<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 June 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 July 31, 2000: 4,210,647 shares
Class of Common Stock: $1.00 par value
<PAGE>2
LNB Bancorp, Inc.
Quarterly Report on Form 10-Q
Quarter Ended June 30, 2000
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Requisition 210.10-01 of
Regulation S-X is included in this Form 10-Q as referenced below:
Page
Number
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements of
Cash Flows 9
Notes to the Condensed Consolidated Financial
Statements 11
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 17
Item 3 - Quantitative and Qualitative Disclosures
about Market Risk 22
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
Security Holders 23
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
JUNE 30, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 2000 1999
------------- -------------
(Unaudited)
ASSETS:
Cash and due from banks $ 27,094,000 $ 28,023,000
Federal funds sold and short-term
investments 3,036,000 9,320,000
Securities:
Available for sale, at fair value 77,412,000 75,728,000
Held to maturity, at cost (fair value
$42,009,000 and $41,819,000, respectively) 44,785,000 44,642,000
Federal Home Loan Bank and Federal Reserve
Bank stock, at cost 3,046,000 2,949,000
------------ ------------
Total Securities 125,243,000 123,319,000
------------ ------------
Loans:
Portfolio loans 429,692,000 409,971,000
Loans available for sale 9,730,000 9,545,000
------------ ------------
Total Loans 439,422,000 419,516,000
Reserve for loan losses (4,868,000) (4,667,000)
------------ ------------
Net loans 434,554,000 414,849,000
------------ ------------
Bank premises and equipment, net 11,274,000 11,253,000
Intangible assets 4,046,000 4,245,000
Accrued interest receivable 4,138,000 4,057,000
Other assets 4,486,000 4,449,000
Other foreclosed assets 247,000 96,000
------------ ------------
TOTAL ASSETS $614,118,000 $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 $ 86,805,000 $ 80,654,000
Savings and passbook accounts 202,733,000 191,928,000
Certificates of deposit 200,004,000 184,249,000
------------ ------------
Total deposits 489,542,000 456,831,000
------------ ------------
Securities sold under repurchase agreements
and other short-term borrowings 42,378,000 52,122,000
Federal Home Loan Bank advances, short-term 5,360,000 15,000,000
Federal Home Loan Bank advances, long-term 18,985,000 19,345,000
Accrued interest payable 1,600,000 1,510,000
Accrued taxes, expenses, and
other liabilities 3,242,000 3,750,000
------------ ------------
Total Liabilities 561,107,000 548,558,000
------------ ------------
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 4,310,447 and
4,227,161, respectively and Shares
outstanding 4,210,447 and 4,127,161
respectively 4,228,000 4,227,000
Additional capital 22,703,000 22,685,000
Retained earnings 30,155,000 28,057,000
Accumulated other comprehensive (loss) (1,175,000) (1,016,000)
Treasury stock at cost, 100,000 shares (2,900,000) (2,900,000)
------------ ------------
Total Shareholders' Equity 53,011,000 51,053,000
------------ ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $614,118,000 $599,611,000
============ ============
See notes to unaudited condensed consolidated financial statements.
<PAGE>5
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SIX MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS JUNE 30,
OF INCOME (UNAUDITED) ------------------------
2000 1999
INTEREST INCOME ------------------------
Interest and fees on loans:
Taxable $18,651,000 $16,429,000
Tax-exempt 10,000 16,000
Interest and dividends on securities:
Taxable 3,590,000 3,421,000
Tax-exempt 124,000 108,000
Interest on Federal funds sold and
short-term investments 85,000 85,000
----------- -----------
TOTAL INTEREST INCOME 22,460,000 20,059,000
----------- -----------
INTEREST EXPENSE:
Interest on Certificates of Deposit
of $100,000 and over 1,326,000 1,249,000
Interest on other deposits 6,096,000 4,920,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 832,000 528,000
Interest on Federal Home Loan Bank advances 679,000 617,000
----------- -----------
TOTAL INTEREST EXPENSE 8,933,000 7,314,000
----------- -----------
NET INTEREST INCOME 13,527,000 12,745,000
Provision for loan losses 600,000 700,000
NET INTEREST INCOME AFTER PROVISION ----------- -----------
FOR LOAN LOSSES 12,927,000 12,045,000
----------- -----------
OTHER INCOME:
Investment and Trust Services Division income 1,117,000 1,074,000
Service charges on deposit accounts 1,546,000 1,526,000
Other service charges, exchanges and fees 1,356,000 1,193,000
Other operating income 26,000 218,000
----------- -----------
TOTAL OTHER INCOME 4,045,000 4,011,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>6
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 5,105,000 4,915,000
Net occupancy expense of premises 758,000 790,000
Furniture and equipment expense 1,289,000 1,201,000
Amortization of intangible assets 208,000 210,000
Supplies and postage 476,000 509,000
FDIC deposit insurance premium 47,000 25,000
Ohio franchise tax 330,000 293,000
Other operating expenses 2,527,000 2,363,000
------------ -----------
TOTAL OTHER EXPENSES 10,740,000 10,306,000
------------ -----------
INCOME BEFORE INCOME TAXES 6,232,000 5,750,000
INCOME TAXES 2,132,000 1,954,000
------------ -----------
NET INCOME $ 4,100,000 $ 3,796,000
============ ===========
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .97 $ .90
====== ======
DILUTED EARNINGS PER SHARE $ .97 $ .90
====== ======
DIVIDENDS DECLARED PER SHARE $ .47 $ .43
====== ======
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 JUNE 30,
OF INCOME (UNAUDITED) ------------------------
2000 1999
INTEREST INCOME -----------------------
Interest and fees on loans:
Taxable $ 9,629,000 $ 8,457,000
Tax-exempt 5,000 8,000
Interest and dividends on securities:
Taxable 1,778,000 1,710,000
Tax-exempt 63,000 54,000
Interest on Federal funds sold and
short-term investments 46,000 52,000
----------- -----------
TOTAL INTEREST INCOME 11,521,000 10,281,000
----------- -----------
INTEREST EXPENSE:
Interest on Certificates of Deposit
of $100,000 and over 714,000 638,000
Interest on other deposits 3,136,000 2,483,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 396,000 291,000
Interest on Federal Home Loan Bank advances 303,000 327,000
----------- -----------
TOTAL INTEREST EXPENSE 4,549,000 3,739,000
----------- -----------
NET INTEREST INCOME 6,972,000 6,542,000
Provision for loan losses 300,000 500,000
NET INTEREST INCOME AFTER PROVISION ----------- -----------
FOR LOAN LOSSES 6,672,000 6,042,000
----------- -----------
OTHER INCOME:
Investment and Trust Services Division income 615,000 604,000
Service charges on deposit accounts 784,000 849,000
Other services charges, exchanges and fees 701,000 601,000
Other operating income 12,000 207,000
----------- -----------
TOTAL OTHER INCOME 2,112,000 2,261,000
STATEMENT CONTINUED ON NEXT PAGE
<PAGE>8
STATEMENT CONTINUED FROM PREVIOUS PAGE
OTHER EXPENSES:
Salaries and employee benefits 2,613,000 2,520,000
Net occupancy expense of premises 372,000 398,000
Furniture and equipment expense 716,000 593,000
Supplies and postage 268,000 253,000
FDIC deposit insurance premium 23,000 12,000
Ohio franchise tax 161,000 142,000
Amortization of intangible assets 104,000 105,000
Other operating expenses 1,283,000 1,275,000
------------ ------------
TOTAL OTHER EXPENSES 5,540,000 5,298,000
------------ ------------
INCOME BEFORE INCOME TAXES 3,244,000 3,005,000
INCOME TAXES 1,124,000 1,042,000
------------ ------------
NET INCOME $ 2,120,000 $ 1,963,000
============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .50 $ .47
====== ======
DILUTED EARNINGS PER SHARE $ .50 $ .47
====== ======
DIVIDENDS DECLARED PER SHARE $ .24 $ .22
====== ======
See notes to unaudited condensed consolidated financial statements.
<PAGE>9
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
SIX MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS JUNE 30,
OF CASH FLOWS (UNAUDITED) -------------------------
2000 1999
CASH FLOWS FROM OPERATING ACTIVITIES: -------------------------
Interest received $22,365,000 $19,999,000
Other income received 4,083,000 3,943,000
Interest paid (8,843,000) (7,145,000)
Cash paid for salaries and
employee benefits (5,251,000) (4,707,000)
Net occupancy expense of premises paid (598,000) (589,000)
Furniture and equipment expenses paid (428,000) (418,000)
Cash paid for supplies and postage (476,000) (509,000)
Cash paid for other operating expenses (3,010,000) (2,466,000)
Federal income taxes paid (2,101,000) (2,010,000)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 5,741,000 6,098,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
available for sale 7,000,000 11,497,000
Proceeds from maturities of securities
held to maturity 318,000 122,000
Purchases of securities held to maturity (701,000) (6,665,000)
Purchases of securities available
for sale (8,858,000) (9,471,000)
Net (increase) in loans made to customers (20,465,000) (41,426,000)
Purchases of bank premises, equipment
and software (1,042,000) (821,000)
Proceeds from sales of bank premises,
and equipment (18,000) -0-
Purchases of other foreclosed assets 247,000 -0-
Proceeds from liquidation of other
foreclosed assets 96,000 1,191,000
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (23,917,000) (45,573,000)
----------- -----------
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 6,151,000 (3,924,000)
Net increase in savings and
passbook deposits 10,805,000 7,133,000
Net increase in certificates of deposit 15,755,000 15,994,000
Net increase (decrease) in securities sold
under repurchase agreements and other
short-term borrowings (9,744,000) 15,383,000
Proceeds from Federal Home Loan
Bank advances -0- 12,300,000
Payment on Federal Home Loan Bank advances 10,000,000 -0-
Proceeds from exercise of stock options 19,000 2,000
Dividends paid (2,023,000) (1,938,000)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 10,963,000 44,950,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS (7,213,000) 5,475,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 37,343,000 32,801,000
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $30,130,000 $38,276,000
=========== ===========
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $ 4,100,000 $ 3,796,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,021,000 984,000
Amortization of intangible assets 199,000 211,000
Amortization of deferred loan fees
and costs, net 135,000 (139,000)
Provision for loan losses 600,000 700,000
(Increase)in accrued interest receivable (81,000) (280,000)
(Increase) in other assets (505,000) (260,000)
Increase in accrued interest payable 90,000 169,000
Increase (decrease) in accrued taxes,
expenses and other liabilities (31,000) 827,000
Others, net 213,000 90,000
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 5,741,000 $ 6,098,000
=========== ===========
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 June 30, 2000, compared to December 31, 1999 and the results of its
operations and cash flows for the three and six months ending June 30,
2000 compared to the same period 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.
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.
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. is strategically reviewing its
new business opportunities under the Gramm-Leach-Bliley Act.
LNB Bancorp, Inc. achieved a significant milestone in its history by the
listing of its common stock on the NASDAQ Stock Market. The NASDAQ
listing will provide greater liquidity for our stock while enhancing our
visibility in the investment community.
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.
<PAGE>12
BASIS OF PRESENTATION
The unaudited condensed consolidated balance sheet as of June 30, 2000,
the unaudited condensed consolidated statements of income and the
unaudited condensed consolidated statements of cash flows for the three
and six months ended June 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
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 June 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 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,
<PAGE>13
depending upon the adequacy of the reserve for loan losses.
RECLASSIFICATIONS
Certain 1999 amounts have been reclassified to conform to 2000
presentation.
<PAGE>14
2. EARNINGS PER SHARE DATA
Earnings per share is calculated as follows:
For the 6 Months ended June 30, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $4,100,000
Basic EPS
Income available to
common stockholders $4,100,000 4,210,185 $ .97
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 5,974
---------- ---------
Dilutive EPS
Income available to common
stockholders + assumed
conversions $4,100,000 4,216,159 $ .97
========== ========= =====
For the 6 Months ended June 30, 1999
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $3,796,000
Basic EPS
Income available to
common stockholders $3,796,000 4,205,142 $ .90
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 8,606
---------- ---------
Dilutive EPS
Income available to common
stockholders + assumed
conversions $3,796,000 4,213,748 $ .90
========== ========= =====
For the 3 Months ended June 30, 2000
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $2,120,000
Basic EPS
Income available to
common stockholders $2,120,000 4,210,292 $ .50
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 4,241
---------- ---------
Dilutive EPS
Income available to common
stockholders + assumed
conversions $2,120,000 4,214,533 $ .50
========== ========= =====
<PAGE>15
For the 3 Months ended June 30, 1999
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $1,963,000
Basic EPS
Income available to
common stockholders $1,963,000 4,205,192 $ .47
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 8,231
---------- ---------
Dilutive EPS
Income available to common
stockholders + assumed
conversions $1,963,000 4,213,423 $ .47
========== ========= =====
3. COMPREHENSIVE INCOME
The Corporation's comprehensive income for the six months ended
June 30, 2000 and 1999 are as follows:
For the six months ended June 30,
2000 1999
---------------------------------
Net income $4,100,000 $3,796,000
Other comprehensive income:
Change in unrealized gain on
securities available for sale,
net of tax (credit) of
$(54,000) and $(525,000) (105,000) (1,018,000)
----------- -----------
Comprehensive Income $3,995,000 $2,778,000
The Corporation's comprehensive income for the three months ended June
30, 2000 and 1999 are as follows:
For the three months ended June 30,
2000 1999
-----------------------------------
Net income $2,120,000 $1,963,000
Other comprehensive income:
Change in unrealized gain on
securities available for sale,
net of tax (credit) of
$(8,000) and $(322,000) (14,000) (624,000)
----------- ------------
Comprehensive Income $2,106,000 $1,339,000
<PAGE>16
4. DIVIDEND REINVESTMENT AND CASH STOCK PURCHASE PLAN
The Board of Directors adopted a dividend reinvestment and cash stock
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 half of 2000. In the first half of
2000, stock was purchased in the open market at the then current market
price.
<PAGE>17
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
FINANCIAL CONDITION
Total assets of the Corporation increased $14,507,000 during the first
half of 2000, to $614,118,000. This growth was funded by increases in
savings deposits, market access accounts, certificates of deposit and
repurchase agreements.
Total earning assets increased 2.8% to $567,701,000 at June 30, 2000 from
$552,155,000 at December 31, 1999. The ratio of earning assets to total
assets increased from 92.1% at December 31, 1999 to 92.4% at June 30,
2000. The loan to deposit ratio has decreased from 91.83% at 1999
year-end to 89.76% at June 30, 2000.
Federal funds sold and other interest bearing investments decreased by
$6,284,000 during the first six months of 2000. This decrease is the
result of the bank eliminating its excess liquidity which was built up for
Y2K purposes.
Total securities increased $1,924,000 ending the first half at
$125,243,000. At June 30, 2000 gross unrealized gains (losses) in the
investment portfolio were approximately $44,000 and $(4,732,000),
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 increased $19,705,000 during the first half to $435,544,000 at
June 30, 2000, for a 5% increase. Commercial loan growth was strong
accounting for 79% of total loan growth while mortgage and consumer loans
accounted for 14% and 6%, respectively, of total loan growth during the
six months ended June 30, 2000. This loan increase was supported by a
spring/summer home equity loan sale program. This home equity sale
program resulted in new loans totaling over $2 million.
The reserve for loan losses ended the quarter at $4,868,000 supported by a
provision for loan losses of $600,000, recoveries of $134,000 and loan
charge-offs of $533,000. The reserve for loan losses as a percentage of
ending loans was 1.11% and 1.11% at December 31, 1999 and June 30, 2000,
respectively. Corporate management believes that the reserve for loan
losses as a percentage of ending loans at June 30, 2000 remains at an
appropriate level. The ratio of the reserve for loan losses to
nonperforming assets improved to 557.6% as of June 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 June 30, 2000.
Nonperforming assets at June 30, 2000 totaled $873,000, down from
$1,439,000 at March 31, 2000. The second quarter decrease in
nonperforming assets of $566,000 resulted from loans being brought current
in the amount of $880,000, loans charged-off in the amount of $000,000
liquidations of nonaccrual loans of $208,000 and increases in nonaccrual loans
of $276,000.
The level of nonperforming assets increased by $100,000 during the first
quarter of 2000. This increase is the result of an increase in nonaccrual
<PAGE>18
loans of $196,000 as well as by a decrease in other foreclosed assets
owned in the amount of $96,000. The increase in nonaccrual loans is due to
decreases in nonaccrual principal balances of $227,000 which have been
paid off or brought current, loans charged-off in the amount of $170,000
and liquidations of nonaccrual loans of $92,000 and increases in
nonaccrual principal balances of $685,000 which includes one large
commercial loan credit of $384,000 and several small commercial and
consumer loan credits. The decrease in nonaccrual loans in the first
quarter of 2000 was due primarily to one commercial loan customer and 28
personal loan customers. The decrease in Other Foreclosed Assets in the
amount of $96,000 resulted from liquidation of one residential property.
The level of nonperforming assets remains at relatively low levels and
Corporate management believes nonperforming assets are well
collateralized.
The table below presents the level of nonperforming assets at the end of
the last four calendar quarters.
Amounts in thousands 06/30/00 03/31/00 12/31/99 09/30/99
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual $ 626 $ 1,439 $ 1,243 $ 994
Restructured 0 0 0 0
Other Foreclosed Assets 247 0 96 0
------ ------ ------ ------
Total Nonperforming Assets $ 873 $ 1,439 $ 1,339 $ 994
====== ====== ====== ======
Reserve for loan losses
to total nonperforming
assets 557.6% 332.8% 348.5% 413.3%
====== ====== ====== ======
Accruing loans past due
90 days $ 437 $ 781 $ 555 $ 505
====== ====== ====== ======
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 June 30, 2000, potential problem loans totaled $6,078,000, a decrease
of $67,000 from the December 31, 1999 balance. The decrease in potential
problem loans during 2000 is primarily due to decreases from consumer
indirect automobile loans.
The Corporation's credit policies are reviewed and modified on an ongoing
basis in order to remain suitable for the management of credit risk within
the loan portfolio as conditions change. At June 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 $100,136,000 and $87,614,000 at June 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 quarter of
2000. Mortgage and commercial construction loan demand increased in the
second quarter of 2000 as seasonal weather conditions improved and the
construction season began. Consumer loan demand increased in the second
quarter as demand for home improvement and automobile loans increased.
<PAGE>19
Total deposits increased $32,711,000 during the first half to
$489,542,000. Noninterest-bearing deposits increased to $86,805,000, at
June 30, 2000 for an increase of $6,131,000, while interest-bearing
deposits climbed to $402,737,000 for an increase of $26,560,000.
Federal funds purchased and securities sold under agreements to repurchase
decreased $9,744,000 during the first half. Due to the volatility of
customer repurchase agreements, most funds generated by repurchase
activity enter the Corporation's earning assets as short-term investments.
LIQUIDITY
Liquidity measures a corporation's ability to generate cash or otherwise
obtain funds at reasonable prices to fund commitments to borrowers as well
as the demand of depositors and debt holders. Principal internal sources
of liquidity for the Corporation and the Bank are cash and cash
equivalents, Federal funds sold, and the maturity structures of investment
securities and portfolio loans. Securities and loans available for sale
provide another source of liquidity through the cash flows of these
interest-bearing assets as they mature or are sold.
The Corporation continues to maintain a relatively high liquid position in
order to take advantage of interest rate fluctuations. As of June 30,
2000, short-term security investments with maturities of one year or less
totalled $7,978,000, which represented 6.4% of total securities. Adding
cash and due from banks of $27,094,000, and Federal Funds sold and other
interest bearing instruments of $3,036,000, total liquid assets
represented 6.2% of total assets. The Corporation's subsidiary bank has
established short-term lines of credit at correspondent banks, the Federal
Home Loan Bank and the Federal Reserve Bank of Cleveland in the amounts of
$16,000,000, $25,000,000 and $24,872,000, respectively, with credit
available in the amounts of $12,000,000, $6,000,000 and $24,827,000,
respectively.
CAPITAL RESOURCES
LNB Bancorp, Inc. continues to maintain a strong capital position. Total
shareholders' equity increased to $53,011,000, at June 30, 2000. The
increase resulted primarily from $4,100,000 of net income generated from
the first half of operations less a cash dividend declared to shareholders
of $2,000,000. The increase in interest rates experienced in the first
half of 2000 has caused a decrease in the overall market value of
available for sale securities which resulted in a decrease in
shareholders' equity of $159,000 for the six months ended June 30, 2000.
As of June 30, 2000, 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 along with the ratios required to be adequately
capitalized have exceeded the ratios for a well-capitalized financial
institution for all periods presented above. The Corporation's capital
and leverage ratios as of June 30, 2000 and 1999 follow together with
<PAGE>20
those ratios required for the Corporation to be considered adequately
capitalized.
June 30,
---------------------
2000 1999
------ ------
Tier I capital ratio 11.75% 11.64%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 12.90% 12.61%
Required total capital ratio 8.00% 8.00%
Leverage ratio 8.44% 8.21%
Required leverage ratio 3.00% 3.00%
The Corporation regularly evaluates acquisition opportunities and conducts
due diligence activities in connection with possible acquisition in
markets near or within the Corporation's current geographic market. As a
result, acquisition discussions and, in some cases, 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 for the first half of 2000 increased $2,216,000
when compared to the first half of 1999. Increased loan income resulted
from the impact of increases in the loan portfolio of $19,906,000 and by
increases in interest rates. Interest and dividends on securities was
$3,714,000 for the first half of 2000 for an increase of $185,000 over the
same period in 1999. Interest and dividends on securities represented
16.6% of total interest income at June 30, 2000 compared to 17.6% at June
30, 1999. Interest on Federal funds sold and short-term investments was
$85,000 at June 30, 2000 and June 30, 1999.
Total interest expense increased by $1,619,000 when compared to the first
half of 1999. The interest expense increase was fueled by increases in
deposit account interest of $1,253,000 and an increase in interest expense
from Federal Home Loan Bank advances of $62,000. Also, total interest
expense for the first half of 2000 was impacted by increases in interest
rates paid on savings accounts, market access accounts, certificate of
deposit accounts and repurchase agreements when compared to the first half
of 1999.
Total other income increased by $34,000 when compared to the first half
of 1999. This increase resulted from increases in income from fiduciary
fees of $43,000, increases in service charges of $20,000, increases in
other service charges, and exchanges and fees of $163,000 and decreases
in other income of $163,000.
The Corporation continuously monitors noninterest expenses for greater
profitability. The entire staff is geared to improving productivity at
all levels. Noninterest expense for the six months ended June 30, 2000
was $10,740,000, 4.2% above the first six months of 1999. This increase
was due primarily to increases in salaries and benefits, and increases in
credit card and merchant expenses.
The effective tax rate increased slightly from 34.0% during the first half
of 1999 to 34.2% during the first half of 2000. The increase in the
effective tax rate is due primarily to the decreases in tax exempt
<PAGE>21
interest income to total interest income. Net income was $4,100,000 and
$3,796,000 for the six months ended June 30, 2000 and 1999, respectively.
Net income per basic and diluted share was $.97 and $.90 for the six
months ended June 30, 2000 and 1999, respectively, after giving effect for
a two percent stock dividend payable July 1, 2000.
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.
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.
<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, 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
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. Also,
Corporate management does 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 (11) - Computation of Shares Used for Earnings Per
Share Calculation.
Exhibit (13) - Second Quarter Report to shareholders of LNB
Bancorp, Inc., June 30, 2000.
(b) Reports on Form 8-K
There were no reports on Form 8-K filed for the six months ended
June 30, 2000.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LNB BANCORP, INC.
(registrant)
Date: August 14, 2000 /s/ Gregory D. Friedman
_________________________
Gregory D. Friedman,
Executive Vice President and
Chief Financial Officer
Date: August 14, 2000 /s/ Mitchell J. Fallis
_________________________
Mitchell J. Fallis,
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
(11) Computation of Shares Used for Earnings Per Share
Calculations Footnote 2 Earnings Per Share on pages 14-
15 of this Form 10Q is incorporated by reference.
(12) Second Quarter Report to Shareholders of LNB Bancorp,
Inc. June 30, 2000 - EDGAR Version
(27) Financial Data Schedule
<PAGE>25
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the six months ended June 30, 2000)
S - K Reference Number (13)
Second Quarter Report to Shareholders of
LNB Bancorp, Inc. (dated June 30, 2000)
EDGAR Version
DESCRIPTION:
Three sided pamphlet:
Outside cover: white with picture showing pen on NASDAQ page
Second Quarter Report
LNB Bancorp, Inc.
June 30, 2000
Inside contains:
Message to shareholders,
Unaudited EDGAR version Consolidated Balance Sheets for period ending
June 30, 2000 and June 30, 1999, respectively,
Unaudited EDGAR version Consolidated Statements of Income for the Six
Months ended June 30, 2000 and June 30, 1999, respectively,
Branch Merchandising: Keeping our customers informed
Directors and Officers of LNB Bancorp, Inc.
<PAGE>26
Message to Shareholders
It's a pleasure, once again, to report on the progress of LNB Bancorp,
Inc., and its wholly owned subsidiary, The Lorain National Bank, after the
first half of 2000. During the first half of 2000, LNB Bancorp, Inc.
reached record milestones in earnings, assets, and dividends. We have
also achieved growth in deposits, loans, and shareholders' equity.
We are pleased to announce that earnings have increased 8 percent for
the first half of the year, compared to the same period one year ago.
Earnings for the first half of 2000 reached $4,100,000, up from $3,796,000
during the first half of 1999. Second quarter's earnings for 2000
surpassed the $2-million mark for the first time for any quarter in the
history of LNB Bancorp, Inc. reaching $2,120,000 compared with
$1,963,000 for the second quarter of 1999.
Basic and diluted earnings per share for the first half of 2000 reached
$.97, an 8 percent increase over the $.90 amount reported for the first
half of 1999. Earnings for the first half of 2000 were higher than a year
ago because of higher net interest income and noninterest income, offset
in part by slightly higher operating expenses. Increases in net interest
income for the first half of 2000 were fueled by strong commercial loan
growth.
Cash dividends declared per share for the first half of 2000 increased
9 percent compared to the first half of 1999. The year to date cash
dividends declared per share in 2000 increased by $.04 to $.47 per share,
up from $.43 per share in 1999. Second quarter 2000 regular cash
dividends surpassed the one-million dollar mark for the first time in the
Bancorp's history.
In addition, we are pleased to announce that a two percent stock
dividend was paid to shareholders on July 1, 2000. The stock dividend
increased the common stock outstanding of LNB Bancorp, Inc. by 82,562
shares to 4,210,646 shares. Cash was issued in lieu of fractional shares.
Assets eclipsed the $600 million mark for the first time in the history
of the Bancorp climbing 4 percent to $614.1 million, as of June 30, 2000,
up $23.6 million from June 30, 1999. Net loans grew by $27.5 million from
one year ago to $434.6 million at June 30, 2000 for a 7 percent increase.
Commercial loan growth was strong accounting for most of the total loan
growth during the twelve months ended June 30, 2000.
Deposits climbed 6 percent to $489.5 million, up $25.3 million from one
year ago. Increases in demand, market access and certificates of deposit
accounted for the deposit increase. Lorain National Bank operates 21
retail branches and 28 ATMs in nine local communities.
Shareholders' equity increased by $3.4 million during the twelve months
ended June 30, 2000 for a 7 percent increase. Shareholders equity
amounted to $53.0 million or $12.59 per share at June 30, 2000, compared
with $49.6 million or $12.04 per share at June 30, 1999. The annualized
return on average shareholders' equity rose .33 basis points to 15.86
percent for the first half of 2000 from 15.53 percent for the first half
of 1999.
For our shareholders seeking investor information electronically, our
newly-revised investor relations section of our web site can be viewed at
www.4LNB.com.
We appreciate and thank you for your continuing support and look forward
to addressing you after the completion of our third quarter of operations.
<PAGE>27
/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.)
Basic Earnings
Net Income Dividends Per Share Per Share
Year Millions of Dollars Dollars* Dollars*
2000 $4,100 $ .47 $0.97
1999 $3,796 $ .43 $0.90
1998 $3,432 $ .39 $0.81
1997 $3,120 $ .31 $0.73
1996 $2,777 $ .27 $0.66
*Adjusted for stock dividends and splits
<PAGE>28
Consolidated Balance Sheets
June 30, 2000 1999
-------------------------------------------------------------------------
ASSETS:
Cash and Due From Banks $ 27,094,000 $ 25,427,000
Federal Funds Sold and Short-term Investments 3,036,000 12,849,000
Federal Home Loan Bank and Federal
Reserve Bank Stock, at Cost 3,046,000 2,256,000
Securities Held to Maturity, at Cost 44,785,000 44,543,000
Securities Available for Sale, at Fair Value 77,412,000 75,061,000
Loans 439,422,000 410,843,000
Reserve for Loan Losses (4,868,000) (3,774,000)
------------------------------------------------------------------------
NET LOANS 434,554,000 407,069,000
------------------------------------------------------------------------
Premises, Equipment and Intangible
Assets, (net) 15,320,000 15,679,000
Accrued Interest Receivable and
Other Assets 8,871,000 7,586,000
------------------------------------------------------------------------
TOTAL ASSETS $614,118,000 $590,470,000
-------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Noninterest-Bearing Deposits $ 86,805,000 $ 82,760,000
Interest-Bearing Deposits 402,737,000 381,417,000
-------------------------------------------------------------------------
TOTAL DEPOSITS 489,542,000 464,177,000
-------------------------------------------------------------------------
Securities Sold under Repurchase Agreements
and Other Short-term Borrowings 42,378,000 38,343,000
Federal Home Loan Bank Advances 24,345,000 34,345,000
Accrued Interest, Taxes, Expenses and
Other Liabilities 4,842,000 3,978,000
-------------------------------------------------------------------------
TOTAL LIABILITIES 561,107,000 540,843,000
-------------------------------------------------------------------------
Preferred Stock -0- -0-
Common Stock 4,228,000 4,223,000
Additional Capital 22,703,000 22,604,000
Retained Earnings 30,155,000 26,177,000
Accumulated Other Comprehensive Income(Loss) (1,175,000) (477,000)
Treasury Stock at Cost (2,900,000) (2,900,000)
-------------------------------------------------------------------------
TOTAL SHAREHOLDERS' EQUITY 53,011,000 49,627,000
-------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $614,118,000 $590,470,000
-------------------------------------------------------------------------
<PAGE>29
TOTAL ASSETS Millions of Dollars
(A Total Assets graph follows in printed version with total assets 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 total deposits 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 Shareholder's Equity graph follows in printed version with total
shareholder's equity 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 Total Deposits Equity
Year Millions of Dollars Millions of Dollars Millions of Dollars
2000 $614.1 $489.5 $53.0
1999 $590.5 $464.2 $49.6
1998 $508.4 $432.6 $46.7
1997 $457.0 $384.5 $43.6
1996 $424.5 $357.6 $42.4
<PAGE>30
Consolidated Statements of Income
Six Months Ended June 30, 2000 1999
-------------------------------------------------------------------------
INTEREST INCOME:
Interest and Fees on Loans $18,661,000 $16,445,000
Interest and Dividends on Securities: 3,670,000 3,529,000
Interest on Federal Funds Sold and
Short-term Investments 129,000 85,000
-------------------------------------------------------------------------
TOTAL INTEREST INCOME 22,460,000 20,059,000
-------------------------------------------------------------------------
INTEREST EXPENSE:
Interest on Deposits 7,422,000 6,169,000
Interest on Securities Sold under Repurchase Agreements
and Other Short-Term Borrowings 832,000 528,000
Interest on Federal Home Loan Bank Advances 679,000 617,000
-------------------------------------------------------------------------
TOTAL INTEREST EXPENSE 8,933,000 7,314,000
-------------------------------------------------------------------------
NET INTEREST INCOME 13,527,000 12,745,000
Provision for Loan Losses 600,000 700,000
-------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES 12,927,000 12,045,000
-------------------------------------------------------------------------
OTHER INCOME:
Investments and Trust Services Division Income 1,117,000 1,074,000
Fees and Service Charges 2,902,000 2,719,000
Gains From Sales of Loans,
Securities, and Buildings -0- 158,000
Other Operating Income 26,000 60,000
-------------------------------------------------------------------------
TOTAL OTHER INCOME 4,045,000 4,011,000
-------------------------------------------------------------------------
OTHER EXPENSES:
Salaries and Employee Benefits 5,105,000 4,915,000
Net Occupancy Expense of Premises 758,000 790,000
Furniture and Equipment Expenses 1,289,000 1,201,000
Supplies and Postage 476,000 509,000
Ohio Franchise Tax 330,000 293,000
Other Operating Expenses 2,782,000 2,598,000
-------------------------------------------------------------------------
TOTAL OTHER EXPENSES 10,740,000 10,306,000
-------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 6,232,000 5,750,000
-------------------------------------------------------------------------
Income Taxes 2,132,000 1,954,000
-------------------------------------------------------------------------
NET INCOME $ 4,100,000 $ 3,796,000
-------------------------------------------------------------------------
-------------------------------------------------------------------------
PER SHARE DATA:
-------------------------------------------------------------------------
BASIC EARNINGS PER SHARE $ .97 $ .90
-------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE $ .97 $ .90
-------------------------------------------------------------------------
DIVIDENDS DECLARED PER SHARE $ .47 $ .43
<PAGE>31
-------------------------------------------------------------------------
(LOGO) LNB
Bancorp, Inc.
and its subsidiary Lorain National Bank
Logos NASDAQ Listing, FDIC, Federal Home Loan Bank, Equal Housing Lender
<PAGE>32
Inside cover
Branch Merchandising: Keeping our customers informed
Top right column color photograph of current advertisement
Despite the world's fast-paced advances in information technology,
today's consumer still remains largely dependent on traditional means of
communication. Recognizing that fact, Lorain National Bank recently
enhanced its customer communications plan during the second quarter of
2000 by adding "merchandising" messages to all of its full-service bank
lobbies.
Merchandising is not new. In fact, it's arguable that merchandising has
been around in some form since the inception of retail sales. If you're
not familiar with the term, you're probably familiar with the look -
virtually all retail establishments at shopping centers and malls employ
merchandising signs and posters to communicate sales events or special
pricing.
While not really new to Lorain National, the size and quantity of
merchandising messages has changed dramatically.
"We have taken this opportunity to add another important layer of
communication to our customers while they are in our lobbies," says James
H. Weber, Sr. V.P., Marketing. "It's an important addition to our offices
because it adds an unspoken element to our communications mix."
Lorain National sees branch merchandising as an addition to, not a
substitute for dialogue between customers and bank service
representatives. The fact is, bank customers spend very little time in
bank lobbies when not transacting business. In an effort to capture their
attention, entering or exiting the banking office, or while waiting for
service, the bank has an opportunity to alert customers of current
specials or new products.
During the third quarter of this year, Lorain National Bank is promoting
its relatively new investment vehicle, the Market Access Account. Market
Access is a deposit account which features tiered market rates and comes
bundled with a free interest-bearing checking account, a Visa Gold credit
card and a BetterWay Reserve overdraft line of credit. It's a product
designed to offer customers a relatively liquid, high-interest account to
park investment or savings dollars.
Lorain National's merchandising consists of wall signs and cards, teller
window signs and free-standing posters adjacent to literature racks. The
artwork applied to the merchandising is designed to mesh with the graphic
style used on bank literature - which is currently being re-printed with
a "family" appearance. The entire merchandising program works in
conjunction with advertising media employed outside the bank.
Currently, Lorain National employs several forms of advertising
communication, including an Internet web site (www.4LNB.com), daily and
weekly newspapers, outdoor billboards, radio commercials and direct mail.
The artwork depicted above in miniature represents a typical branch
merchandising element currently in use.
<PAGE>33
Back Cover:
White background with blue along top of page
Three column format
Directors and Officers of LNB Bancorp, Inc.
Directors:
---------------------------------------------------------
Stanley G. Pijor Jeffrey F. Riddell
Chairman of the Board President and
LNB Bancorp, Inc. and Chief Executive Officer,
Lorain National Bank Consumeracq, Inc. and
Consumers Builders Supply Co.
James F. Kidd
Vice Chairman of the Board Thomas P. Ryan
LNB Bancorp, Inc. and Executive Vice President
Lorain National Bank and Secretary/Treasurer
LNB Bancorp, Inc.
Daniel P. Batista Executive Vice President
Attorney/Shareholder and Secretary
Wickens, Herzer, Panza, Lorain National Bank
Cook & Batista
John W. Schaeffer, M.D.
Robert M. Campana President
Managing Director North Ohio Heart Center, Inc.
P.C. Campana, Inc.
Gary C. Smith
Terry D. Goode President and
Vice President Chief Executive Officer
Lorain County Title Company LNB Bancorp, Inc. and
Lorain National Bank
Wellsley O. Gray
Retired Eugene M. Sofranko
President and
James R. Herrick Chief Executive Officer
President Lorain Glass Company, Inc.
Liberty Auto Group, Inc.
Leo Weingarten
David M. Koethe Retired
Retired, former
Chairman of the Board
The Lorain Printing Company
Benjamin G. Norton
Human Resource Consultant
LTI Power Systems
Directors Emeritii of Lorain National Bank:
James L Bardoner T.L. Smith, M.D. Paul T. Stack
Retired, Former President Retired Physician Retired Manufacturer's
Dorn Industries, Inc. Representative
<PAGE>34
Officers:
---------------------------
Stanley G. Pijor
Chairman of the Board
James F. Kidd
Vice Chairman of the Board
Gary C. Smith
President and
Chief Executive Officer
Thomas P. Ryan
Executive Vice President
and Secretary/Treasurer
Gregory D. Friedman, CPA
Executive Vice President and
Chief Financial Officer
Kevin W. Nelson
Executive Vice President and
Chief Operating Officer
Debra R. Brown
Senior Vice President
Branch Administration
Sandra L. Dubell
Senior Vice President and
Senior Lending Officer
Michael D. Ireland
Senior Vice President and
Senior Operations Officer
Emma N. Mason
Senior Vice President and
Senior Trust Officer
James H. Weber
Senior Vice President and
Senior Marketing Officer
Mitchell J. Fallis, CPA
Vice President and
Chief Accounting Officer
(Logo) LNB
Bancorp, Inc.
Mail: LNB Bancorp, Inc.*457 Broadway*Lorain, Ohio 44052-1739
E-Mail: [email protected]*Internet:www.4LNB.com
Telephone: (440) 244-6000*Toll Free: (800) 860-1007
Telefax: (440) 244-4815*Telebanker: (440) 245-4562
<PAGE>35
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the six months ended June 30, 2000)
S - K Reference Number (27)
Financial Data Schedule
