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, 2002
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 August 14, 2002: 4,401,032 shares
Class of Common Stock: $1.00 par value
2
LNB Bancorp, Inc.
Quarterly Report on Form 10-Q
Quarter Ended June 30, 2002
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Rule 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 26
Part II - Other Information
Item 1 - Legal Proceedings 27
Item 2 - Changes in Securities 27
Item 3 - Defaults Upon Senior Securities 27
Item 4 - Submission of Matters to a Vote of
Security Holders 27
Item 5 - Other Information 28
Item 6 - Exhibits and Reports on Form 8-K 28
Signatures 29
Exhibit Index 30
3
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
JUNE 30, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 2002 2001
(Unaudited) ------------- -------------
ASSETS:
Cash and due from banks $ 28,053,000 $ 28,017,000
Federal funds sold and short-term
investments 3,463,000 3,488,000
Securities:
Available for sale, at fair value 131,224,000 117,628,000
Held to maturity, at cost (fair value
$12,225,000 and $17,485,000, respectively) 11,915,000 17,191,000
Federal Home Loan Bank and Federal Reserve
Bank and other equity stock, at cost 3,658,000 3,582,000
-------------- -------------
Total Securities 146,797,000 138,401,000
------------- -------------
Loans:
Portfolio loans 490,653,000 465,029,000
Loans available for sale 8,449,000 12,459,000
------------- -------------
Total Loans 499,102,000 477,488,000
Reserve for loan losses (6,140,000) (5,890,000)
------------- -------------
Net loans 492,962,000 471,598,000
------------- -------------
Bank premises and equipment, net 10,635,000 10,520,000
Intangible assets 3,288,000 3,470,000
Accrued interest receivable 3,459,000 3,796,000
Other assets 5,608,000 5,113,000
Foreclosed assets 167,000 123,000
------------- -------------
TOTAL ASSETS $694,432,000 $664,526,000
============= =============
STATEMENT CONTINUED ON NEXT PAGE
4
STATEMENT CONTINUED FROM PREVIOUS PAGE
LIABILITIES AND SHAREHOLDERS' EQUITY:
Deposits:
Demand and other noninterest-bearing
deposits $ 84,362,000 $ 87,488,000
Savings, Market Access and passbook
Accounts 270,991,000 253,506,000
Certificates of deposit 198,158,000 177,273,000
------------- -------------
Total deposits 553,511,000 518,267,000
------------- -------------
Securities sold under repurchase agreements
and other short-term borrowings 21,633,000 48,170,000
Federal Home Loan Bank advances, short-term 22,185,000 10,750,000
Federal Home Loan Bank advances, long-term 26,690,000 19,595,000
Accrued interest payable 1,114,000 1,131,000
Accrued taxes, expenses, and
other liabilities 5,109,000 4,475,000
------------- -------------
TOTAL LIABILITIES 630,242,000 602,388,000
------------- -------------
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 4,417,558 and
4,417,558, respectively and Shares
outstanding 4,317,558 and 4,317,558
respectively 4,417,000 4,417,000
Additional capital 26,238,000 26,238,000
Retained earnings 35,303,000 33,126,000
Accumulated other comprehensive income 1,132,000 1,257,000
Treasury stock at cost, 100,000 shares (2,900,000) (2,900,000)
------------- -------------
TOTAL SHAREHOLDERS' EQUITY 64,190,000 62,138,000
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $694,432,000 $664,526,000
============= =============
See notes to unaudited condensed consolidated financial statements.
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) ------------------------
2002 2001
INTEREST INCOME ------------------------
Interest and fees on loans:
Taxable $17,027,000 $19,407,000
Tax-exempt -0- 5,000
Interest and dividends on securities:
U.S. Treasury securities 7,000 57,000
U.S. Government agencies and securities 3,060,000 3,288,000
States and political subdivision 275,000 180,000
Other debt and equity securities 242,000 184,000
Interest on Federal funds sold and other
interest-bearing instruments 52,000 88,000
----------- -----------
TOTAL INTEREST INCOME 20,663,000 23,209,000
----------- -----------
INTEREST EXPENSE:
Interest on Deposits:
Time certificates of $100,000 and over 629,000 1,434,000
Other deposits 4,547,000 6,606,000
Interest on securities sold under repurchase
agreements and other short-term borrowings 244,000 636,000
Interest on Federal Home Loan Bank advances 861,000 659,000
----------- -----------
TOTAL INTEREST EXPENSE 6,281,000 9,335,000
----------- -----------
NET INTEREST INCOME 14,382,000 13,874,000
Provision for loan losses 1,125,000 900,000
NET INTEREST INCOME AFTER PROVISION ----------- -----------
FOR LOAN LOSSES 13,257,000 12,974,000
----------- -----------
NONINTEREST INCOME:
Investment and Trust Services Division income 1,043,000 1,161,000
Service charges on deposit accounts 1,910,000 1,635,000
Other service charges, exchanges and fees 1,595,000 1,458,000
Gains on sales of securities and loans 585,000 97,000
Other operating income 172,000 75,000
----------- -----------
TOTAL NONINTEREST INCOME 5,305,000 4,426,000
----------- -----------
STATEMENT CONTINUED ON NEXT PAGE
6
STATEMENT CONTINUED FROM PREVIOUS PAGE
NONINTEREST EXPENSES:
Salaries and employee benefits 5,762,000 5,356,000
Net occupancy expense of premises 745,000 778,000
Furniture and equipment expense 1,088,000 1,045,000
Supplies and postage 533,000 543,000
Ohio franchise tax 228,000 324,000
Card related expenses 648,000 597,000
Other operating expenses 3,112,000 2,505,000
------------ -----------
TOTAL NONINTEREST EXPENSES 12,116,000 11,148,000
------------ -----------
INCOME BEFORE INCOME TAXES 6,446,000 6,252,000
INCOME TAXES 2,104,000 2,091,000
------------ -----------
NET INCOME $ 4,342,000 $ 4,161,000
============ ===========
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .99 $ .95
====== ======
DILUTED EARNINGS PER SHARE $ .99 $ .95
====== ======
DIVIDENDS DECLARED PER SHARE $ .50 $ .49
====== ======
See notes to unaudited condensed consolidated financial statements.
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) ------------------------
2002 2001
INTEREST INCOME -----------------------
Interest and fees on loans:
Taxable $ 8,655,000 $ 9,574,000
Tax-exempt -0- 2,000
Interest and dividends on securities:
U.S. Treasury securities 1,000 27,000
U.S. Government agencies and corporations 1,525,000 1,615,000
States and political subdivisions 141,000 108,000
Other debt and equity securities 119,000 112,000
Interest on Federal funds sold and other
interest-bearing instruments 33,000 47,000
----------- -----------
TOTAL INTEREST INCOME 10,474,000 11,485,000
----------- -----------
INTEREST EXPENSE:
Interest on Deposits:
Time certificates of $100,000 and over 331,000 656,000
Other deposits 2,271,000 3,205,000
Interest on securities sold under
repurchase agreements and other
short-term borrowings 93,000 240,000
Interest on Federal Home Loan Bank advances 480,000 331,000
----------- -----------
TOTAL INTEREST EXPENSE 3,175,000 4,432,000
----------- -----------
NET INTEREST INCOME 7,299,000 7,053,000
Provision for loan losses 525,000 450,000
NET INTEREST INCOME AFTER PROVISION ----------- -----------
FOR LOAN LOSSES 6,774,000 6,603,000
----------- -----------
NONINTEREST INCOME:
Investment and Trust Services Division income 468,000 603,000
Service charges on deposit accounts 994,000 836,000
Other services charges, exchanges and fees 1,129,000 814,000
Gains from sales of securities and loans 11,000 68,000
Other operating income 65,000 62,000
----------- -----------
TOTAL NONINTEREST INCOME 2,667,000 2,383,000
----------- -----------
STATEMENT CONTINUED ON NEXT PAGE
8
STATEMENT CONTINUED FROM PREVIOUS PAGE
NONINTEREST EXPENSES:
Salaries and employee benefits 2,845,000 2,756,000
Net occupancy expense of premises 364,000 392,000
Furniture and equipment expense 557,000 526,000
Supplies and postage 257,000 268,000
Ohio franchise tax 167,000 162,000
Card related expenses 265,000 315,000
Other operating expenses 1,667,000 1,330,000
------------ ------------
TOTAL NONINTEREST EXPENSES 6,122,000 5,749,000
------------ ------------
INCOME BEFORE INCOME TAXES 3,319,000 3,237,000
INCOME TAXES 1,082,000 1,082,000
------------ ------------
NET INCOME $ 2,237,000 $ 2,155,000
============ ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .51 $ .49
====== ======
DILUTED EARNINGS PER SHARE $ .51 $ .49
====== ======
DIVIDENDS DECLARED PER SHARE $ .25 $ .25
====== ======
See notes to unaudited condensed consolidated financial statements.
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) -------------------------
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES: -------------------------
Interest received $21,188,000 $23,850,000
Other income received 4,622,000 3,141,000
Interest paid (6,298,000) (9,426,000)
Cash paid for salaries and
employee benefits (5,524,000) (5,909,000)
Net occupancy expense of premises paid (593,000) (598,000)
Furniture and equipment expenses paid (454,000) (326,000)
Cash paid for supplies and postage (533,000) (543,000)
Cash paid for other operating expenses (3,345,000) (2,485,000)
Federal income taxes paid (2,378,000) (1,955,000)
----------- -----------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 6,685,000 5,749,000
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
held to maturity 5,800,000 10,795,000
Proceeds from sales and maturities of
securities available for sale 45,030,000 33,091,000
Purchases of securities held to maturity (600,000) (607,000)
Purchases of securities available
for sale (58,571,000) (43,207,000)
Net (increase) in loans made to customers (22,408,000) (9,715,000)
Purchases of bank premises and equipment
and intangible assets (901,000) (510,000)
Proceeds from sales of bank premises,
and equipment 26,000 (16,000)
Proceeds from liquidation of other
foreclosed assets 42,000 296,000
Purchases of other foreclosed assets (86,000) (247,000)
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (31,668,000) (10,120,000)
----------- -----------
STATEMENT CONTINUED ON NEXT PAGE
10
STATEMENT CONTINUED FROM PREVIOUS PAGE
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in demand and
other noninterest-bearing deposits (3,126,000) 203,000
Net increase in savings and
passbook deposits 17,485,000 11,237,000
Net increase in certificates of deposit 20,885,000 1,002,000
Net increase (decrease) in securities sold
under repurchase agreements and other
short-term borrowings (26,537,000) (7,204,000)
Proceeds from Federal Home Loan
Bank advances 35,830,000 5,000,000
Payment on Federal Home Loan Bank advances (17,300,000) -0-
Proceeds from exercise of stock options 1,000 3,000
Dividends paid (2,244,000) (2,210,000)
----------- -----------
NET CASH PROVIDED BY FINANCING
ACTIVITIES 24,994,000 8,031,000
----------- -----------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 11,000 3,660,000
CASH AND CASH EQUIVALENTS AT BEGINNING 31,505,000 25,136,000
OF YEAR ----------- -----------
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $31,516,000 $28,796,000
=========== ===========
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $ 4,342,000 $ 4,161,000
Adjustments to reconcile net income to net cash
provided by operating activities:
Gain on sale of investments & loans 585,000 103,000
Depreciation and amortization 786,000 899,000
Amortization of intangible assets 188,000 188,000
Amortization of deferred loan fees
and costs, net (81,000) 117,000
Provision for loan losses 1,125,000 900,000
Decrease in accrued interest
receivable 331,000 609,000
(Increase) in other assets (288,000) (807,000)
(Decrease) in accrued interest payable (17,000) (91,000)
Increase (decrease) in accrued taxes,
expenses and other liabilities (274,000) 136,000
Others, net (12,000) (466,000)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 6,685,000 $ 5,749,000
=========== ===========
See notes to unaudited condensed consolidated financial statements.
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 balance sheets of LNB Bancorp, Inc. (The Parent Company) and its
wholly-owned subsidiaries, Lorain National Bank (The Bank) and Charleston
Insurance Agency, Inc., and a 49% interest in Charleston Title Insurance
Agency, LLC., at June 30, 2002, compared to December 31, 2001 and the related
unaudited condensed consolidated statements of income for the three and six
months ended June 30, 2002 and the related unaudited condensed consolidated
statements of cash flows for the six months ended June 30, 2002 compared to
the same periods in 2001. The term "the Corporation" refers to LNB Bancorp,
Inc. and its wholly-owned subsidiaries. It is the intent of this discussion
to provide the reader with a more thorough understanding of the unaudited
condensed consolidated financial statements and should be read in conjunction
with the Corporation's December 31, 2001 Annual Report toShareholders.
LNB Bancorp, Inc. is not aware of any trends, events, or uncertainties that
might have a material effect on the soundness of operations; neither is LNB
Bancorp, Inc. aware of any proposed recommendations by regulatory authorities
which would have a similar effect if implemented.
BASIS OF PRESENTATION
The unaudited condensed consolidated balance sheet as of June 30, 2002, the
unaudited condensed consolidated statements of income for the three and six
months ended June 30, 2002 and 2001 and the unaudited condensed consolidated
statements of cash flows for the six months ended June 30, 2002 are prepared
in accordance with accounting principles generally accepted in the United
States of America. Certain information and footnote disclosures normally
included in financial statements prepared in accordance with accounting
principles generally accepted in the United States of America have been
condensed or omitted. The above mentioned statements reflect all 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. All such adjustments are normal and recurring in nature.
The consolidated balance sheet at December 31, 2001 has been taken from the
audited financial statements and condensed. It is suggested that these
unaudited condensed consolidated financial statements be read in conjunction
12
with the financial statements and notes thereto included in the Corporation's
December 31, 2001 Annual Report to Shareholders.
The results of operations for the period ended June 30, 2002 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 loan's
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 is established for the difference. The impairment reserve is
established by either an allocation of the reserve for loan losses or by a
provision for loan losses, depending upon the adequacy of the reserve for
loan losses.
RECLASSIFICATIONS
Certain 2001 amounts have been reclassified to conform to 2002 presentation.
13
2. EARNINGS PER SHARE DATA
Earnings per share is calculated as follows:
For the 6 Months ended June 30, 2002
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $4,342,000
Basic EPS
Income available to
common shareholders $4,342,000 4,401,032 $ .99
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 2,721
---------- ---------
Diluted EPS
Income available to common
shareholders + assumed
conversions $4,342,000 4,403,753 $ .99
========== ========= =====
For the 6 Months ended June 30, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $4,161,000
Basic EPS
Income available to
common shareholders $4,161,000 4,381,275 $ .95
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 4,279
---------- ---------
Diluted EPS
Income available to common
shareholders + assumed
conversions $4,161,000 4,385,554 $ .95
========== ========= =====
14
For the 3 Months ended June 30, 2002
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $2,237,000
Basic EPS
Income available to
common shareholders $2,237,000 4,401,032 $ .51
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 3,473
---------- ---------
Diluted EPS
Income available to common
shareholders + assumed
conversions $2,237,000 4,404,505 $ .51
========== ========= =====
For the 3 Months ended June 30, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
--------------------------------------
Net Income $2,155,000
Basic EPS
Income available to
common shareholders $2,155,000 4,381,275 $ .49
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 3,627
---------- ---------
Diluted EPS
Income available to common
shareholders + assumed
conversions $2,155,000 4,384,902 $ .49
========== ========= =====
15
3. COMPREHENSIVE INCOME
The Corporation's comprehensive income for the six months ended
June 30, 2002 and 2001 are as follows:
For the six months ended June 30,
2002 2001
---------------------------------
Net income $4,342,000 $4,161,000
Other comprehensive income:
Change in unrealized gain on
securities available for sale,
net of tax (credit) of
$(63,000) and $425,000 (122,000) 825,000
----------- -----------
Comprehensive Income $4,220,000 $4,986,000
Disclosure of Reclassification Amount
Unrealized holding gains arising
during the period
net of tax $ 234,000 $ 878,000
Less reclassification adjustment
for gains included in net income
net of tax of $184,000 and
$27,000 356,000 53,000
----------- -----------
Change in unrealized gain on
securities available for sale,
net of tax $ (122,000) $ 825,000
=========== ===========
The Corporation's comprehensive income for the three months ended June
30, 2002 and 2001 are as follows:
For the three months ended June 30,
2002 2001
-----------------------------------
Net income $2,237,000 $2,155,000
Other comprehensive income:
Change in unrealized gain on
securities available for sale,
net of tax of $351,000 and
$34,000 682,000 65,000
----------- ------------
Comprehensive Income $2,919,000 $2,220,000
16
Disclosure of Reclassification Amount
Unrealized holding gains arising
during the period
net of tax $ 856,000 $ 103,000
Less reclassification adjustment
for gains included in net income
net of tax of $90,000 and $19,000
174,000 38,000
----------- -----------
Change in unrealized gain on
securities available for sale,
net of tax $ 682,000 $ 65,000
=========== ===========
4. CRITICAL ACCOUNTING POLICIES
The Corporation maintains critical accounting policies for reserve for loan
losses, classification and evaluation of securities and a deferred tax asset
valuation allowance. Refer to notes 1, 5, 7 and 12 of Notes to Consolidated
Financial Statements of the 2001 Annual Report to Shareholders for the year
ended December 31, 2001 for additional information incorporated by reference.
5. INTANGIBLE ASSETS
The Corporation accounts for intangible assets under the provisions of
Statement of Financial Accounting Standard No. 72 "Accounting for Certain
Acquisitions of Banking or Thrift Institutions". The following intangible
assets and related amortization arising from a 1997 branch acquisition and
included in the accompanying condensed consolidated financial statements
are summarized as follows at June 30, net of accumulated amortization:
2002 2001
--------------------------
Goodwill $2,695,000 $2,959,000
Core deposit intangible 586,000 700,000
--------------------------
Total intangible assets $3,281,000 $3,659,000
==========================
Amortization expense for intangible assets totaled $188,000 for the six
months ended June 30, 2002 and 2001.
17
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein are not based on historical facts and are
"forward-looking statements" within the meaning of Section 21A of the
Securities Exchange Act of 1934. Forward-looking statements which are based
on various assumptions (some of which are beyond the Corporation's control),
may be identified by reference to a future period or periods, or by the use
of forward-looking terminology, such as "may," "will," "believe," "expect,"
"estimate," anticipate," "continue," or similar terms or variations on those
terms, or the negative of these terms. Actual results could differ
materially from those set forth in forward-looking statements, due to a
variety of factors, including, but not limited to, those related to the
economic environment, particularly in the market areas in which the company
operates, competitive products and pricing, fiscal and monetary policies of
the U.S. Government, changes in government regulations affecting financial
institutions, including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of acquired
businesses, credit risk management, asset/liability management, the financial
and securities markets and the availability of and costs associated with
sources of liquidity.
The Corporation does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
FINANCIAL CONDITION
Total assets of the Corporation increased $29,906,000 during the first half
of 2002, to $694,432,000. This growth was funded by increases in savings
deposits, market access accounts, certificates of deposit, Federal Home Loan
Bank advances and Shareholders' equity.
Total earning assets increased 4.8% to $649,362,000 at June 30, 2002 from
$619,377,000 at December 31, 2001. The ratio of earning assets to total
assets increased from 93.21% at December 31, 2001 to 93.51% at June 30,
2002. The loan to deposit ratio has decreased from 92.13% at 2001 year-end
to 90.17% at June 30, 2002. Federal funds sold and other interest bearing
investments decreased by $25,000 during the first six months of 2002.
Total securities increased $8,396,000 ending the first half at $146,797,000.
At June 30, 2002 gross unrealized gains and (losses) in the investment
portfolio were approximately $2,137,000 and $(76,000), respectively. The
increase in the market value of the securities portfolio is due to market
18
interest rate fluctuations.
Net loans increased $21,364,000 during the first half to $492,962,000 at
June 30, 2002. This increase was a result of good loan demand in our
market. Commercial and consumer loan growth was particularly strong,
showing first half increases of $24,338,000 and $7,905,000, respectively.
mortgage loans decreased by $10,629,000, during the first half of 2002.
The consumer loan portfolio has increased because of increases in quality
indirect automobile credits and home equity lines of credit while mortgages
decreased due to refinancing.
The reserve for loan losses ended the quarter at $6,140,000 supported by a
provision for loan losses of $1,125,000, recoveries of $173,000 and loan
charge-offs of $1,048,000. The reserve for loan losses as a percentage of
ending loans was 1.23% and 1.23% at December 31, 2001 and June 30, 2002,
respectively. Corporate management believes that the reserve for loan losses
at June 30, 2002 remains at an appropriate level. The ratio of the reserve
for loan losses to nonperforming assets increased to 382.7% as of June 30,
2002 compared to 247.7% at December 31, 2001. 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, 2002.
Nonperforming assets at June 30, 2002 totaled $1,817,000, up from $1,554,000
at March 31, 2002. The second quarter increase in nonperforming assets of
$263,000 resulted from loans being brought current in the amount of $366,000,
loans charged-off in the amount of $59,000, liquidations of nonaccrual loans
of $74,000, increases in nonaccrual loans of $736,000 and increases in
foreclosed assets of $26,000.
The level of nonperforming assets increased by $378,000 during the first
half of 2002. This increase is the result of an increase in nonaccrual
loans of $334,000 as well as by an increase in other foreclosed assets owned
in the amount of $44,000. The increase in nonaccrual loans is due to
decreases in nonaccrual principal balances of $732,000 which have been paid
off or brought current, loans charged-off in the amount of $72,000 and
liquidations of nonaccrual loans of $187,000 and increases in nonaccrual
principal balances of $1,325,000 which includes seven large commercial loan
credits of $980,000 and 34 small consumer loan credits. The increase in
foreclosed assets resulted from the acquisition of one residential
property in the amount of $35,000 less a net decrease in repossessed vehicles
of $9,000. The level of nonperforming assets remains at relatively low levels
and Corporate management believes nonperforming assets are well
collateralized.
19
The table below presents the level of nonperforming assets at the end of
the last four calendar quarters.
Amounts in thousands 06/30/02 03/31/02 12/31/01 09/30/01
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual $1,650 $1,413 $1,316 $2,518
Restructured 0 0 0 0
Other Foreclosed Assets 167 141 123 0
------ ------ ------ ------
Total Nonperforming Assets $1,817 $1,554 $1,439 $2,518
====== ====== ====== ======
Reserve for loan losses
to total nonperforming
assets 337.9% 247.7% 409.3% 214.9%
====== ====== ====== ======
Accruing loans past due
90 days $ 327 $ 151 $ 149 $ 66
====== ====== ====== ======
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,
2002, potential problem loans totaled $11,955,000, an increase of $3,376,000
from the December 31, 2001 balance. The increase in potential problem loans
during 2002 is primarily due to the addition of four large commercial
credits that have weakened due to depressed economic conditions in the steel
industry.
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, 2002 there are no
significant concentrations of credit in the loan portfolio.
The Corporation had outstanding loan and credit commitments to make loans
totaling $121,626,000 and $95,893,000 at June 30, 2002 and December 31, 2001,
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 programs during the past twelve months. Commercial
loan demand increased in the second quarter of 2002 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.
Total deposits increased $35,244,000 during the first half to $553,511,000.
Noninterest-bearing deposits decreased to $84,362,000, at June 30, 2002 for
a decrease of $3,126,000, while interest-bearing deposits climbed to
$469,149,000 for an increase of $38,370,000.
20
Federal funds purchased and securities sold under agreements to repurchase
increased $7,537,000 during the first half mainly due to decreases in Federal
Funds purchased. 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 liquid position in order to take
advantage of interest rate fluctuations. As of June 30, 2002, short-term
security investments with maturities of one year or less totaled $10,144,000,
which represented 7.2% of total securities. Adding cash and due from banks of
$28,053,000, and Federal Funds sold and other interest bearing instruments of
$3,463,000, total liquid assets represented 5.0% 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 $24,000,000, $40,000,000 and $34,346,000,
respectively, with credit available in the amounts of $24,000,000,
$40,000,000 and $34,346,000, respectively. Additional sources of liquidity
at June 30, 2002 could be provided by available unused Federal Home Loan
Bank long-term advances of $17,000,000 collateralized by qualified mortgages.
CAPITAL RESOURCES
LNB Bancorp, Inc. continues to maintain a strong capital position. Total
shareholders' equity increased to $64,190,000, at June 30, 2002. The increase
resulted primarily from $4,342,000 of net income generated from the first
half of operations less a cash dividend declared to shareholders of
$2,179,000. The change in interest rates experienced in the first half of
2002 has caused a decrease in the overall market value of available for sale
securities which resulted in a decrease in accumulated other comprehensive
income of $122,000 for the six months ended June 30, 2002. As of June 30,
2002, the LNB Bancorp, Inc. held 100,000 shares of common stock as treasury
stock at a 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
21
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, 2002 and
2001 follow together with those ratios required for the Corporation to be
considered adequately capitalized.
June 30,
---------------------
2002 2001
------ ------
Tier I capital ratio 12.57% 11.97%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 13.77% 13.11%
Required total capital ratio 8.00% 8.00%
Leverage ratio 9.58% 8.77%
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 its current
capital resources are sufficient to support any foreseeable acquisition
activity.
RESULTS OF OPERATIONS
Earnings for 2002 were higher than a year ago because of higher net interest
income and noninterest income, offset in part by a higher loan loss provision
and operating expenses.
Increases in net interest income were fueled by increases in commercial and
consumer loans combined with growth and decreases in rates paid on interest
bearing liabilities. The increases in noninterest income resulted primarily
from increases in fees and service charges and increases of gains on sales
of loans and investments. Increases in noninterest expenses resulted from
increases in salaries and employee benefits, marketing expenses and outside
services. The softening of the economy and its related impact on credit plus
the increase in the loan growth resulted in the recording of higher levels
of loan loss provision in the first half of 2002, compared with the same
period in 2001.
The net interest margin for the six months ended June 30, 2002 decreased
20 basis points to 4.58% compared to 4.78% for the same period one year ago.
The net interest margin for the second quarter of 2002 was 4.53% compared
to 4.87% for the second quarter of 2001.
Interest and fees on loans for the first half of 2002 decreased $2,385,000
when compared to the first half of 2001. Decreased loan income resulted from
22
the impact of increases in the average loan portfolio balance for the first
half of 2002 by $36,226,000 to $489,738,000 as compared to the first half of
2001 offset by decreases in interest rates. Interest and dividends on
securities was $3,584,000 for the first half of 2002 for a decrease of
$161,000 over the same period in 2001. Decreased investment income resulted
from the impact of increases in the average investment portfolio balance for
the first half of 2002 of $10,959,000 to $138,046,000 as compared
to the first half of 2001, offset by decreases in interest rates for 2002
compared with 2001. Interest and dividends on securities represented 17.3% of
total interest income at June 30, 2002 compared to 16.0% at June 30, 2001.
Interest on Federal funds sold and short-term investments was $52,000 and
$88,000 at June 30, 2002 and 2001,respectively.
Total interest expense decreased by $3,054,000 when compared to the first
half of 2001. The interest expense decrease resulted from decreases in
deposit account interest of $2,864,000 and a decrease in interest expense
from repurchase agreements and other short-term borrowings of $392,000,
offset by increases in interest expense from Federal Home Loan Bank advances
of $202,000. Also, total interest expense for the first half of 2002 was
impacted by decreases in interest rates paid on savings accounts,
checkinvest, market access accounts, certificate of deposit accounts and
repurchase agreements when compared to the first half of 2001.
Total noninterest income increased by $879,000 when compared to the first
half of 2001. This increase resulted from increases in service charges of
$275,000, increases in other service charges, and exchanges and fees of
$137,000, increases in other operating income of $97,000 and gains on sales
of investments and securities of $460,000 offset by decreases in income from
Investment and Trust Services Division income of $118,000.
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, 2002 was
$12,116,000, 8.7% above the first six months of 2001. This increase was due
primarily to increases in salaries and employee benefits, supplies and
postage and increases in card-related expenses, outside services and
marketing expenses.
The effective tax rate decreased slightly from 33.5% during the first half of
2001 to 32.6% during the first half of 2002. The decrease in the effective
tax rate is due primarily to the increases in tax exempt interest income to
total interest income.
Net income was $4,342,000 and $4,161,000 for the six months ended June 30,
2002 and 2001, respectively. Net income per basic and diluted share was $.99
and $.95 for the six months ended June 30, 2002 and 20001 respectively, after
giving effect for a two percent stock dividend paid on July 1, 2002. The
annualized return on average assets for the 2002 first half was 1.30 percent
compared with 2001's 1.34 percent. The annualized return on average
23
shareholders' equity for the first half was 13.82 percent compared with
14.39 percent last year.
SECOND QUARTER INFORMATION
Interest and fees on loans for the second quarter of 2002 decreased $921,000
when compared to the second quarter of 2001. Decreased loan income resulted
from the impact of increases in the average loan portfolio balance for the
second quarter of 2002 as compared to the second quarter of 2001 offset by
decreases in interest rates. Interest and dividends on securities was
$1,786,000 for the second quarter of 2002 for a decrease of $76,000 over the
same period in 2001. Decreased investment income resulted from the impact of
increases in the average investment portfolio balance for the second quarter
of 2002 as compared to the second quarter of 2001, offset by decreases in
interest rates for 2002 compared with 2001. Interest on Federal funds sold
and short-term investments was $33,000 and $47,000 for the second quarter of
2002 and 2001, respectively.
Total interest expense for the second quarter of 2002 decreased by $1,257,000
when compared to the second quarter of 2001. The interest expense decrease
resulted from decreases in deposit account interest of $1,259,000 and a
decrease in interest expense from repurchase agreements and other short-term
borrowings of $147,000, offset by increases in interest expense from Federal
Home Loan Bank advances of $149,000. Also, total interest expense for the
second quarter of 2002 was impacted by decreases in interest rates paid on
savings accounts, checkinvest, market access accounts, certificate of deposit
accounts and repurchase agreements when compared to the second quarter of
2001.
Total noninterest income increased by $284,000 when compared to the second
quarter of 2001. This increase resulted from increases in service charges of
$158,000, increases in other service charges, and exchanges and fees of
$315,000, increases in other operating income of $3,000 offset by decreases
in income from Investment and Trust Services Division income of $135,000 and
gains on sales of investments and securities of $57,000.
Noninterest expense for the three months ended June 30, 2002 was $6,122,000,
6.5% above the first three months of 2001. This increase was due primarily
to increases in salaries and employee benefits, outside services and
marketing expenses.
24
IMPACTS OF ACCOUNTING AND REGULATORY PRONOUNCEMENTS
Corporate management is not aware of any current recommendations by the
Financial Accounting Standards Board (FASB) or by regulatory authorities
which, if they were implemented, would have a material effect on the
liquidity, capital resources or operations of the Corporation. However, the
potential impact of certain accounting and regulatory pronouncements warrant
further discussion.
In July 2001, the FASB issued Statement No. 142, "Accounting for Goodwill and
Other Intangible Assets." SFAS No. 142 eliminates amortization of goodwill
associated with business combinations completed after June 30, 2001.
Effective January 1, 2002, all goodwill amortization expenses ceased and
goodwill will be assessed (at least annually) for impairment at the reporting
unit level by applying a fair-value-based test. SFAS No. 142 also provides
additional guidance on acquired core deposit intangible requiring separate
disclosure and amortization with impairment testing at least annually. LNB
Bancorp, Inc. adopted SFAS No. 142 as of January 1, 2002 and reports Branch
Goodwill and Core Deposit intangibles separately. The Corporation has
determined that the provisions of SFAS No. 142 will have no effect on our
financial position, results of operations or liquidity.
In June 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." Statement 143 addresses financial accounting
and reporting for obligations associated with the retirement of tangible
long-lived assets and the associated asset retirement costs. Statement
143 is effective for fiscal years beginning after June 15, 2002. The
Corporation has reviewed the provisions of Statement 143, and believes that
upon adoption, it did not have a material impact on its financial position,
results of operations or liquidity.
In August 2001, the FASB issued Statement No. 144, "Accounting for the
impairment or disposal of long-lived assets." SFAS No. 144 addresses the
accounting and reporting for the impairment or disposal of long-lived assets.
The SFAS No. 144 provides a single accounting model for long-lived assets to
be disposed of. New criteria must be met to classify the asset as an asset
held-for-sale. This statement also focuses on reporting the effects of
disposal of a segment of a business. The provisions of SFAS No. 144 were
effective for the Corporation January 1, 2002 and did not have a material
impact on our financial position, results of operations or liquidity.
In April 2002, the FASB issued Statement No. 145, "Rescission of FASB
Statements No. 4, 44, and 64. Amendment of FASB Statement No. 13 and
Technical Corrections." This Statement rescinds FASB No. 4, "Reporting Gains
and Losses from Extinguishment of Debt," and FASB Statement No. 64,
"Extinguishments of Debt Made to Satisfy Sinking-Fund Requirements." This
Statement also rescinds FASB Statement No. 44, "Accounting for Intangible
Assets of Motor Carriers" and amends FASB Statement No. 13, "Accounting for
25
leases" which was written to eliminate an inconsistency between the required
accounting for sale-leaseback transactions and the required accounting for
certain lease modifications that have economic effects that are similar to
sale-leaseback transactions. This Statement also amends other existing
authoritative pronouncements to make various technical corrections. The
provisions of this statement related to the recission of Statement No. 4
shall be for fiscal years beginning after May 15, 2002 and as it relates to
Statement No. 13 shall be effective for transactions occurring after May 15,
2002. All other provisions of FASB No. 145 shall be effective for financial
statements issued on or after May 15, 2002. The Corporation has reviewed the
provisions of Statement No. 145 and believes that it will not have a material
impact on its financial position, results of operation or cash flows.
USA PATRIOT ACT
On October 26, 2001, President Bush signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
And Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act"). During the first
quarter of 2002, the Financial Crimes Enforcement Network (FinCEN), a bureau
of the Department of the Treasury, issued proposed and interim regulations as
mandated by the USA PATRIOT Act that would: (i) prohibit certain financial
institutions from providing correspondent accounts to foreign shell banks;
(ii) require such financial institutions to take reasonable steps to ensure
that correspondent accounts provided to foreign banks are not being used to
indirectly provide banking services to foreign shell banks; (iii) require
certain financial institutions that provide correspondent accounts to foreign
banks to maintain records of the ownership of such foreign banks and their
agents in the United States; (iv) require the termination of correspondent
accounts of foreign banks that fail to turn over their account records in
response to a lawful request from the Secretary of the Treasury or the
Attorney General. Additionally the USA PATRIOT Act encourages information
sharing among financial institutions and federal law enforcement agencies to
identify, prevent, deter and report money laundering and terrorist activity.
Management does not believe that the USA PATRIOT Act will have a material
impact on the financial position, results of operation or liquidity of the
Corporation.
26
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, 2001,
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 that
there have been no significant changes in the Corporation's interest rate
risk profile since December 31, 2001.
27
Part II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
Previously reported in LNB Bancorp's Current Report on Form 8-K
filed on June 7, 2002. See Item 6(b) of Part II of this Quarterly
Report on Form 10Q.
ITEM 2 - Changes in Securities
None
ITEM 3 - Defaults Upon Senior Securities
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
(a) LNB Bancorp Inc.'s 2002 Annual Meeting of Shareholders
was held on April 16, 2002 .
(b) Proxies were solicited by LNB Bancorp Inc.'s management
pursuant to Regulation 14 under the Securities Exchange
Act of 1934, there was no solicitation in opposition to
management's nominees for election to the board of
directors as listed in the proxy statement, and all
such nominees were elected to the classes in the proxy
statement pursuant to the vote of the shareholders.
(c) Other matters voted upon
(1)Election of directors to serve as Class II Directors
until April 19, 2005 Annual Meeting of Shareholders as
follows:
FOR WITHHELD
Terry D. Goode 2,579,693.78 65,426.27
Wellsley O. Gray 2,593,608.25 51,511.80
James R. Herrick 2,589,956.46 55,163.59
Benjamin G. Norton 2,595,106.57 50,013.48
John W.Schaeffer, M.D. 2,592,524.57 52,595.48
Gary C. Smith 2,589,725.78 55,394.27
The total number of shares of LNB Bancorp, Inc. Common Stock,
$1.00 par value, outstanding as of March 5, 2002, the record
date of the Annual Meeting was 4,315,558.
28
ITEM 5 - Other Information
None
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibits - The following exhibits are filed as part of this report:
EXHIBIT NO. EXHIBIT
3.1 LNB Bancorp, Inc. Second Amended Articles of
Incorporation (Incorporated by reference to
the quarterly report on Form 10-Q filed on
November 14, 2000.)
3.2 LNB Bancorp, Inc. Amended Code of Regulations.
(Incorporated by reference to the current report
on Form 8-K filed on January 4, 2001.)
4. Instruments Defining the Rights of Security
Holders. (See Exhibits 3.1 and 3.2)
99.1 Certification pursuant to 18 U.S.C. section 1350,
as enacted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 Certification pursuant to 18 U.S.C. section 1350,
as enacted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
(b) Reports on Form 8-K
Registrant discloses that the Securities and Exchange
Commission is conducting an informal inquiry of the Company's
purchases of its common shares during the period of January 2000 to
July 2001. The focus of the inquiry by the SEC is on trading
activity after 3:30 p.m. ET, which is an alleged violation of SEC
Rule 10b-18.
The purchase of common stock, typically 100 to 200 shares per
day, authorized by a former employee of the Company, was intended
to fund employee benefits plans. All the purchases were conducted
through licensed and registered broker / dealers. The Company
voluntarily ceased late day trading prior to the informal inquiry
by the SEC.
The Company has proposed a resolution to the inquiry, and a
third party agent has been engaged to facilitate future purchases
of shares for employee benefits plans.
The Company cannot predict the SEC's reaction, nor the timing
29
of the final resolution of the matter.
Management of the Company does not believe that the final
resolution of the inquiry will have a material financial impact in
the future.
Cautionary Statement Regarding Forward-looking Information.
This 8-K Filing contains forward-looking statements based on
current expectations that are covered under the "safe harbor"
provision of the Securities Litigation Reform Act of 1995. These
forward-looking statements are based on various assumptions,
including matters outside our control. These forward-looking
statements may be identified by reference to a future period, or by
the use of forward-looking terminology, such as "expect", "will",
"believe", "anticipate" or similar terms or variations of them.
Actual results could differ materially from those set forth in
forward-looking statements due to a variety of factors, including
the outcome of the Company's discussions with the SEC regarding its
inquiry.
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, 2002 /s/ Gregory D. Friedman
_________________________
Gregory D. Friedman, CPA
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
Date: August 14, 2002 /s/ Mitchell J. Fallis
_________________________
Mitchell J. Fallis, CPA
Vice President and
Chief Accounting Officer
30
LNB Bancorp, Inc.
Form 10-Q
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K
EXHIBIT NO. PAGE DESCRIPTION
3.1 NA LNB Bancorp, Inc. Second Amended Articles of
Incorporation (Incorporated by reference to
the quarterly report on Form 10-Q filed on
November 14, 2000.)
3.2 NA LNB Bancorp, Inc. Amended Code of Regulations.
(Incorporated by reference to the current report
on Form 8-K filed on January 4, 2001.)
4. NA Instruments Defining the Rights of Security
Holders. (See Exhibits 3.1 and 3.2)
99.1 NA Certification pursuant to 18 U.S.C. section 1350,
as enacted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.
99.2 NA Certification pursuant to 18 U.S.C. section 1350,
as enacted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.