Securities 24
Item 3 - Defaults upon Senior Securities 24
Item 4 - Submission of matters to a Vote of 24
Security Holders
Item 5 - Other Information 24
Item 6 - Exhibits and Reports on Form 8-K 24
Signatures 24
Appendix Index 25
<PAGE>3
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SEPTEMBER 30, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 2000 1999
------------- -------------
(Unaudited)
ASSETS:
Cash and due from banks $ 27,897,000 $ 28,023,000
Federal funds sold and short-term investments 3,077,000 9,320,000
Securities:
Available for sale, at fair value 79,193,000 75,728,000
Held to maturity, at cost (fair value
$42,014,000 and $41,819,000, respectively) 44,529,000 44,642,000
Federal Home Loan Bank and Federal Reserve
Bank Stock, at cost 3,098,000 2,949,000
------------- -------------
Total Securities 126,820,000 123,319,000
------------- -------------
Loans:
Portfolio loans 440,803,000 409,971,000
Loans available for sale 9,174,000 9,545,000
------------- -------------
Total loans 449,977,000 419,516,000
Reserve for loan losses (5,184,000) (4,667,000)
------------- -------------
Net loans 444,793,000 414,849,000
------------- -------------
Bank premises and equipment, net 11,257,000 11,253,000
Intangible assets 3,946,000 4,245,000
Accrued interest receivable 3,934,000 4,057,000
Other assets 4,216,000 4,449,000
Other foreclosed assets 47,000 96,000
------------- -------------
TOTAL ASSETS $625,987,000 $599,611,000
============= =============
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>4
STATEMENT CONTINUED FROM PREVIOUS PAGE
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand and other noninterest-bearing
deposits $ 84,426,000 $ 80,654,000
Savings and passbook accounts 204,377,000 191,928,000
Certificates of deposit 211,577,000 184,429,000
------------- -------------
Total deposits 500,320,000 456,831,000
------------- -------------
Securities sold under repurchase agreements
and other short-term borrowings 33,540,000 52,122,000
Federal Home Loan Bank advances, short-term 13,360,000 15,000,000
Federal Home Loan Bank advances, long-term 18,985,000 19,345,000
Accrued interest payable 1,722,000 1,510,000
Accrued taxes, expenses and
other liabilities 3,416,000 3,750,000
------------- -------------
Total Liabilities 571,343,000 548,558,000
------------- -------------
Shareholders' equity:
Preferred stock, no par value: Shares
authorized 1,000,000, and shares
outstanding, none
Common stock $1.00 par: Shares authorized
15,000,000, Shares issued 4,312,847 and
4,227,161, respectively and Shares
outstanding 4,210,847 and 4,127,161,
respectively 4,312,000 4,227,000
Additional capital 24,333,000 22,685,000
Retained earnings 29,593,000 28,057,000
Accumulated other comprehensive (loss) (655,000) (1,016,000)
Treasury Stock at cost, 102,000
and 100,000 shares, respectively (2,939,000) (2,900,000)
------------- -------------
Total Shareholders' Equity 54,644,000 51,053,000
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $625,987,000 $599,611,000
============= =============
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) -------------------------
2000 1999
INTEREST INCOME: ------------ ------------
Interest and fees on loans:
Taxable $28,737,000 $25,169,000
Tax-exempt 14,000 20,000
Interest and dividends on securities:
U.S. Government agencies and corporations 4,827,000 4,018,000
U.S. Treasury securities 340,000 1,027,000
States and political subdivisions 187,000 162,000
Other debt and equity securities 176,000 124,000
Interest on Federal funds sold and other
interest-bearing instruments 171,000 250,000
------------ ------------
TOTAL INTEREST INCOME 34,452,000 30,770,000
------------ ------------
INTEREST EXPENSE:
Interest on Deposits:
Time certificates of $100,000 and over 2,206,000 1,967,000
Other deposits 9,423,000 7,486,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 1,355,000 870,000
Interest on Federal Home Loan Bank advances 987,000 1,067,000
------------ ------------
TOTAL INTEREST EXPENSE 13,971,000 11,390,000
------------ ------------
NET INTEREST INCOME 20,481,000 19,380,000
Provision for loan losses 1,250,000 1,250,000
------------ ------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 19,231,000 18,130,000
------------ ------------
OTHER INCOME:
Investment and Trust Services Division income 1,704,000 1,587,000
Service charges on deposit accounts 2,353,000 2,175,000
Other service charges, exchanges and fees 2,072,000 2,071,000
Gain on sale of bank premises and equipment -0- 162,000
Other operating income 40,000 68,000
------------ ------------
TOTAL OTHER INCOME 6,169,000 6,063,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>6
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 7,754,000 7,481,000
Furniture and equipment expenses 1,697,000 1,627,000
Net occupancy expense of premises 1,108,000 1,136,000
Supplies and postage 705,000 727,000
Ohio franchise tax 418,000 414,000
Credit card and merchant expenses 821,000 703,000
Other operating expenses 3,374,000 3,317,000
------------ ------------
TOTAL OTHER EXPENSES 15,877,000 15,405,000
------------ ------------
INCOME BEFORE INCOME TAXES 9,523,000 8,788,000
INCOME TAXES 3,262,000 3,001,000
------------ ------------
NET INCOME $ 6,261,000 $ 5,787,000
============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ 1.49 $ 1.37
====== ======
DILUTED EARNINGS PER SHARE $ 1.49 $ 1.37
====== ======
DIVIDENDS DECLARED PER SHARE $ .72 $ .66
====== ======
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) --------------------------
2000 1999
INTEREST INCOME ------------ ------------
Interest and fees on loans:
Taxable $10,086,000 $ 8,740,000
Tax-Exempt 4,000 4,000
Interest and dividends on securities:
U.S. Government agencies and corporations 1,650,000 1,435,000
U.S. Treasury securities 80,000 267,000
States and political subdivisions 63,000 54,000
Other debt and equity securities 67,000 46,000
Interest on Federal funds sold and other
interest-bearing instruments 42,000 165,000
------------ ------------
TOTAL INTEREST INCOME 11,992,000 10,711,000
------------ ------------
INTEREST EXPENSE:
Interest on Deposits:
Time certificates of $100,000 and over 880,000 718,000
Other deposits 3,327,000 2,566,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 523,000 342,000
Interest on Federal Home Loan Bank advances 308,000 450,000
------------ ------------
TOTAL INTEREST EXPENSE 5,038,000 4,076,000
------------ ------------
NET INTEREST INCOME 6,954,000 6,635,000
Provision for loan losses 650,000 550,000
NET INTEREST INCOME AFTER PROVISION ------------ ------------
FOR LOAN LOSSES 6,304,000 6,085,000
------------ ------------
OTHER INCOME:
Investment and Trust Services Division income 587,000 513,000
Service charges on deposit accounts 807,000 773,000
Other service charges, exchanges and fees 716,000 754,000
Other operating income 14,000 12,000
------------ ------------
TOTAL OTHER INCOME 2,124,000 2,052,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>8
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 2,649,000 2,566,000
Furniture and equipment expenses 408,000 426,000
Net occupancy expense of premises 350,000 346,000
Supplies and postage 229,000 218,000
Ohio franchise tax 88,000 121,000
Credit card and merchant expenses 288,000 276,000
Other operating expenses 1,125,000 1,146,000
------------ ------------
TOTAL OTHER EXPENSES 5,137,000 5,099,000
------------ ------------
INCOME BEFORE INCOME TAXES 3,291,000 3,038,000
INCOME TAXES 1,130,000 1,047,000
------------ ------------
NET INCOME $ 2,161,000 $ 1,991,000
============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .51 $ .47
====== ======
DILUTED EARNINGS PER SHARE $ .51 $ .47
====== ======
DIVIDENDS DECLARED PER SHARE $ .25 $ .23
====== ======
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) -------------------------
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES: ------------ ------------
Interest received $34,516,000 $31,063,000
Other income received 6,218,000 5,926,000
Interest paid (13,759,000) (11,392,000)
Cash paid for salaries and
employee benefits (7,557,000) (7,131,000)
Net occupancy expense of premises paid (865,000) (876,000)
Furniture and equipment expenses paid (654,000) (626,000)
Cash paid for supplies and postage (705,000) (727,000)
Cash paid for other operating expenses (4,154,000) (3,401,000)
Federal income taxes paid (3,227,000) (2,498,000)
------------ -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,813,000 10,338,000
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 8,000,000 19,500,000
Proceeds from maturities of securities
held to maturity 502,000 181,000
Purchase of securities held to maturity (753,000) (7,080,000)
Purchase of securities available
for sale (11,126,000) (18,333,000)
Net (increase) in loans made to customers (31,442,000) (44,266,000)
Proceeds from sales of bank premises and
equipment (18,000) -0-
Purchases of bank premises and equipment
and intangible assets (1,290,000) (1,052,000)
Proceeds from liquidation of other
foreclosed assets 296,000 1,400,000
Purchases of other foreclosed assets (247,000) -0-
------------ -----------
NET CASH USED IN INVESTING ACTIVITIES (36,078,000) (49,650,000)
------------ -----------
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>10
STATEMENT CONTINUED FROM PREVIOUS PAGE
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and other
noninterest-bearing deposits 3,772,000 (6,823,000)
Net increase in savings and passbook deposits 12,409,000 734,000
Net increase in certificates of deposit 27,308,000 36,256,000
Net (decrease) in securities sold under
repurchase agreements and other
short-term borrowings (18,582,000) (250,000)
Proceeds from Federal Home Loan
Bank advances 8,000,000 12,300,000
Payment on Federal Home Loan advances (10,000,000) -0-
Purchase of Treasury Stock (39,000) -0-
Proceeds from exercise of stock options 62,000 2,000
Dividends paid (3,034,000) (2,845,000)
------------ -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 19,896,000 39,374,000
------------ ------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (6,369,000) 62,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 37,343,000 32,801,000
------------ ------------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $30,974,000 $32,863,000
============ ============
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $6,261,000 $5,787,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,286,000 1,261,000
Amortization of intangible assets 298,000 316,000
Amortization of deferred loan fees
and costs, net 248,000 (218,000)
Provision for loan losses 1,250,000 1,250,000
(Increase) Decrease in accrued
interest receivable 123,000 (16,000)
(Increase) Decrease in other assets (213,000) 54,000
Increase in accrued interest payable 212,000 72,000
Increase in accrued taxes,
expenses and other liabilities 43,000 1,729,000
Others, net 305,000 103,000
------------ ------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 9,813,000 $10,338,000
============ ============
See notes to unaudited condensed consolidated financial statements.
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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), and Charleston Title Agency LLC at September 30, 2000, compared
to December 31, 1999, and the results of its operations for the three
and nine months ended September 30, 2000 and cash flows for the nine
months ended September 30, 2000 compared to the same periods in 1999.
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 and the Corporation's December 31,
1999 Annual Report.
In an effort to take advantage of the recently passed Gramm-Leach-Bliley
Act, otherwise known as the financial modernization act, LNB Bancorp,
Inc. has applied for, and received, one of the first charters as a
financial holding company. The Act enables financial holding companies
to engage in business activities previously unavailable to them. The
Corporation will also be able to offer new products and services as they
are developed and approved by regulators. LNB Bancorp, Inc. has a
49 percent interest in a newly formed company named "Charleston Title
Agency LLC". The main function of Charleston Title Agency LLC is to
provide real estate settlement services via a title insurance agency.
Charleston Title Agency LLC began operations on September 1, 2000. LNB
Bancorp, Inc. is currently expanding into additional new areas that have
been opened up by the passage of the Financial Modernization Act. We
look forward to further reporting to you on these matters in our year
end 10K report.
LNB Bancorp, Inc. achieved a significant milestone in its history by the
listing of its common stock on the NASDAQ Stock Market in the second
quarter of 2000. The NASDAQ listing will provide greater liquidity for
our stock while enhancing our visibility in the investment community.
BASIS OF PRESENTATION
The unaudited condensed consolidated balance sheet as of September 30,
2000, the unaudited condensed consolidated statements of income for the
three and nine months ended September 30, 2000 and the unaudited
condensed consolidated statements of cash flows for the nine months
ended September 30, 2000 and 1999 are prepared in accordance with
generally accepted accounting principles for interim financial
information. The above mentioned statements reflect all normal and
<PAGE>12
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, 1999 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, 1999 Annual Report to Shareholders.
The results of operations for the period ended September 30, 2000 are
not necessarily indicative of the operating results for the full year.
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 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.
<PAGE>13
RECLASSIFICATIONS
Certain 1999 amounts have been reclassified to conform to the 2000
presentation.
<PAGE>14
2. EARNINGS PER SHARE
Earnings per share is calculated as follows:
For the 9 Months ended September 30, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $6,261,000
Basic EPS
Income available to
common shareholders $6,261,000 4,210,379 $1.49
Effect of Dilutive Securities
Incentive Stock Options -0- 3,960 -0-
---------- --------- -----
Diluted EPS
Income available to common
shareholders + assumed
conversions $6,261,000 4,214,339 $1.49
========== ========= =====
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 shareholders $5,787,000 4,205,171 $1.37
Effect of Dilutive Securities
Incentive Stock Options -0- 8,380 -0-
---------- --------- -----
Diluted EPS
Income available to common
shareholders + assumed
conversions $5,787,000 4,213,551 $1.37
========== ========= =====
<PAGE>15
For the 3 Months ended September 30, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $2,161,000
Basic EPS
Income available to
common shareholders $2,161,000 4,210,762 $ .51
Effect of Dilutive Securities
Incentive Stock Options -0- 2,822 -0-
---------- --------- -----
Diluted EPS
Income available to common
shareholders + assumed
conversions $2,161,000 4,214,224 $ .51
========== ========= =====
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 shareholders $1,991,000 4,205,231 $ .47
Effect of Dilutive Securities
Incentive Stock Options -0- 7,922 -0-
---------- --------- -----
Diluted EPS
Income available to common
shareholders + assumed
conversions $1,991,000 4,213,153 $ .47
========== ========= =====
3. COMPREHENSIVE INCOME
The Corporation's comprehensive income for the nine months ended
September 30, 2000 and 1999 are as follows:
For the nine months ended September 30,
2000 1999
--------------------------------
Net income $6,261,000 $5,787,000
Other comprehensive income(loss):
Unrealized gain (loss) on
securities available for sale,
net of tax (benefit) of
($186,000) and ($324,000) 361,000 (629,000)
----------- -----------
Comprehensive Income $6,622,000 $5,158,000
<PAGE>16
The Corporation's comprehensive income for the three months ended
September 30, 2000 and 1999 are as follows:
For the three months ended September 30
2000 1999
------------------------------------
Net income $2,161,000 $1,991,000
Other comprehensive income(loss):
Unrealized gain (loss) on
securities available for sale,
net of tax (benefit) of
$268,000 and ($78,000) 520,000 (152,000)
----------- -----------
Comprehensive Income $2,681,000 $1,839,000
<PAGE>17
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
FORWARD LOOKING STATEMENTS
When used in this Form 10Q, the words or phrases "are expected to",
"will continue", "is anticipated", "estimate", "projected", or similar
expressions are intended to identify "forward-looking statements" within
the meaning of the Private Securities Litigation Reform Act. Such
statements are subject to certain risks and uncertainties including
changes in economic conditions in the Corporation's market area, changes
in policies by regulatory agencies, fluctuations in interest rates,
demand for loans, and competition, that could cause actual results to
differ materially from historical earnings and those presently
anticipated or projected.
FINANCIAL CONDITION
Total assets of the Corporation increased $26,376,000 during the first
nine months in 2000, to $625,987,000. This growth was funded by
increases in demand deposits, Market Access and certificates of deposit.
Total earning assets increased 5.0% to $579,874,000 at September 30,
2000 from December 31, 1999. The ratio of earning assets to total
assets increased from 92.1% at December 31, 1999 to 92.6% at September
30, 2000. The loan to deposit ratio has increased from 87.04% at 1999
year-end to 89.94% at September 30, 2000.
Federal funds sold and short-term investments decreased by $6,243,000
during the first nine months of 2000. This decrease is the result of
the bank eliminating its excess liquidity which was built up for Y2K
purposes at 1999 year end.
Total securities increased $3,501,000 ending the third quarter at
$126,820,000. At September 30, 2000 gross unrealized gains (losses)in
the investment securities portfolio were approximately $94,000 and
($3,246,000), respectively. The decrease in the market value of the
securities portfolio is due to market interest rate fluctuations and not
due to the deterioration of the credit worthiness of debt issuers.
Net loans grew by $29,944,000 during the first nine months to
$444,793,000 at September 30, 2000 for a 7.2% growth rate. Commercial
loan growth was strong accounting for almost all of total loan growth
during the nine months ended September 30, 2000. Loan increase was
supported by spring and summer home equity loan sale programs which
resulted in new loans totaling over $2 million.
The reserve for loan losses ended the quarter at $5,184,000. Activity
for the nine months ended September 30, 2000 included provision for loan
losses of $1,250,000, recoveries of $162,000 and loan charge-offs of
$895,000. The reserve for loan losses as a percentage of ending loans
increased .04% from 1.11% at December 31, 1999 to 1.15% at September 30,
2000. Corporate management believes that the reserve for loan losses as
a percentage of ending loans at September 30, 2000 remains at an
appropriate level. The ratio of the reserve for loan losses to
<PAGE>18
nonperforming assets remained at an adequate level even though it
decreased to 296.4% at September 30, 2000. Also, Corporate management
believes that the current level of the reserve for loan losses is
adequate based upon quantitative analysis of identified risks and
analysis of historical trends, and probable losses inherent in the loan
portfolio at September 30, 2000.
The level of nonperforming assets increased by $410,000 during the first
nine months of 2000. This increase is the result of an increase in non-
accrual loans of $459,000 offset by a decrease in other foreclosed
assets in the amount of $49,000. The decrease in other foreclosed
assets results from the liquidation of assets. The increase in
nonaccrual loans is due to decreases in nonaccrual principal balances of
$1,114,000 which have been paid off and brought current, loans
charged-off in the amount of $279,000, liquidation of non-accrual loans
of $610,000 and increases in nonaccrual principal balances of
$2,462,000. The increase in nonaccrual loans in the first nine months
of 2000 was due primarily to sixteen commercial loan customers, five
mortgage loan customers and several personal loans, particularly in the
indirect automobile loan category. Management does not believe that
this increase in non-accrual loans is indicative of a failing local
economy and that this change did not result from any change in
underwriting standards.
Nonperforming assets at September 30, 2000 totaled $1,749,000, up from
$873,000 at June 30, 2000. The third quarter increase in nonperforming
assets of $1,236,000 resulted from loans being brought current in the
amount of $7,000, loans charged-off in the amount of $109,000,
liquidation of non-accrual loans of $310,000, decreases in other
foreclosed assets of $200,000 and increases in nonaccrual loans of
$1,502,000. The increase in nonaccrual loans in the third quarter of
2000 was due primarily to seven commercial loan customers, five mortgage
loan customers and twenty seven consumer loan customers.
The level of nonperforming assets at September 30, 2000 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 09/30/00 06/30/00 03/31/00 12/31/99
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual loans $1,702 $ 626 $1,439 $1,243
Restructured loans 0 0 0 0
Other Foreclosed Assets 47 247 0 96
-------- -------- -------- --------
Total Nonperforming Assets $1,749 $ 873 $1,439 $1,339
======== ======== ======== ========
Reserve for possible
loan losses to total
nonperforming assets 296.4% 557.6% 332.8% 348.5%
======== ======== ======== ========
Accruing loans past due 90 days $ 197 $ 437 $ 781 $ 555
======== ======== ======== ========
Potential problem loans are those loans identified on Management's watch
<PAGE>19
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, 2000, potential problem loans totaled
$4,241,000, a decrease of $107,000 from the December 31, 1999 balance
of $4,348,000.
LNB Bancorp, Inc. changed its policy on the timing of placing mortgage
loans on non-accrual status during the third quarter of 2000. The
policy changed from placing loans on non-accrual status based upon
individual credit review to automatically placing loans on non-accrual
status once they are 90 days past due. The sum of potential problem
loans, accruing loans past 90 days and non-accrual loans has remained
relatively constant at $6,078,000 and $6,140,000 on June 30, 2000 and
September 30, 2000, respectively. The change during the third quarter
of 2000 in the components of the watch list: potential problem loans,
accruing loans past due 90 days and non-accrual loans has occurred as a
result of the change in the mortgage loan policy as mentioned above.
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,
2000, there are no significant concentrations of credit in the loan
portfolio.
The Corporation had outstanding loan and credit commitments to make
loans totaling $112,872,000 and $87,614,000 at September 30, 2000 and
December 31,1999, 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 2000. Mortgage and commercial construction
loan demand increased in the second and third quarters of 2000 as
seasonal weather conditions improved and the construction season moved
forward. Consumer loan demand leveled off in the first, second and
third quarters of 2000.
Total deposits increased $43,489,000 during the first nine months to
$500,320,000. Noninterest-bearing deposits increased to $84,426,000, at
September 30, 2000 for an increase of $3,772,000, while interest-bearing
deposits climbed to $415,954,000 for an increase of $39,597,000.
Federal funds purchased and securities sold under agreements to
repurchase decreased $18,582,000 during the first nine months of 2000
due to increases in deposit balances. 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 decreased to $32,345,000 at September 30,
2000, down $2,000,000 from 1999 year end.
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
<PAGE>20
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, 2000, short-term security investments with maturities of
one year or less totalled $11,830,000 which represented 9.3% of total
securities. Adding cash and due from banks of $27,897,000 and Federal
funds sold and short-term investments of $3,077,000, total liquid assets
represented 6.8% of total assets. The Corporation's subsidiary bank has
established short-term lines of credit at correspondent banks, Federal
Home Loan Bank, and the Federal Reserve Bank of Cleveland in the amounts
of $18,000,000, $30,000,000 and $25,621,000, respectively, with credit
available in the amounts of $4,000,000. $22,000,000 and $25,621,000,
respectively.
CAPITAL RESOURCES
LNB Bancorp, Inc. continues to maintain a strong capital position.
Total shareholders' equity reached an all time high of $54,644,000, at
September 30, 2000, an increase of $3,591,000, or 7% from one year ago.
The increase resulted primarily from $6,261,000 of net income generated
from the first nine months of operations less a cash dividend payable to
shareholders of $3,054,000. The increase in interest rates experienced
in the first three quarters of 2000 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
$361,000 for the nine months ended September 30, 2000. As of September
30, 2000, the LNB Bancorp, Inc. held 102,000 shares of common stock as
treasury stock. LNB Bancorp, Inc. purchased 97,996 of these shares in
1997, 2,004 shares in 1998, and 2,000 shares in 2000 for a total cost of
$2,939,000.
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 institution for all periods presented. The
Corporation's capital and leverage ratios as of September 30, 2000 and
1999 follow together with those ratios required for the Corporation to
be considered adequately capitalized .
September 30 Minimum Required Minimum
----------------- To Be Well Required
2000 1999 Capitalized Capital
------ ------ ---------------- ----------
Total capital ratio 12.98% 12.81% 10.00% 8.00%
Tier I capital ratio 11.79% 11.77% 6.00% 4.00%
Leverage ratio 8.57% 8.26% 5.00% 4.00%
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.
<PAGE>21
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 $28,751,000 for the first nine months of
2000 for an increase of $3,562,000 when compared to the first nine
months of 1999. Increased loan income resulted from net increases in
the loan portfolio of $30,461,000 and increases in interest rates.
Interest and dividends on securities was $5,530,000 for the first nine
months of 2000 for an increase of $199,000 over the same period in 1999.
Increased security income results from increase in the volume of
securities and from increases in yields on those securities. Interest
and dividends on securities represented 16.1% of total interest income
at September 30, 2000 compared to 17.3% at September 30, 1999. Interest
on Federal funds sold and short-term investments was $171,000 at
September 30, 2000 compared to $250,000 at September 30, 1999. The decrease
resulted from decreases in the average balances invested in
these forms of financial instruments net of increases in interest rates.
Total interest expense increased by $2,581,000 when compared to the
first nine months of 1999. The interest expense increase was fueled by
an increase in interest expense on deposits of $2,176,000 and repurchase
agreement interest of $485,000, offset by decreases in Federal Home Loan
Bank advances of $80,000. Also, total interest expense for the first
nine months of 2000 was impacted by a net increase in deposits of
$43,489,000, and by increases in interest rates paid on savings, Market
Access and certificate of deposit accounts when compared to the first
nine months of 1999.
Total other income increased by $106,000 when compared to the first nine
months of 1999. This increase resulted from increases in income from
investment and trust services fees of $117,000, increases in service
charges of $178,000 and increases in other charges, exchanges and fees
of $1,000. 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 Corporation reported a
non-recurring gain on sale of a building in the second quarter of 1999
of $162,000. Other operating income decreased by $28,000.
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,
2000 was $15,877,000, 3.1% above the first nine months of 1999. This
increase was due primarily to increases in salaries and benefits,
furniture and equipment expense and increases in credit card and
merchant expenses.
The effective tax rate remained constant at 34.2% during the first nine
months of 2000 and 1999. Net income was $6,261,000 and $5,787,000 for
the nine months ended September 30, 2000 and 1999, respectively. Net
income per basic and diluted share was $1.49 and $1.37 for the nine
months ended September 2000 and 1999, respectively.
<PAGE>22
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.
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.
LNB BANCORP, INC. SHAREHOLDERS' RIGHTS
On October 24, 2000, the Board of Directors of LNB Bancorp, Inc.
approved a shareholder rights plan. The rights plan provides to record
owners of common shares at the close of business on November 6, 2000, a
dividend distribution of rights to purchase shares of a new series of
voting preferred stock ("rights"). The rights plan is designed to
prevent a potential acquirer from exceeding a prescribed ownership level
in the Corporation, other in the context of a negotiated acquisition
involving the Board of Directors. If the prescribed level is exceeded,
the rights become exercisable and, following a limited period for the
Board to redeem the rights, allows shareholders, other that the acquirer
that triggered the exercise of the rights, to purchase Preferred Share
Units of the Corporation having characteristics comparable to the
Corporation's Common Shares, at 50% of market value. This dramatically
dilutes the acquirer's ownership level and voting power and makes it
prohibitively expensive for the acquirer to complete its acquisition of
the Corporation. The description and terms of the Rights are set forth
in a Rights Agreement dated as of October 24, 2000, between LNB Bancorp,
Inc. and Registrar and Transfer Corporation, as Rights Agent, as filed
with the Securities and Exchange Commission on November 6, 2000.
GRAMM-LEACH-BLILEY ACT OF 1999
In February of 2000, the Corporation filed an application with the
Federal Reserve Bank of Cleveland to be regulated as a financial holding
company. In March of 2000, LNB Bancorp, Inc. received approval to
operate as a financial holding company. The Corporation is
strategically reviewing its new business opportunities under the
Gramm-Leach-Bliley Act. LNB Bancorp, Inc. is currently expanding into
new areas that have been opened up by the passage of the Financial
Modernization Act. We look forward to further reporting to you
regarding these matters in our year end 10K report.
<PAGE>23
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, 1999, 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, 1999.
With the Federal Reserve Board's recent announcements to increase the
prime lending rate by 25 basis points to 8.75% on February 3, 2000, and
its subsequent increase by 25 basis points to 9.00% on March 22, 2000,
and subsequent increase by 50 basis points to 9.50% on May 16, 2000, the
Corporation does not anticipate any significant changes in the net
interest margin. However, the Corporation does anticipate a slight
compression in net interest margin in the 4th quarter of 2000 with
increases in interest expense due to the repricing of certificates of
deposit at higher rates. Also, Corporate management does not anticipate
any significant changes in the Corporation's market risk of interest
rate risk portfolio.
<PAGE>24
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)(a) - LNB Bancorp, Inc. - Second Amended Articles
of Incorporation of LNB Bancorp, Inc.
(b) Exhibit (11) - Computation of Shares Used for Earnings Per
Share Calculation.
(c) Exhibit (13) - Third Quarter Report to Shareholders of LNB
Bancorp, Inc., September 30, 2000 - 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, 2000.
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 13, 2000 /s/ Gregory D. Friedman
_________________________
Gregory D. Friedman, CPA
Executive Vice President and
Chief Financial Officer
Date: November 13, 2000 /s/ Mitchell J. Fallis
_________________________
Mitchell J. Fallis, CPA
Vice President and
Chief Accounting Officer
<PAGE>25
LNB Bancorp, Inc.
Form 10-Q
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K
S-K Reference Exhibit
Number
(3) (a)LNB Bancorp, Inc., - Second Amended Articles of
Incorporation of LNB Bancorp, Inc.
(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, 2000 - EDGAR Version.
(27) Financial Data Schedule.
<PAGE>26
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, 2000)
EDGAR Version
DESCRIPTION:
Three sided pamphlet:
Outside cover: white with picture showing pen on NASDAQ page
Third Quarter Report
LNB Bancorp, Inc.
September 30, 2000
Inside contains:
Message to shareholders,
Unaudited EDGAR version Consolidated Balance Sheets for period ending
September 30, 2000 and September 30, 1999, respectively,
Unaudited EDGAR version Consolidated Statements of Income for the Nine
Months ended September 30, 2000 and September 30, 1999, respectively,
Executive Officers: Keeping LNBB in pace with the future
Banking Offices and ATMS
<PAGE>27
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, 2000, we have
achieved significant growth in earnings, dividends, assets, loans,
deposits and shareholders' equity.
We are pleased to announce that earnings increased 8.2% in the first
nine months of 2000 compared with the same period one year ago. Earnings
for the first nine months of 2000 reached $6,261,000, up from $5,787,000
during the first nine months of 1999. Third quarter's earnings for 2000
significantly passed the $2-million mark for the second consecutive
quarter in the history of LNB Bancorp, Inc. Earnings for the third
quarter of 2000 were $2,161,000 compared with $1,991,000 for the third
quarter of 1999.
Basic earnings per share for the first nine months of 2000 reached
$1.49, an 8.8% increase over the $1.37 per basic share reported for the
same period in 1999. Earnings thus far in 2000 were higher than a year
ago because of higher net interest income and other noninterest income,
offset in part by higher 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 2000
increased 9% compared with the same period last year. The year-to-date
cash dividends declared per share in 2000 increased by $.06 to $.72 per
share, up from $.66 per share in 1999. Third quarter 2000 cash
dividends declared surpassed the $1-million mark for the second
consecutive quarter in the Bancorp's history. In addition to cash
dividends, a 2% stock dividend was paid to shareholders on July 1, 2000.
Asset growth remained solid. Total assets increased 6.6% to $626.0
million at September 30, 2000, up $38.5 million from September 30,
1999. Net loans grew by $35.4 million from one year ago to $444.8
million at September 30, 2000, for an 8.7% increase. Commercial loan
growth was strong accounting for almost all of the loan growth during
the 12 months ended September 30, 2000.
Total deposits increased 5.3% to $500.3 million, up $25.2 million from
one year ago. Increases in demand, Market Access and certificates of
deposit accounted for most of the deposit increase. Lorain National
Bank operates 21 retail branches and 28 Atms in nine local communities.
Total shareholders' equity increased by $4.1 million during the 12
months ended September 30, 2000, for an 8.2% increase. Total
shareholders' equity amounted to $54.6 million or $12.98 per share at
September 30, 2000 compared with $50.5 million or $12.26 per share at
September 30, 1999. The annualized return on average shareholders'
equity rose to 15.86% for the nine months ended September 30, 2000, up
from 15.58% return for the same period one-year ago.
The Bancorp is currently expanding into new areas that have been opened
up by the passage of the Financial Modernization Act. We look forward
to further reporting to you regarding these matters in our 2000 Annual
Report. We appreciate and thank you for your continuing support and
<PAGE>28
look forward to addressing you after the completion of another
successful year of operations.
Sincerely,
/s/ Stanley G. Pijor /s/ Gary C. Smith
--------------------- ------------------------
Stanley G. Pijor Gary C. Smith
Chairman of the Board President and
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 1996 through 2000 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 1996 through 2000 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 1996 through 2000 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 Basic Earnings
Net Income Per Share Per Share
Year Millions of Dollars Dollars* Dollars*
2000 $6,261 $ .72 $1.49
1999 $5,782 $ .66 $1.37
1998 $5,258 $ .60 $1.25
1997 $4,780 $ .48 $1.32
1996 $4,280 $ .42 $1.00
*Adjusted for stock dividends and splits
<PAGE>29
Consolidated Balance Sheets
September 30 2000 1999
------------------------------------------------------------------------
ASSETS:
Cash and Due from Banks $ 27,897,000 $ 19,937,000
Federal Funds Sold and Short-Term Investments 3,077,000 12,926,000
Federal Home Loan Bank and Federal Reserve
Bank Stock, at Cost 3,098,000 2,670,000
Securities Held to Maturity, at Cost 44,529,000 44,415,000
Securities Available for Sale, at Fair Value 79,193,000 75,756,000
Loans 449,977,000 413,544,000
Reserve for Loan Losses (5,184,000) (4,108,000)
------------------------------------------------------------------------
NET LOANS 444,793,000 409,436,000
------------------------------------------------------------------------
Premises, Equipment and Intangible
Assets, (net) 15,203,000 15,146,000
Accrued Interest Receivable and
Other Assets 8,197,000 7,250,000
------------------------------------------------------------------------
TOTAL ASSETS $625,987,000 $587,536,000
------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Noninterest-Bearing Deposits $ 84,426,000 $ 79,861,000
Interest-Bearing Deposits 415,894,000 395,280,000
------------------------------------------------------------------------
TOTAL DEPOSITS 500,320,000 475,141,000
------------------------------------------------------------------------
Securities Sold under Repurchase Agreements
and Other Short-Term Borrowings 33,540,000 22,710,000
Federal Home Loan Bank Advances 32,345,000 34,345,000
Accrued Interest, Taxes, Expenses and
Other Liabilities 5,138,000 4,809,000
------------------------------------------------------------------------
TOTAL LIABILITIES 571,343,000 537,005,000
------------------------------------------------------------------------
Preferred Stock -0- -0-
Common Stock 4,312,000 4,223,000
Additional Capital 24,333,000 22,604,000
Retained Earnings 29,593,000 27,233,000
Accumulated Other Comprehensive (Loss) (655,000) (629,000)
Treasury Stock, at Cost (2,939,000) (2,900,000)
------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 54,644,000 50,531,000
------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $625,987,000 $587,536,000
------------------------------------------------------------------------
<PAGE>30
TOTAL ASSETS millions of dollars
(A Total Assets graph follows in printed version with earnings per share
on the y-axis and years 1996 through 2000 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' EQUITY millions of dollars
(A Total Shareholders' Equity graph follows in printed version with
dividends per share on the y-axis and years 1996 through 2000 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 DEPOSITS millions of dollars
(A Total Deposits graph follows in printed version with earnings per
share on the y-axis and years 1996 through 2000 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 Total Deposits
Year Millions of Dollars Millions of Dollars Millions of Dollars
2000 $626.0 $ 54.6 $500.3
1999 $587.5 $ 50.5 $475.1
1998 $523.6 $ 48.2 $433.3
1997 $496.8 $ 44.4 $422.1
1996 $433.6 $ 43.3 $360.5
<PAGE>31
Consolidated Statements of Income
Nine Months Ended September 30, 2000 1999
-----------------------------------------------------------------------
INTEREST INCOME:
Interest and Fees on Loans $28,751,000 $25,189,000
Interest and Dividends on Securities 5,530,000 5,331,000
Interest on Federal Funds Sold and
Short-term Investments 171,000 250,000
------------------------------------------------------------------------
TOTAL INTEREST INCOME 34,452,000 30,770,000
------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits 11,629,000 9,453,000
Interest on Securities Sold Under Repurchase
Agreements and Other Short-term Borrowings 1,355,000 870,000
Interest on Federal Home Loan Bank Advances 987,000 1,067,000
------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 13,971,000 11,390,000
------------------------------------------------------------------------
NET INTEREST INCOME 20,481,000 19,380,000
Provision for Loan Losses 1,250,000 1,250,000
------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 19,231,000 18,130,000
------------------------------------------------------------------------
OTHER INCOME:
Investment and Trust Services Division Income 1,704,000 1,587,000
Fees and Service Charges 4,425,000 4,246,000
Gains From Sales of Loans,
Securities, and Buildings -0- 158,000
Other Operating Income 40,000 72,000
------------------------------------------------------------------------
TOTAL OTHER INCOME 6,169,000 6,063,000
------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and Employee Benefits 7,754,000 7,481,000
Net Occupancy Expense of Premises 1,108,000 1,136,000
Furniture and Equipment Expenses 1,697,000 1,627,000
Supplies and Postage 705,000 727,000
Ohio Franchise Tax 418,000 414,000
Other Operating Expenses 4,195,000 4,020,000
------------------------------------------------------------------------
TOTAL OTHER EXPENSES 15,877,000 15,405,000
------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 9,523,000 8,788,000
------------------------------------------------------------------------
Income Taxes 3,262,000 3,001,000
------------------------------------------------------------------------
NET INCOME $6,261,000 $5,787,000
------------------------------------------------------------------------
------------------------------------------------------------------------
PER SHARE DATA:
------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $ 1.49 $ 1.37
------------------------------------------------------------------------
<PAGE>32
DILUTED EARNINGS PER SHARE $ 1.49 $ 1.37
------------------------------------------------------------------------
DIVIDENDS DECLARED PER SHARE $ .72 $ .66
========================================================================
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
Logos LNBB NASDAQ Listed, FDIC Insured, Federal Home Loan Bank System,
Equal Housing Lender
<PAGE>33
Executive Officers: Keeping LNBB in pace with the future
As leaders of one of Ohio's rapidly-emerging financial holding
companies, the executive management team of LNB Bancorp, Inc. is
focusing its efforts on controlled growth of the organization. Now the
parent company of two subsidiaries: The Lorain National Bank and the
Charleston Insurance Agency, LNB Bancorp, Inc. is quickly taking
advantage of new opportunities to diversify under the provisions of the
Gramm-Leach-Bliley Act, popularly known as the Financial Modernization
Act.
In support of president and chief executive officer, Gary C. Smith,
executive vice presidents Kevin W. Nelson, Thomas P. Ryan and Gregory D.
Friedman, are optimistic about the organization's growth as it enters
the new millennium.
Color photo on left side of page of Kevin W. Nelson
Kevin W. Nelson, Executive V.P., Chief Operating Officer
In his first year of service to the organization as chief operating
officer, Mr. Nelson is a 14-year banking veteran who oversees the daily
function of the bank. He joined Lorain National in the first quarter,
after most recently serving as President of the Dayton division of First
National Bank of Zanesville, a subsidiary of BankFirst Ohio Corporation.
He and his wife Lisa reside in Avon Lake.
Color photo on left side of page of Thomas P. Ryan
Thomas P. Ryan, Executive V.P., Secretary/Treasurer
Mr. Ryan, an LNBB board member, is a 39-year veteran of Lorain National
Bank, and serves as LNB Bancorp's shareholder relations officer. The
bank's Investment Management and Trust Services division also reports to
him.
During Mr. Ryan's tenure, he has served in branch management and
marketing and was most recently appointed president and chief executive
officer of LNBB's newly-formed Charleston Insurance Agency, Inc.
subsidiary. The agency can offer non-traditional investment and
insurance products, such as annuities, mutual funds and life insurance.
Tom and his wife Carole reside in Vermilion.
Color photo on left side of page of Gregory D. Friedman
Gregory D. Friedman, Executive V.P., Chief Financial Officer, CPA
Mr. Friedman has served as a financial accountant for the past 30 years,
including the past 15 years with LNB Bancorp, Inc. and Lorain National
Bank. A veteran of the U.S. Navy and a former senior manager at Peat,
Marwick, Mitchell & Co. (now KPMG LLP) and Mellon Financial Services,
Inc., Mr. Friedman oversees the daily financial management of the
organization.
<PAGE>34
Mr. Friedman also serves as vice president and treasurer of the
Charleston Insurance Agency, Inc. and is an executive trustee and
treasurer of the Cleveland Zoological Society.
He and his wife Sharon and their two sons reside in Westlake.
<PAGE>35
Back Cover:
White background with blue 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 Elyria Township,
Park Road 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
Village of LaGrange
**Oberlin Avenue Office Banking Office
3660 Oberlin Avenue **Village of LaGrange Office
Lorain, Ohio 44053 546 North Center Street
(440) 282-9196 Village of LaGrange
Ohio 44050
**Pearl Avenue Office (440) 355-6734
2850 Pearl Avenue
Lorain, Ohio 44055 Oberlin Banking Offices
(440) 277-1103 **Kendal at Oberlin Office*
600 Kendal Drive
**West Park Drive Office Oberlin, Ohio 44074
2130 West Park Drive (440) 774-5400
Lorain, Ohio 44053
(440) 989-3131 **Oberlin Office
40 East College Street
Amherst Banking Office Oberlin, Ohio 44074
**Amherst Office (440) 775-1361
1175 Cleveland Avenue
Amherst, Ohio 44001 Olmsted Township
(440) 988-4423 Banking Offices
**Olmsted Township Office
Avon Lake Banking Office 27095 Bagley Road
**Avon Lake Office Olmsted Township,
240 Miller Road Ohio 44138
Avon Lake, Ohio 44012 (440) 235-4600
(440) 933-2186
<PAGE>36
The Renaissance Office **Oberlin IGA Foodliner
26376 John Road 331 East Lorain
Olmsted Township, Ohio 44138 Oberlin, Ohio
(440) 427-0041
Other Offices
Vermilion Banking Office Executive Offices
**Vermilion Office 457 Broadway
4455 East Liberty Avenue Lorain, Ohio 44052
Vermilion, Ohio 44089 (440) 244-7123
(440) 967-3124
Branch Administration
Westlake Banking Offices 457 Broadway
**Crossings of Lorain, Ohio 44052
Westlake Office (440) 244-7253
30210 Detroit Road
Westlake, Ohio 44145 Commercial, Consumer
(440) 892-9696 and Mortgage Loans
457 Broadway
Westlake Village Office Lorain, Ohio 44052
28550 Westlake (440) 244-7220
Village Drive (440) 244-7272
Westlake, Ohio 44145 (440) 244-7216
(440) 808-0229
Credit Cards
ATMs 2130 West Park Drive
**Captain Larry's Marathon Lorain, Ohio 44053
1317 State Route 60 (440) 989-3348
Vermilion, Ohio
Customer Service
**Dad's Sunoco 2130 West Park Drive
7580 Leavitt Road Lorain, Ohio 44053
State Route 58 (440) 989-3348
Amherst, Ohio (800) 860-1007
**Fligner's Supermarket Human Resources
1846 Broadway 2130 West Park Drive
Lorain, Ohio Lorain, Ohio 44053
(440) 989-3139
**Gateway Plaza
3451 Colorado Avenue Operations
Lorain, Ohio 2130 West Park Drive
Lorain, Ohio 44053
**Lakeland Medical Center (440) 989-3315
3700 Kolbe Road
Lorain, Ohio Purchasing
2150 West Park Drive
**Lorain County Lorain, Ohio 44053
Community College (440) 989-3327
1005 North Abbe Road
Elyria, Ohio Investments and Trust Services
457 Broadway
**Lowe'a Home Lorain, Ohio 44052
Improvement Warehouse (440) 244-7226
620 Midway Boulevard
Elyria, Ohio
<PAGE>37
All Other Departments &
Information Not Listed
Telebanker (440) 245-4562
Telebanker (800) 610-9033
Toll Free (800) 860-1007
Lorain (440) 244-6000
Internet
www.4LNB.com
*Access restricted to residents,
their visitors and employees
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
<PAGE>38
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the nine months ended September 30, 2000)
S - K Reference Number (3a)
LNB Bancorp, Inc., - Second Amended Articles
Of Incorporation of LNB Bancorp, Inc.
<PAGE>39
Exhibit A
SECOND AMENDED ARTICLES OF INCORPORATION
OF
LNB BANCORP, INC.
These Second Amended Articles of Incorporation (the "Articles") of
LNB Bancorp, Inc. ("Corporation") hereby supersede Corporation's
existing Amended Articles of Incorporation and shall read as follows:
FIRST. The name of Corporation shall be LNB Bancorp, Inc.
SECOND. The place in Ohio where Corporation's principal office is
to be located is the City of Lorain, Lorain County.
THIRD. The purpose for which Corporation is formed is to engage
in any lawful act or activity for which corporations may be formed under
Sections 1701.01 through 1701.98, inclusive, of the Ohio Revised Code,
including (but not limited to) to qualify and act as a "financial
holding company" as defined by the Gramm-Leach-Bliley Act of 1999.
FOURTH. The number of shares (collectively, the "Shares") which
Corporation is authorized to have outstanding is 16,000,000 Shares
consisting of: (i) 15,000,000 of common Shares, One Dollar ($1.00) par
value (the "Common Shares"); and (ii) 1,000,000 of voting preferred
Shares, no par value (the "Voting Preferred Shares") as follows:
A. Common Shares:
The holders of the Common Shares are entitled at all times
to one (1) vote for each Share and to such dividends as the Board of
Directors (herein called the "Board") may in its discretion periodically
declare, subject, however, to the voting and dividend rights of the
holders of the Voting Preferred Shares. In the event of any
liquidation, dissolution or winding up of Corporation, the remaining
assets of Corporation after the payment of all debts and necessary
expenses shall be distributed among the holders of the Common Shares pro
rata in accordance with their respective Share holdings, subject,
however, to the rights of the holders of the Voting Preferred Shares
then outstanding. The Common Shares are subject to all of the terms and
provisions of the Voting Preferred Shares as established by the Board in
accordance with this Article FOURTH.
B. Voting Preferred Shares:
The Board is hereby expressly authorized in its discretion
to adopt amendments to the Articles to provide for the issuance of one
(1) or more series of Voting Preferred Shares; to establish periodically
the number of Shares to be included in each such series; and to fix the
designation, powers, preferences, dividend rights and other rights of
the Voting Preferred Shares of each such series and any qualifications,
limitations or restrictions thereof, to the fullest extent permitted by
law. When voting as a class, the holders of the Voting Preferred Shares
shall be entitled at all times to one (1) vote for each Voting Preferred
Share. Voting Preferred Shares redeemed or otherwise acquired by
<PAGE>40
Corporation shall become authorized but unissued Voting Preferred
Shares, shall be unclassified as to series, and may thereafter be
reissued in the same manner as other authorized but unissued Voting
Preferred Shares.
C. Series A Voting Preferred Shares:
From the authorized number of Voting Preferred Shares of
Corporation, a series of Voting Preferred Shares designated as "Series A
Voting Preferred Shares" is hereby created and shall consist of 750,000
Shares, without par value, of which the preferences, relative and other
rights, and the qualifications, limitations or restrictions thereof
shall be (in addition to those set forth elsewhere in these Articles) as
follows:
1. Dividends and Distribution.
(a) In preference to the holders of Common Shares
and of any outstanding junior Shares of Corporation, but subject to the
prior and superior rights of the holders of any Shares of any series of
Voting Preferred Shares ranking prior and superior to the Shares of
Series A Voting Preferred Shares with respect to dividends, the holders
of Series A Voting Preferred Shares shall be entitled to receive (when,
as and if declared by the Board) from funds legally available for the
purpose, quarterly dividends payable in cash on the first Business Day
of January, April, July and October in each year (each such date being
referenced herein as a "Quarterly Dividend Payment Date", and "Business
Day" meaning any day other than a Saturday, Sunday or a day on which
banking institutions in the State of Ohio are authorized or obligated by
law or executive order to close), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a Share or fraction of
a Share of Series A Voting Preferred Shares. Such dividends shall be in
an amount per Share (rounded to the nearest cent) equal to the greater
of: (a) One Dollar ($1.00), or (b) subject to the provision for
adjustment hereinafter set forth, 100 times the aggregate per Share
amount of all cash dividends and 100 times the aggregate per Share
amount (payable in kind) of all non-cash dividends or other
distributions (other than a dividend payable in Common Share or other
subdivision of the outstanding Common Shares, by reclassification or
otherwise, declared on the Common Shares) since the immediately
preceding Quarterly Dividend Payment Date, or, with respect to the first
Quarterly Dividend Payment Date, since the first issuance of any Share
or fraction of a Share of Series A Voting Preferred Shares. If
Corporation shall, on or after November 6, 2000 (the "Rights Declaration
Date"), (i) declare any dividend on Common Shares payable in Common
Shares, (ii) subdivide the outstanding Common Shares, or (iii) combine
the outstanding Common Shares into a smaller number of Shares, then (in
each such case) the amount to which holders of Series A Voting Preferred
Shares were entitled immediately prior to such event under clause (b) of
the preceding sentence shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is
the number of Common Shares outstanding immediately prior to such event.
(b) The Board shall declare a dividend or
<PAGE>41
distribution on the Series A Voting Preferred Shares as provided in
paragraph (a) above immediately after it declares a dividend or
distribution on the Common Shares (other than a dividend payable in
Shares of Common Shares); provided that, subject to the requirements of
applicable law, in the event no dividend or distribution has been
declared on the Common Shares during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend Payment
Date, a dividend of One Dollar ($1.00) per Share on the Series A Voting
Preferred Shares shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(c) Dividends shall accrue and be cumulative on
outstanding Series A Voting Preferred Shares from the Quarterly Dividend
Payment Date next preceding the date of issue of such Shares of Series A
Voting Preferred Shares, unless: (i) the date of issue of such Shares
is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such Shares shall accrue from the date
of issue of such Shares, or (ii) the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of Series A Voting Preferred Shares entitled to
receive a quarterly dividend and before such Quarterly Dividend Payment
Date, in either of which events such dividends shall accrue and be
cumulative from such Quarterly Dividend Payment Date. Accrued but
unpaid dividends shall not bear interest. Dividends paid on Series A
Voting Preferred Shares in an amount less than the total amount of such
dividends at the time accrued and payable on such Shares shall be
allocated pro rata on a Share-by-Share basis among all such Shares at
the time outstanding. The Board may fix a record date for the
determination of holders of Series A Voting Preferred Shares entitled to
receive payment of a dividend or distribution declared thereon, which
record date shall be no more than sixty (60) days prior to the date
fixed for the payment thereof.
2. Voting Rights. The holders of Series A Voting
Preferred Shares shall have the following voting rights, in addition to
those set forth elsewhere in this Article FOURTH:
(a) Subject to the provision for adjustment
hereinafter set forth, each Series A Voting Preferred Share shall
entitle the holder thereof to one hundred (100) votes on all matters
submitted to a vote of the shareholders of Corporation. If Corporation
shall at any time on or after the Rights Declaration Date: (i) declare
any dividend on Common Shares payable in Common Shares, (ii) subdivide
the outstanding Common Shares, or (iii) combine the outstanding Common
Shares into a small number of Shares, then (in each such case) the
number of votes per Share to which holders of Series A Voting Preferred
Shares were entitled immediately prior to such event shall be adjusted
by multiplying such number by a fraction, the numerator of which is the
number of Common Shares outstanding immediately after such event and the
denominator of which is the number of Common Shares outstanding
immediately prior to such event.
(b) Except as otherwise provided herein or by law,
the holders of Series A Voting Preferred Shares and the holders of
Common Shares shall vote together as one class on all matters submitted
to a vote of shareholders of Corporation.
<PAGE>42
(c) Except as set forth herein, the holders of
Series A Voting Preferred Shares shall have no special voting rights and
their consent shall not be required (except to the extent they are
entitled to vote as set forth in these Articles or by law) for taking
any corporate action.
3. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends
or distributions payable on the Series A Voting Preferred Shares as
provided in Section 1 of paragraph C. (Series A Voting Preferred Shares)
of Article FOURTH are in arrears, thereafter and until all accrued and
unpaid dividends and distributions (whether or not declared) on Series A
Voting Preferred Shares outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends or make any other distributions on Shares
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Voting Preferred Shares;
(ii) declare or pay dividends or make any other distributions on any
Shares ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Voting Preferred Shares,
except dividends paid ratably on the Series A Voting Preferred Shares
and all such parity Shares on which dividends are payable or in arrears
in proportion to the total amounts to which the holders of all such
Shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration Shares
ranking junior (either as to dividends or upon liquidation, dissolution
or winding up) to the Series A Junior Voting Preferred Shares; provided,
however, that Corporation may at any time redeem, purchase or otherwise
acquire any such junior Shares in exchange for any Shares of Corporation
ranking junior (either as to dividends or upon dissolution, liquidation
or winding up) to the Series A Voting Preferred Shares; and
(iv) purchase or otherwise acquire for consideration any Series A
Voting Preferred Shares or any Shares ranking on a parity with the
Series A Voting Preferred Shares, except in accordance with a purchase
offer made in writing or by publication (as determined by the Board) to
all holders of such Shares upon such terms as the Board, after
consideration of the respective annual dividend rates and other relative
rights and preferences of the respective series and classes, determines
in good faith will result in fair and equitable treatment among the
respective series or classes.
(b) Corporation shall not permit any subsidiary of
Corporation to purchase or otherwise acquire for consideration any
Shares of Corporation unless, pursuant to paragraph (a) of this Section
3, Corporation could purchase or otherwise acquire such Shares at such
time and in such manner.
4. Reacquired Shares. Any Series A Voting Preferred
Shares purchased or otherwise acquired by Corporation in any manner
whatsoever shall be retired and cancelled promptly after such
acquisition. All such Shares, upon their cancellation, shall become
<PAGE>43
authorized but unissued Voting Preferred Shares, without designation as
to series, and may be reissued as part of any series of Voting Preferred
Shares created by the Board (including Series A Voting Preferred Shares)
subject to the condition and restrictions on issuance set forth herein.
5. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of Corporation, no distribution
shall be made to:
(a) The holder of Shares ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series
A Voting Preferred Shares, unless (prior thereto) the holders of Series
A Voting Preferred Shares have received the greater of: (i) One Dollar
($1.00) per Share ($0.001 per one one-hundredth of a Share), plus an
amount equal to accrued and unpaid dividends and distributions thereon
(whether or not declared) to the date of such payment, or (ii) an
aggregate amount per Share, subject to the provision for adjustment
herein set forth, equal to 100 times the aggregate amount to be
distributed per Share to holders of Common Shares; or
(b) The holders of Shares ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the
Series A Voting Preferred Shares, except distributions made ratably on
the Series A Voting Preferred Shares and all other such parity Shares in
proportion to the total amounts to which the holders of all such Shares
are entitled upon such liquidation, dissolution or winding up.
If Corporation shall at any time declare or pay any
dividend on Common Shares payable in Common Shares, or effect a
subdivision or combination or consolidation of the outstanding Common
Shares (by reclassification or otherwise) into a greater or lesser
number of Common Shares, then (and in each such event) the aggregate
amount to which the holder of each Share of Series A Voting Preferred
Shares was entitled immediately prior to such event under paragraph (a)
of this Section 5 shall be adjusted by multiplying such amount by a
fraction, the numerator of which is the number of Common Shares
outstanding immediately after such event and the denominator of which is
the number of Common Shares that were outstanding immediately prior to
such event.
6. Combination. If Corporation shall enter into any
consolidation, merger, combination or other transaction in which the
Common Shares are exchanged for or changed into other stock, securities,
cash or any other property, then (in each such event) the Series A
Voting Preferred Shares shall at the same time be similarly exchanged or
changed in an amount per Share (subject to the provision for adjustment
hereinafter set forth) equal to 100 times the aggregate amount of stock,
securities, cash or any other property (payable in kind), as the case
may be, into which or for which each Common Share is changed or
exchanged. If, at any time on or after the Rights Declaration Date,
Corporation (i) declares any dividend on Common Shares payable in Common
Shares, (ii) subdivides the outstanding Common Shares; or (iii) combines
the outstanding Common Shares into a smaller number of Shares, then (in
each such case) the amount set forth in the preceding sentence with
respect to the exchange or change of Series A Voting Preferred Shares
shall be adjusted by multiplying such amount by a fraction, the
<PAGE>44
numerator of which is the number of Common Shares outstanding
immediately after such event and the denominator of which is the number
of Common Shares that were outstanding immediately prior to such event.
7. No Redemption. The Series A Voting Preferred Shares
shall not be redeemable; provided, however, that Corporation may acquire
Series A Voting Preferred Shares in any other manner permitted by law or
these Articles.
8. Ranking. Unless otherwise provided in these Articles
or any subsequent amendment of these Articles relating to a subsequent
series of preferred Shares of Corporation, the Series A Voting Preferred
Shares shall rank junior to all other series of Corporation's Voting
Preferred Shares as to the payment of dividends and the distribution of
assets on liquidation, dissolution or winding up and shall rank senior
to the Common Shares.
9. Amendment. These Articles shall not be further
amended in any manner which would materially and adversely alter or
change the powers, preference or special rights of the Series A Voting
Preferred Shares without the affirmative vote of the holders of at least
a majority of the outstanding Series A Voting Preferred Shares, voting
together as a single series.
10. Fractional Shares. Series A Voting Preferred Shares
may be issued in fractions of a Share (in one one-hundredth (1/100) of a
Share and integral multiples thereof) that shall entitle the holder (in
proportion to such holder's fractional Shares) to exercise voting
rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series A Voting Preferred
Shares.
FIFTH. Except as otherwise provided in these Articles,
Corporation is hereby authorized to purchase through action of the
Board, without the approval of the holders of any Shares of any class
and upon such terms and conditions as the Board determines: (1) Shares
of any class or series issued by Corporation, subject to express terms
of such Shares; (2) any security or other obligation of the Corporation
which may confer upon the holder thereof the right to convert such
security or obligation into Shares of any class or series authorized by
these Articles; (3) any security or other obligation which may confer
upon the holder thereof the right to purchase Shares of any class or
series authorized by these Articles; and (4) Shares of any class issued
by Corporation if and when any holder of such Shares desires to (or,
upon the happening of any event, is required to) sell such Shares.
SIXTH. No holder of any Shares of any class shall have the right
to vote cumulatively in the election of Directors to the Board.
SEVENTH. No holder of the Shares of any class shall have any
preemptive right to subscribe for or to purchase any Shares of any class
whether now or hereafter authorized.
<PAGE>45
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the nine months ended September 30, 2000)
S - K Reference Number (27)
Financial Data Schedule
(Follows as a separate document)
