Attached files
| file | filename |
|---|---|
| EX-13 - WESTERN RESERVE BANCORP INC | v178240_ex13.htm |
| EX-21 - WESTERN RESERVE BANCORP INC | v178240_ex21.htm |
| EX-23 - WESTERN RESERVE BANCORP INC | v178240_ex23.htm |
| EX-32.2 - WESTERN RESERVE BANCORP INC | v178240_ex32-2.htm |
| EX-32.1 - WESTERN RESERVE BANCORP INC | v178240_ex32-1.htm |
| EX-31.2 - WESTERN RESERVE BANCORP INC | v178240_ex31-2.htm |
| EX-99.1 - WESTERN RESERVE BANCORP INC | v179736_ex99-1.htm |
| EX-31.1 - WESTERN RESERVE BANCORP INC | v178240_ex31-1.htm |
| EX-99.2 - WESTERN RESERVE BANCORP INC | v179736_ex99-2.htm |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-K/A
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x
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Annual
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
|
For the
fiscal year ended December 31,
2009
or
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o
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Transition
report pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
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Commission
file number 000-51264
Western Reserve Bancorp,
Inc.
(Exact
name of registrant as specified in its charter)
|
Ohio
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31-1566623
|
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
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|
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4015 Medina Road, Suite 100, Medina, Ohio
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44256
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|
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(Address of principal executive offices)
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(Zip Code)
|
Registrant’s
telephone number, including area code (330)
764-3131
Securities
registered under Section 12(b) of the Exchange Act: None
Securities
registered pursuant to Section 12(g) of the Exchange Act: Common stock, no par value,
$1.00 stated value
(Title of
class)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as identified
in Rule 405 of the Securities Act.
¨Yes xNo
Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.
¨Yes xNo
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
past 12 months (or for such shorter period that the Issuer was required to file
such reports), and (2) has been subject to such filing requirements for past 90
days. xYes ¨No
Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not
be contained, to the best of registrant’s knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form
10-K.
x
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a small reporting
company. See the definitions of “large accelerated filer”,
“accelerated filer”, and “small reporting company” in Rule 12b-2 of the Exchange
Act. (Check one):
|
Large accelerated filer ¨
|
Accelerated filer ¨
|
|
|
Non-accelerated filer ¨
|
(do not check if a smaller reporting company)
|
Smaller reporting company x
|
Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Act). ¨Yes xNo
As of
June 30, 2009, the aggregate market value of the common stock held by
non-affiliates of the Bancorp was $7,027,635 (which excludes 115,748 shares held
by directors and executive officers). As of that date, there were
584,257 shares of common stock issued and outstanding.
As of
March 23, 2010, there were 584,727 shares of the Company’s common stock, without
par value, issued and outstanding.
DOCUMENTS
INCORPORATED BY REFERENCE
|
Parts
I and II:
|
Portions
of Registrant’s 2009 Annual Report to Shareholders and Portions of
Registrants Proxy Statement for the Annual Meeting of Shareholders to be
held April 28, 2010.
|
|
Part
III:
|
Portions
of Registrant’s Proxy Statement for the Annual Meeting of Shareholders to
be held April 28, 2010
|
2
PART
I
Item
1. Description of
Business
General
Western
Reserve Bancorp, Inc. (“the Company”), an Ohio corporation incorporated on
February 25, 1997, is a bank holding company that owns all of the capital stock
of the Western Reserve Bank, an Ohio state-chartered bank headquartered in
Medina, Ohio (the "Bank"). From the date of the Company’s inception
through October 1998, the Company and the Bank conducted no business other than
matters incidental to their organization and opening for business. On
February 24, 1998, the Company commenced an initial public offering (the
“Offering”) of up to 625,000 shares of its Common Stock pursuant to a
Registration Statement on Form SB-2 filed with the Securities and Exchange
Commission ("SEC") on February 12, 1998, as amended. The Offering was concluded
on July 1, 1998. A total of 400,334 shares of the Company’s common
stock were sold, with proceeds, net of offering costs, of
$6,368,499. Approximately $5,800,000 of the proceeds was used to
provide initial capitalization for the Bank. The Bank commenced
business on November 6, 1998.
During
2000, the Company sold an additional 84,731 shares of common stock in an
intra-state offering exempt from the Securities Act of 1933 pursuant to Section
3(a)(11) and Rule 147 promulgated thereunder. A registration
statement was filed with the Ohio Division of Securities on Form 6(A)(1) on
September 11, 2000. The Offering resulted in proceeds, net of
offering costs, of approximately $1,577,000.
During
2004, the Company sold an additional 83,277 shares of common stock in an
intra-state offering exempt from the Securities Act of 1933 pursuant to Section
3(a)(11) and Rule 147 promulgated thereunder. A registration
statement was filed with the Ohio Division of Securities on Form 6(A)(1) on May
3, 2004. The Offering resulted in proceeds, net of offering costs, of
approximately $1,968,000.
The
Company filed a Registration Statement on Form 8-A with the SEC on April 28,
2005 to register its common shares under Section 12(g) of the 1934
Act.
The
Company declared a five-for-four stock split as of September 22, 2006 for
shareholders of record as of September 5, 2006. A total of 114,270
new shares were issued and cash of $4,803 was paid for 141 fractional
shares. All share and per share amounts have been adjusted to reflect
the stock split.
On May
15, 2009 the Company became a participant in the U.S. Treasury’s Troubled Asset
Relief Program Capital Purchase Program (the “CPP”) and issued $4,700,000 in
preferred stock to the U.S. Treasury. Refer to the Company’s
2009 Annual Report to Shareholders Note 17 (which is incorporated herein by
reference) for additional discussion about the CPP.
The
Company and the Bank currently maintain their offices at 4015 Medina Road, Suite
100, Medina, Ohio 44256. The Bank opened a second full-service office
in October 2004 located at 8751 Brecksville Road, Brecksville, Ohio 44141 and a
lending office in December 2009 located at 148 E. Liberty Street, Suite 210,
Wooster, Ohio 44691.
The
Company’s telephone number is (330) 764-3131, and its web site is www.westernreservebank.com.
Business
Strategy
In the
mid- to late-1990s, many of the financial institutions in the Medina County
market area had been acquired by large regional organizations headquartered
outside of the area. As a result, the organizers believed that the
competitive and economic environment was right for a new, independent, locally
owned and managed bank to serve the financial needs of the residents and
businesses in the Medina area. The Company is a bank holding company
within the meaning of the Bank Holding Company Act of 1956, as
amended. Currently, the only business the Company is engaged in is
the ownership of its wholly owned bank subsidiary, Western Reserve
Bank. However, in the future, the holding company structure could
provide flexibility for the expansion of the Company’s business through
additional banking-related services which commercial banks are currently unable
to provide under present law.
3
The Bank
offers a broad range of deposit services for consumers and businesses, including
noninterest-bearing and interest-bearing checking accounts, savings and money
market accounts, time certificates of deposit and individual retirement
accounts. The Bank engages in a full line of lending
activities, including all types of commercial loans to businesses, consumer
loans to individuals for household, family and other personal expenditures, and
real estate loans including first mortgage loans, home equity loans and
construction loans. The Bank offers both fixed rate and variable rate
residential mortgage loans. Generally, the Bank does not keep
longer-term fixed rate mortgages in its portfolio, but participates in a
Mortgage Purchase Program with the Federal Home Loan Bank of Cincinnati to
assist the Bank’s customers in obtaining fixed rate mortgage
loans. The Bank also offers other services, including debit and ATM
cards with access to regional and national automated teller networks, a courier
service for business deposits, remote deposit capture, cash management services,
internet banking for both businesses and consumers, safe deposit boxes, cashiers
checks, traveler’s checks and two ATMs.
Under
applicable law, the Bank is permitted to make loans to individual borrowers in
aggregate amounts of up to 15 percent of the sum of the Bank’s total capital and
allowance for loan losses. At December 31, 2009, the Bank’s legal
lending limit was approximately $3,190,000. The Board of Directors
has established an "in-house” lending limit of $2,000,000, although, under
certain circumstances, the Board Loan Committee can authorize, on a case-by-case
basis, lending relationships in excess of this “in-house” limit. The
Board may from time to time raise or lower the “in-house” limit as it deems
appropriate to comply with safe and sound banking practices and respond to
overall economic conditions. The Company believes that
the Bank’s legal lending limit is adequate to satisfy the credit needs of most
of its clients. For credit needs that exceed the Bank’s legal lending
limit, the Bank has the ability to participate with other banks to meet the
credit need. In such instances, the Bank intends to be the lead bank
in the loan arrangement.
The
Bank’s market area is competitive. There are at least thirteen
commercial banks and savings institutions with nearly twenty-seven offices in
the Bank’s primary service areas of Medina and Brecksville. In recent
years, several banks and savings institutions headquartered outside of Medina
County acquired or opened new branches in the Medina area. The rapid
growth of the Bank in the eleven years since it opened has confirmed the
founding shareholders’ belief that a local community bank that offered excellent
customer service would be well-received in the Bank’s primary market
areas. The Bank’s competition, in addition to large regional banks,
includes finance companies, insurance companies, mortgage companies, securities
brokerage firms, money market funds, loan production offices and other providers
of financial services.
Employees
At
December 31, 2009, the Bank has 37 full-time-equivalent employees (34 full-time
and 6 part-time). None of its employees is covered by a collective
bargaining agreement. The Company considers its employee relations to
be excellent.
Reports
to Security Holders
The
Company files annual reports on Form 10-K, quarterly reports on Form 10-Q,
current reports on Form 8-K and proxy solicitation materials, as applicable,
under Commission Regulation 14A. The public may read and copy any
materials the Company files with the Commission at the SEC’s Public Reference
Room at 100 F. Street, NE, Washington, DC 20549, on official business days
during the hours of 10:00 am to 3:00 pm. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet
site that contains reports, proxy and information statements, and other
information regarding issuers that file electronically with the Commission at
http://www.sec.gov.
SUPERVISION
AND REGULATION
General
Financial
institutions and their holding companies are extensively regulated under federal
and state law. As a result, the growth and earnings performance of
the Company can be affected not only by management decisions and general
economic conditions, but also by the requirements of applicable state and
federal statutes and regulations and the policies of various governmental
regulatory authorities including, but not limited to, the Board of Governors of
the Federal Reserve System (the "FRB"), the Federal Deposit Insurance
Corporation (the "FDIC"), the Ohio Division of Financial Institutions (the
“Division”), the Internal Revenue Service (the “IRS”), the state taxing
authorities and the Securities and Exchange Commission (the "SEC"). The effect
of such statutes, regulations and policies can be significant, and cannot be
predicted with a high degree of certainty.
4
Federal
and state laws and regulations generally applicable to financial institutions
such as the Company and the Bank regulate, among other things, the scope of
business, investments, reserves against deposits, capital levels relative to
operations, the nature and amount of collateral for loans, the establishment of
branches, mergers, consolidations and dividends. The system of
supervision and regulation applicable to the Company and the Bank establishes a
comprehensive framework for their respective operations and is intended
primarily for the protection of the FDIC's deposit insurance funds and the
depositors, rather than the shareholders, of financial
institutions.
The
following references to material statutes and regulations affecting the Company
and the Bank are brief summaries thereof and do not purport to be
complete. As such, they are qualified in their entirety by reference
to such statutes and regulations. Any change in applicable law or
regulations may have a material effect on the business of the Company and the
Bank.
The
Company
General. The
Company, as the sole stockholder of the Bank, is a bank holding
company. As a bank holding company, the Company is registered with,
and is subject to regulation by, the FRB under the Bank Holding Company Act of
1956 (the “BHCA”) as amended. In accordance with FRB policy, the
Company is expected to act as a source of financial strength to the Bank and to
commit resources to support the Bank. Under the BHCA, the Company is
subject to periodic examination by the FRB and is required to file with the FRB
periodic reports of its operations and such additional information as the FRB
may require. The Company is also subject to regulation by the Division under
Ohio law.
Investments and
Activities. Under the BHCA, a bank
holding company must obtain FRB approval before acquiring substantially all the
assets of any bank or bank holding company or ownership or control of any voting
shares of any bank or bank holding company if, after such acquisition, it would
own or control, directly or indirectly, more than five percent (5%) of the
voting shares of such bank or bank holding company. The BHCA also
prohibits the Company, with certain limited exceptions, from acquiring direct or
indirect ownership or control of more than 5% of the voting shares of any
company which is not a bank or bank holding company, and from engaging in any
business other than that of banking, managing and controlling banks or
furnishing services to banks and their subsidiaries. The principal
exception to this prohibition allows bank holding companies to engage in, and to
own shares of companies engaged in, certain businesses found by the FRB to be so
closely related to banking as to be a proper incident thereto.
Affiliate
Transactions. Various governmental requirements, including
Sections 23A and 23B of the Federal Reserve Act, limit borrowings by holding
companies and other non-bank subsidiaries from affiliated insured depository
institutions, and also limit other transactions between holding companies and
their non-bank subsidiaries and their affiliated insured depository
institutions. Section 23A of the Federal Reserve Act generally
requires that an insured depository institution's loan to its non-bank
affiliates be secured, and Section 23B of the Federal Reserve Act generally
requires that an insured depository institution's transactions with its non-bank
affiliates be on arms-length terms.
Control
Acquisitions. The Change in Bank Control Act prohibits a
person or group of persons from acquiring "control" of a bank holding company
unless the FRB has been notified and has not objected to the
transaction. Under the rebuttable presumption established by the FRB,
the acquisition of 10% or more of a class of voting stock of a bank holding
company with a class of securities registered under Section 12 of the Exchange
Act, such as the Company, would, under the circumstances set forth in the
presumption, constitute acquisition of control of the bank holding
company.
Gramm-Leach-Bliley
Act. The Financial Services Modernization Act of 1999, better
known as the Gramm-Leach-Bliley Act (the “GLBA”), permits bank holding companies
to become “financial holding companies” and thereby affiliate with securities
firms and insurance companies and engage in other activities that are financial
in nature. A bank holding company may become a financial holding
company if each of its subsidiary banks is well capitalized, well managed and
has at least a satisfactory rating under the Community Reinvestment
Act. No regulatory approval will be required for a financial holding
company to acquire a company, other than a bank or savings association, engaged
in activities that are financial in nature or incidental to activities that are
financial in nature, as determined by the FRB. The GLBA defines
“financial in nature” to include securities underwriting, dealing and market
making; sponsoring mutual funds and investment companies; insurance underwriting
and agency; merchant banking activities; and activities that the FRB has
determined to be closely related to banking. The Company has not
elected to become a financial holding company under this regulatory
framework.
5
The Sarbanes-Oxley Act of
2002. The Sarbanes-Oxley Act of 2002 contains important requirements for
public companies in the area of financial disclosure and corporate governance.
In accordance with section 302(a) of the Sarbanes-Oxley Act, written
certifications by the Company’s Chief Executive Officer and Chief Financial
Officer are required which attest that the Company’s quarterly and annual
reports filed with the SEC do not contain any untrue statement of a material
fact. Additionally, the Chief Executive Officer and Chief Financial Officer are
required to certify that the Company has effective disclosure controls and
procedures. In accordance with Section 404 of the Sarbanes-Oxley Act,
the Company implemented a program to monitor the Company’s internal control over
financial reporting. This includes the identification of significant
processes and accounts, documentation of the design of control effectiveness
over process and entity level controls and testing of the operating
effectiveness of key controls over financial reporting. The Company’s
independent registered public auditing firm will be required to issue an opinion
on the effectiveness of the Company’s internal controls over financial reporting
as of December 31, 2010. See Item 9A(T) of the Company’s annual
report on Form 10-K for more information regarding management’s evaluation of
the Company’s disclosure controls and procedures, and the Company’s internal
control over financial reporting.
Also in
response to the Sarbanes-Oxley Act, the Company adopted a series of policies and
procedures to improve its corporate governance
practices, including the adoption of charters for the Audit Committee,
the Compensation Committee and the Nominating and Governance
Committee. The charters for these three committees are designed to
help the committees function more efficiently and with greater independence from
the Board of Directors, which was one of the primary goals in the adoption of
Sarbanes-Oxley. The members of each of these three committees are
currently and, under the terms of the respective charters, will continue to be
"independent" pursuant to standards adopted by NASDAQ. Further, the
Board of Directors has determined that under the NASDAQ "independence"
standards, a majority of the members of the Board of Directors is currently
independent. The Board of Directors also has adopted a Code of
Business Conduct and Ethics (the "Code") which applies to all officers,
directors and employees of the Company and the Bank. The Code
addresses topics such as compliance with laws and regulations, honest and
ethical conduct, conflicts of interest, confidentiality and protection of
Company assets, fair dealing and accurate and timely periodic reports, and also
provides for enforcement mechanisms. The administration of the Code
has been delegated to the Nominating and Governance Committee of the Board of
Directors. Copies of the Company’s Audit Committee Charter,
Compensation Committee Charter, Nominating and Corporate Governance Committee
Charter and Code of Business Conduct and Ethics are available on the Company’s
website at www.westernreservebank.com.
Troubled Asset Relief
Program Capital Purchase Program (the “CPP”). As a participant
in the U.S. Treasury’s CPP, the Bank is subject to dividend and other provisions
imposed by the Emergency Economic Stabilization Act of 2008 (the “EESA”) as
amended by The American Recovery and Reinvestment Act of 2009 (the
“ARRA”). These restrictions include limitations on dividends to
common shareholders, effectively eliminating the Company’s ability to declare
such dividends during the time the Company is a participant in the
CPP. In addition, certain forms of compensation for executive
officers, generally including the chief executive officer, chief financial
officer and the next three highest compensated executive officers are limited or
prohibited. Refer to the Company’s 2009 Annual Report to Shareholders
Note 17 and to the Company’s Proxy Statement under the caption “Recent
Amendments to Compensation Plans and Arrangements Necessary to Comply with EESA”
(both of which are incorporated herein by reference) for additional discussion
about the CPP.
The
Bank
General. The
Bank is an Ohio-chartered bank and member of the Federal Reserve
System. The Bank is therefore regulated by the Division as well as
the FRB. The regulatory agencies have the authority to regularly
examine the Bank, which is subject to all applicable rules and regulations
promulgated by its supervisory agencies. In addition, the deposits of
the Bank are insured by the Federal Deposit Insurance Corporation up to
applicable limits through the Deposit Insurance Fund (DIF) and, therefore, the
Bank is subject to FDIC regulations.
Deposit
Insurance. Deposit accounts of the
Bank are insured by the FDIC, generally up to a maximum of $100,000 per
separately insured depositor and up to a maximum of $250,000 for self-directed
retirement accounts. The FDIC expanded the deposit account insurance
to include all accounts up to $250,000 through December 31, 2013. In
addition, the Bank elected to participate in the FDIC’s Temporary Liquidity
Guarantee Program which provides unlimited deposit insurance for non-interest
bearing transaction accounts through June 30, 2010. The Company is
required to pay deposit insurance premium assessments to the
FDIC. The FDIC deposit reserve ratio declined significantly during
2008 and 2009 to levels below the 1.15% minimum ratio. As a result of
this decline and the potential for additional losses in 2009, the FDIC imposed a
special assessment in 2009 and required banks to prepay three years of estimated
deposit insurance premiums on December 31, 2009.
Effective
March 31, 2006, the FDIC merged the Bank Insurance Fund (BIF) and the Savings
Association Insurance Fund (SAIF) to form the Deposit Insurance Fund
(DIF). The merger of the BIF and the SAIF into the Deposit Insurance
Fund does not affect the authority of the Financing Corporation (FICO) to impose
and collect assessments for anticipated payments, issuance costs and custodial
fees on bonds issued by the FICO in the 1980’s to recapitalize the Federal
Savings and Loan Insurance Corporation. The annual FICO assessment
rate as of the first quarter of 2010 is 1.06 basis points.
6
FDIC
regulations assess deposit insurance premiums based on risk such that the FDIC
closely ties each financial institution’s deposit insurance premiums to the risk
it poses to the DIF. Under the risk-based assessment system, the FDIC
evaluates the risk of each financial institution based on its supervisory
rating, its financial ratios and its long-term debt issuer
rating. For institutions deemed by the FDIC to pose the least amount
of risk to the DIF, rates ranged between seven and twenty-four cents for every
$100 of domestic deposits in 2009. The assessment paid by the Company
during the year ended December 31, 2009 was just over fifteen cents for every
$100 of domestic deposits. FDIC premiums for institutions in Risk
Category I (such as Western Reserve Bank) are not expected to increase in 2010;
however, in 2011 those premiums are expected to increase 20% to approximately
eighteen cents for every $100 of domestic deposits. In addition, the
FDIC assessed a special one-time assessment of five basis points (bp) on the
second quarter 2009 average net assets resulting in an expense of $89,000 in
2009.
The FDIC
may terminate the deposit insurance of any insured depository institution if the
FDIC determines, after a hearing, that the institution has engaged or is
engaging in unsafe or unsound practices, is in an unsafe or unsound condition to
continue operations or has violated any applicable law, regulation, order, or
any condition imposed in writing by, or written agreement with, the
FDIC. The FDIC may also suspend deposit insurance temporarily during
the hearing process for a permanent termination of insurance if the institution
has no tangible capital. Management of the Company is not aware of
any activity or condition that could result in termination of the deposit
insurance of the Bank.
Capital
Requirements.
The FRB, Division and FDIC require banks and holding companies to maintain
minimum capital ratios. The “risk-adjusted” capital guidelines for
the Bank involve a mathematical process of assigning various risk weights to
different classes of assets, then evaluating the sum of the risk-weighted
balance sheet structure against the Bank’s capital base. The rules
set the minimum guidelines for the ratio of capital to risk-weighted assets
(including certain off-balance sheet activities, such as standby letters of
credit) at 8%. Tier 1 Capital is comprised of common equity, retained earnings,
and a limited amount of perpetual preferred stock less certain intangible items.
At least half of the total capital is to be Tier 1 Capital. The
remainder may consist of a limited amount of subordinated debt, other preferred
stock, and a portion of the loan loss reserves (not to exceed 1.25% of
risk-weighted assets). The Bank anticipates maintaining capital at a
level sufficient to be classified as “well capitalized” pursuant to the Federal
Reserve guidelines.
In
addition, the federal banking regulatory agencies have adopted leverage capital
guidelines for banks and bank holding companies. Under these
guidelines, banks and bank holding companies must maintain a minimum ratio of
three percent (3%) Tier 1 Capital to total assets. However, most
banking organizations are expected to maintain capital ratios well in excess of
the minimum level and generally must keep their Tier 1 ratio at or above
5%. The Bank intends to maintain capital well above the regulatory
minimum.
The
capital requirements described above are minimum requirements. Higher
capital levels will be required if warranted by the particular circumstances or
risk profiles of individual institutions. For example, the
regulations provide that additional capital may be required to take adequate
account of, among other things, interest rate risk or the risks posed by
concentrations of credit, nontraditional activities or securities trading
activities.
In
addition to the minimum regulatory capital requirements discussed above,
provisions contained in the Federal Deposit Insurance Corporation Improvement
Act (“FDICIA”) expressly provide for certain supervisory actions which are
directly keyed to the capital levels of an insured depository
institution. These “prompt corrective action” provisions impose
progressively more restrictive constraints on operations, management and capital
distributions of a particular institution as its regulatory capital
decreases. Using Tier 1 risk-based, total risk-based, and Tier 1
leverage capital ratios as the relevant measures, FDIC insured depository
institutions are grouped into one of the following five prompt corrective action
capital categories: well capitalized, adequately capitalized; undercapitalized;
significantly undercapitalized; and critically undercapitalized. An
institution may be considered well capitalized if it has a total risk-based
capital ratio of at least 10%, a Tier 1 risk-based capital ratio of at least 6%
and a Tier 1 leverage capital ratio of at least 5%, provided, however, such
institution is not subject to a written advisement, order or capital directive
to meet and maintain a specific capital level for any particular capital
measure. An adequately capitalized institution must have a total
risk-based capital ratio of at least 8%, a Tier 1 risk-based capital ratio of at
least 4% and a Tier 1 leverage capital ratio of at least 4% (3% if the
institution has achieved the highest composite rating in its most recent
examination).
7
As of
December 31, 2009, the Bank was considered “well-capitalized” and exceeded its
minimum regulatory capital requirements with a total risk-based capital ratio of
12.3%, a Tier 1 risk-based capital ratio of 8.7% and a leverage ratio of
7.7%. The Bank issued $4,000,000 in subordinated debt to the
holding company in 2009 that qualified as Tier 2 capital.
The Bank
has grown rapidly in its eleven-year history, and continued rapid growth will
require it to consider capital strategies to support that growth. The
Company has a $5,000,000 line of credit through an unaffiliated financial
institution, with up to $2,000,000 for the purpose of providing additional
capital to the Bank as needed, and up to $3,000,000 for liquidity
purposes. At December 31, 2009, $5,000,000 remained on the line of
credit. The Company is able to borrow against the line of credit and
then invest the funds in the Bank as paid-in capital, thus enabling the Bank to
manage its capital ratios. The interest rate on the line is variable,
at 0.75% below the prime rate or LIBOR plus 1.75%, which is at the Company’s
option at the time the line is drawn. The line has a floor rate of
4.20% regardless of the option the Company chooses at the time a draw is
made. The line is secured by 100% of the stock of the
Bank. There are certain covenants on the line relating to the
Company’s and the Bank’s operating performance and capital status. As
of December 31, 2009 the Bank and the Company were in compliance with all but
one of the covenants. The Bank’s ratio of nonperforming loans to
total assets was 1.86% at December 31, 2009, above the covenant of 1.50% or
less. The Company expects the covenant to be waived. At
December 31, 2008, the Company and the Bank were in compliance with all
covenants. The Company borrowed $3,000,000 against the liquidity line
of credit for seven days during 2008. At year-end 2008, the Company
borrowed $500,000 on the capital line of credit, which was repaid in May
2009. Other capital-raising strategies that the Company could
consider in the future include issuing preferred stock, common stock or issuing
subordinated debt at the Bank level. However, there is currently very
little market for these instruments.
Dividends. Ohio
law and FRB provisions prohibit the Bank, without the prior approval of both the
Division and the FRB, from paying dividends in an amount greater than the lesser
of its undivided profits or the total of its net income for that year, combined
with its retained net income from the preceding two years. As a
practical matter, banks are discouraged from paying dividends in excess of
current year net income. The Bank will have approximately $823,000,
plus its net income in 2010, available to be paid as dividends to the
Company. The payment of dividends by any financial institution or its
holding company is also affected by the requirement to maintain adequate capital
pursuant to applicable capital adequacy guidelines and regulations, and a
financial institution generally is prohibited from paying any dividends if,
following payment thereof, the institution would be
under-capitalized. As described above, the Bank exceeded its minimum
capital requirements under applicable guidelines as of December 31,
2009.
Branching Authority.
Ohio chartered banks have the authority under Ohio law to establish branches
anywhere in the State of Ohio, subject to receipt of all required regulatory
approvals. Additionally, in May 1997 Ohio adopted legislation “opting
in” to the provisions of Riegle-Neal Interstate Banking and Branching Efficiency
Act of 1994 (the "Interstate Act") which allows banks to establish interstate
branch networks through acquisitions of other banks, subject to certain
conditions, including certain limitations on the aggregate amount of deposits
that may be held by the surviving bank and all of its insured depository
institution affiliates. The establishment of de novo interstate branches
or the acquisition of individual branches of a bank in another state (rather
than the acquisition of an out-of-state bank in its entirety) is also allowed by
the Riegle-Neal Act and authorized by Ohio law.
Management
and the Board, on an ongoing basis, evaluate selected growth opportunities,
including branching. Several criteria are considered to be essential
for an expansion, including: the area must have a large deposit base,
the community must have a strong community identity; there should not be another
community bank located in the same area; and there must be significant
opportunities for profit.
After
extensive study and evaluation throughout 2003, the Board authorized the Bank to
pursue expansion into the Brecksville, Ohio market area. In December
2003, the Ohio Division of Financial Institutions approved the Bank’s
application to establish a banking office in Brecksville. The City of
Brecksville granted its approval for the project, and remodeling began in March
2004 of a building located at 8751 Brecksville Road. The Bank became
the anchor tenant of this building in October 2004, leasing nearly half of the
available square footage. This office has a Regional President and
offers all of the services and amenities that are offered in the Medina banking
office. There is also a local advisory board of directors that offers
guidance and assistance.
After
extensive study and evaluation throughout 2008, the Board authorized the Bank to
pursue expansion into the Wooster, Ohio market area via a lending
office. The Bank provided the necessary notification to the Ohio
Division of Financial Institutions and the lending office in Wooster, Ohio
opened in December 2008.
8
Depositor
Preference. The Federal Deposit Insurance Act provides that,
in the event of the “liquidation or other resolution” of an insured depository
institution, the claims of depositors of the institution, including the claims
of the FDIC as subrogee of insured depositors, and certain claims for
administrative expenses of the FDIC as a receiver, will have priority over other
general unsecured claims against the institution. If an insured depository
institution fails, insured and uninsured depositors, along with the FDIC, will
have priority in payment ahead of unsecured, non deposit creditors and
shareholders of the institution.
Privacy Provisions of
Gramm-Leach-Bliley Act. Under GLBA, federal banking regulators
adopted rules that limit the ability of banks and other financial institutions
to disclose non-public information about consumers to non-affiliated third
parties. These limitations require disclosure of privacy policies to
consumers and, in some circumstances, allow consumers to prevent disclosure of
certain personal information to non-affiliated third parties. The
privacy provisions of GLBA affect how consumer information is transmitted
through diversified financial companies and conveyed to outside
vendors.
Federal Home Loan
Bank. The Federal Home Loan Banks (“FHLBs”) provide credit to
their members in the form of advances. As a member of the FHLB of
Cincinnati, the Bank must maintain an investment in the capital stock of an FHLB
in an amount equal to the greater of 1% of the aggregate outstanding principal
amount of the Bank’s residential mortgage loans, home purchase contracts and
similar obligations at the beginning of each year, or 5% of its advances from
the FHLB.
Upon the
origination or renewal of a loan or advance, each FHLB is required by law to
obtain and maintain a security interest in collateral in one or more of the
following categories: fully-disbursed, whole first mortgage loans on improved
residential property not more than 90 days delinquent or securities representing
a whole interest in such loans; securities issued, insured or guaranteed by the
United States Government or an agency thereof; deposits in any FHLB; or other
real estate-related collateral acceptable to the applicable FHLB, if such
collateral has a readily ascertainable value and the FHLB can perfect its
security interest in the collateral.
Anti-Money Laundering
Provisions of the USA Patriot Act of 2001. On October 26,
2001, the USA Patriot Act of 2001 (the “Patriot Act”) was signed into law. The
Patriot Act is intended to strengthen U.S. law enforcement's and the
intelligence community's ability to work cohesively to combat terrorism on a
variety of fronts. The potential impact of the Patriot Act on financial
institutions of all kinds is significant and wide-ranging. The Patriot Act
contains sweeping anti-money laundering and financial transparency laws and
requires various regulations, including: (a) due diligence requirements for
financial institutions that administer, maintain, or manage private bank
accounts or correspondent accounts for non-U.S. persons; (b) standards for
verifying customer identification at account opening; and (c) rules to promote
cooperation among financial institutions, regulators and law enforcement
entities in identifying parties that may be involved in terrorism or money
laundering.
Fiscal and Monetary
Policies. The Bank’s business and earnings are affected
significantly by the fiscal and monetary policies of the federal government and
its agencies. The Bank is particularly affected by the policies of the FRB,
which regulates the supply of money and credit in the United States. Among the
instruments of monetary policy available to the Federal Reserve are (a)
conducting open market operations in United States government securities, (b)
changing the discount rates of borrowings of depository institutions, (c)
imposing or changing reserve requirements against depository institutions’
deposits, and (d) imposing or changing reserve requirements against certain
borrowing by banks and their affiliates. These methods are used in varying
degrees and combinations to affect directly the availability of bank loans and
deposits, as well as the interest rates charged on loans and paid on deposits.
For that reason alone, the policies of the FRB can have a material effect on the
earnings of the Bank.
Additional and Pending
Regulation. The Bank is also subject to federal regulation as to such
matters as the maintenance of required reserves against deposits, limitations in
connection with affiliate transactions, limitations as to the nature and amount
of its loans and investments, regulatory approval of any merger or
consolidation, issuance or retirement by the Bank of its own securities and
other aspects of banking operations. In addition, the activities and
operations of the Bank are subject to a number of additional detailed, complex
and sometimes overlapping laws and regulations. These include state
usury and consumer credit laws, state laws relating to fiduciaries, the Federal
Truth-in-Lending Act (Regulation Z), the Federal Equal Credit Opportunity Act
(Regulation B), the Fair Credit Reporting Act (Regulation V), the Truth in
Savings Act (Regulation DD), the Community Reinvestment Act (Regulation BB),
anti-redlining legislation and antitrust laws.
In
addition to programs discussed elsewhere herein, there have been numerous other
actions recently undertaken by the Federal Reserve Board, the U.S. Department of
the Treasury, the FDIC and others in efforts to address the current liquidity
and credit crisis in the financial industry. These measures, many of which were
taken in connection with or pursuant to recent stimulus measures enacted by
Congress, include proposed acquisitions of troubled bank assets; homeowner
relief that encourages loan restructuring and modification; the establishment of
significant liquidity and credit facilities for financial institutions and
investment banks; the lowering of the federal funds rate; a temporary guaranty
program for money market funds; and other coordinated efforts to address
illiquidity and other weaknesses in the banking sector. The Company
cannot predict the impact that these measures may have on the financial
condition or results of operations of the Company or the Bank. Nor
can the Company predict what other legislation or regulations might be adopted
going forward or the impact that such future measures may have on the Company or
the Bank
9
BUSINESS-STATISTICAL
DISCLOSURE
|
I.
|
DISTRIBUTION OF ASSETS,
LIABILITIES AND SHAREHOLDERS' EQUITY; INTEREST RATES AND INTEREST DIFFERENTIAL
|
|
|
The
information on contained in the Company’s 2009 Annual Report to
Shareholders under the caption “Net Interest Income” of “Management’s
Discussion and Analysis” is incorporated by
reference.
|
|
II.
|
INVESTMENT
PORTFOLIO
|
The
estimated fair values of securities available for sale at December 31, 2009 and
2008 are as follows:
|
Fair
Value
|
Gross
Unrealized
Gains
|
Gross
Unrealized
Losses
|
Weighted
Average
Yield
|
|||||||||||||
|
2009
|
||||||||||||||||
|
Mortgage-backed
|
5,264,140 | 215,372 | — | 4.83 | % | |||||||||||
|
Municipal
|
4,755,085 | 141,682 | (3,632 | ) | 5.52 | %(1) | ||||||||||
| $ | 10,019,225 | $ | 357,054 | $ | (3,632 | ) | 5.16 | % | ||||||||
|
2008
|
||||||||||||||||
|
U.S.
Government sponsored agencies
|
$ | 516,032 | $ | 16,032 | $ | — | 5.25 | % | ||||||||
|
Mortgage-backed
|
5,378,328 | 191,220 | (1,884 | ) | 5.07 | % | ||||||||||
|
Municipal
|
4,319,962 | 75,183 | (17,093 | ) | 5.60 | %(1) | ||||||||||
| $ | 10,214,322 | $ | 282,435 | $ | (18,977 | ) | 5.31 | % | ||||||||
Maturities of Investment Securities
|
Due in one
to five years
|
Due in five
to ten years
|
Greater
than ten years
|
||||||||||||||||||||||
|
Amount
|
Weighted
Average
Yields
|
Amount
|
Weighted
Average
Yields
|
Amount
|
Weighted
Average
Yields
|
|||||||||||||||||||
|
Mortgage-backed
|
— | — | 1,227,988 | 4.96 | 4,036,152 | 4.80 | % | |||||||||||||||||
|
Municipal
|
507,633 | 5.40 |
(1)
|
3,580,390 | 5.51 |
(1)
|
667,062 | 5.69 |
(1)
|
|||||||||||||||
| $ | 507,633 | 5.40 | % | $ | 4,808,378 | 5.37 | % | $ | 4,703,214 | 4.92 | % | |||||||||||||
|
(1)
|
Fully
tax-equivalent based on federal income tax structure applicable at
December 31, 2009 and 2008.
|
There are
no securities maturing in less than one year. Actual maturities may
differ from contractual maturities because issuers may have the right to call or
prepay obligations.
|
III.
|
LOAN
PORTFOLIO
|
|
|
A.
|
Types of Loans
- Total loans on the balance sheet are comprised of the following
classifications at December 31, 2009 and
2008.
|
|
2009
|
2008
|
|||||||
|
Commercial
|
$ | 149,323,296 | $ | 127,707,591 | ||||
|
Home
equity lines of credit
|
10,211,566 | 7,734,516 | ||||||
|
Residential
mortgage and construction
|
933,687 | 1,277,501 | ||||||
|
Consumer
and other loans
|
4,096,687 | 3,298,283 | ||||||
|
Purchased
auto loans
|
2,589,488 | 3,577,953 | ||||||
|
Other
|
22,121 | 29,587 | ||||||
| 167,176,845 | 143,625,431 | |||||||
|
Less
allowance for loan losses
|
2,316,715 | 1,743,470 | ||||||
| $ | 164,860,130 | $ | 141,881,961 | |||||
10
Concentrations
of Credit Risk: Western Reserve Bank grants commercial, residential
real estate mortgage and installment loans to businesses and individuals mainly
in Medina, Cuyahoga, Wayne and contiguous counties in
Ohio. Commercial loans include loans collateralized by business
assets. At December 31, 2009, commercial loans secured by real estate
make up approximately 62.3% of the loan portfolio. Other commercial
loans to businesses comprise 27.1% of total loans, and are expected to be repaid
from cash flows from operations of the businesses.
Variable
rate home equity lines of credit make up approximately 6.1% of the loan
portfolio and are collateralized by residential real
estate. Residential mortgage and construction loans are 0.6% of the
loan portfolio and are secured primarily by first mortgages on residential
property. Installment loans to individuals and other loans make up
approximately 2.5% of the loan portfolio and are primarily collateralized by
consumer assets or are unsecured. Purchased auto loans make up
approximately 1.5% of the loan portfolio and are collateralized by automobiles
and serviced by another financial institution. At December 31, 2009,
approximately 1.5% of the Bank’s total loan portfolio was
unsecured.
|
|
B.
|
Maturities and
Sensitivities of Loans to Changes in Interest Rates - The following
table shows the maturity distribution and sensitivity to changes in
interest rates of loans outstanding as of December 31,
2009. Fixed rate loans are presented based on their maturity
date, and variable rate loans with floating or adjustable interest rates
are included based on their earliest repricing
opportunity.
|
|
Within
|
One to
|
After
|
||||||||||||||
|
one year
|
five years
|
five years
|
Total
|
|||||||||||||
|
Commercial
|
$ | 83,420,456 | $ | 64,346,142 | $ | 1,531,361 | $ | 149,297,959 | ||||||||
|
Home
equity lines of credit
|
10,211,566 | — | — | 10,211,566 | ||||||||||||
|
Residential mortgageand construction
|
160,900 | 611,590 | 161,198 | 933,688 | ||||||||||||
|
Consumer
and other
|
3,865,283 | 196,399 | 54,947 | 4,116,629 | ||||||||||||
|
Purchased
auto loans
|
4,853 | 2,314,979 | 269,658 | 2,589,490 | ||||||||||||
|
Other
|
27,513 | — | — | 27,513 | ||||||||||||
| $ | 97,690,571 | $ | 67,469,110 | $ | 2,017,164 | $ | 167,176,845 | |||||||||
Of the
loans maturing or repricing after one year, approximately $32,556,000 have
variable interest rates, and $36,930,000 have fixed interest rates.
|
|
C.
|
Risk
Elements
|
|
|
1.
|
Nonaccrual,
Past Due, Restructured and Impaired Loans - The following schedule
summarizes nonaccrual, past due, restructured and impaired loans at
December 31.
|
|
2009
|
2008
|
||||||||
|
(a)
|
Nonhomogeneous
loans accounted for on a nonaccrual basis
|
$ | 3,591,816 | $ | 1,657,328 | ||||
|
(b)
|
Accruing
loans which are contractually past due 90
|
||||||||
|
days
or more as to interest or principal payments
|
— | — | |||||||
|
(c)
|
Loans
not included in (a) or (b) which are
|
||||||||
|
"Troubled
Debt Restructurings" as defined in
|
|||||||||
|
The
FASB’s Accounting Standards Codification
|
|||||||||
|
(ASC)
Topic 310, subtopic 40, sections 15, 30 and 50
|
1,834,245 | — | |||||||
|
(d)
|
Other
loans defined as “impaired”
|
— | — | ||||||
| $ | 5,426,061 | $ | 1,657,328 | ||||||
|
Percentage
of allowance to non-performing loans
|
43 | % | 105 | % | |||||
11
|
III.
|
LOAN PORTFOLIO
(Continued)
|
Information
related to the Company’s credit risk profile by internally assigned grade at
December 31, 2009, is included in the following table.
|
Commercial
Real Estate
|
Commercial &
Industrial
|
Residential
|
Consumer
|
Total
|
||||||||||||||||
|
Grade:
|
||||||||||||||||||||
|
Pass
|
$ | 93,277,462 | $ | 32,952,310 | $ | 11,079,186 | $ | 6,667,558 | $ | 143,976,516 | ||||||||||
|
Watch
|
5,663,583 | 1,175,681 | 6,839,264 | |||||||||||||||||
|
Special
mention
|
3,671,595 | 1,309,728 | 4,981,323 | |||||||||||||||||
|
Substandard
|
4,839,386 | 1,007,490 | 5,846,876 | |||||||||||||||||
|
Nonaccruing
and troubled
|
||||||||||||||||||||
|
debt
restructurings
|
4,791,192 | 634,869 | 66,067 | 40,738 | 5,532,866 | |||||||||||||||
|
Total
|
$ | 112,243,218 | $ | 37,080,078 | $ | 11,145,253 | $ | 6,708,296 | $ | 167,176,845 | ||||||||||
Loans
graded other than “Pass” are typically in industries displaying distress in the
current economy. As the grades become more adverse, the related
industry is likely displaying greater sensitivity to the current economic
conditions and the borrower’s financial strength may have
deteriorated. Industries such as commercial real estate management
and real estate development are particularly affected by current economic
conditions.
Management
believes the allowance for loan losses at December 31, 2009 is adequate to
absorb probable losses on nonperforming loans, as the allowance balance is
maintained by management at a level considered adequate to cover losses that are
currently anticipated based on the Company’s loss experience, the loss
experience of comparable companies, general economic conditions, information
about specific borrower situations including their financial position and
collateral values, and other factors and estimates which are subject to change
over time.
|
2009
|
||||
|
Gross
interest income that would have been recorded in 2009 on nonaccrual loans
outstanding at December 31, 2009 if the loans had been current, in
accordance with their original terms and had been outstanding throughout
the period or since origination if held for part of the
period
|
$ | 384,494 | ||
|
Interest
income actually recorded on nonaccrual loans and included in net income
for the period
|
146,258 | |||
|
Interest
income not recognized during the period
|
$ | 238,236 | ||
|
|
Discussion
of the Nonaccrual Policy
|
|
|
The
accrual of interest income is discontinued when the collection of a loan’s
principal or interest, in whole or in part, is doubtful. When
interest accruals are discontinued, interest income accrued but not yet
paid is reversed. In general, while loans which are past due 90
days or more as to interest or principal payments are considered for
nonaccrual status, management may elect to continue the accrual of
interest when the estimated net realizable value of collateral, in
management’s judgment, is sufficient to cover the principal balance and
accrued interest and the loan is in process of
collection. Management may also elect to place loans that are
less than 90 days past due on nonaccrual status when circumstances
warrant. These circumstances may include deteriorating
financial condition of the borrower, project or industry, bankruptcy and
any other issue that management determines is likely to result in the
borrower’s inability to repay the
loan.
|
12
|
|
2.
|
Potential
Problem Loans
|
|
|
As
of December 31, 2009, in addition to the $5,426,061 of loans reported
under Item III, C.1., there are no other outstanding loans where known
information about possible credit problems of the borrowers causes
management to have serious doubts as to the ability of such borrowers to
comply with the present loan repayment terms and which may result in
disclosure of such loans pursuant to Item III. C.1 at some future
date. There were no loans classified for regulatory purposes as
loss, doubtful or substandard that have not been disclosed in Section 1
above.
|
|
3.
|
Foreign
Loans Outstanding
|
|
|
None
|
|
4.
|
Loan
Concentrations
|
|
|
As
of December 31, 2009, commercial loans to entities classified as real
estate holding companies comprise approximately $54,581,000, or 32.6% of
the total loan portfolio. However, this category includes a
significant proportion of loans for buildings that are owner-occupied, and
that are classified as real estate holding companies solely because the
owner of the operating company has formed a real estate holding company
for the single purpose of owning the building that they then lease to
their operating company.
|
|
|
D.
|
Other Interest-Bearing
Assets
|
|
|
There
are no other interest-bearing assets as of December 31, 2009 that would be
required to be disclosed under Item III. C.1 or 2 if such assets were
loans.
|
13
|
IV.
|
SUMMARY
OF LOAN LOSS EXPERIENCE
|
|
|
A.
|
The
following schedule presents an analysis of the allowance for loan losses,
average loan data and related ratios for the years ended
December 31:
|
|
2009
|
2008
|
|||||||
|
Loans
|
||||||||
|
Loans
outstanding at end of period
|
$ | 167,176,845 | $ | 143,625,431 | ||||
|
Average
loans outstanding during period
|
$ | 155,567,937 | $ | 135,848,093 | ||||
|
Allowance
for loan losses
|
||||||||
|
Balance
at beginning of period
|
$ | 1,743,470 | $ | 1,605,766 | ||||
|
Loans
charged-off
|
||||||||
|
Commercial
|
207,986 | 351,899 | ||||||
|
Home
equity lines of credit
|
39,766 | — | ||||||
|
Residential
mortgage and construction
|
48,000 | — | ||||||
|
Consumer
installment
|
10,018 | 24,309 | ||||||
|
Purchased
auto loans
|
29,367 | 18,502 | ||||||
| 335,137 | 394,710 | |||||||
|
Recoveries
of loans previously charged-off
|
||||||||
|
Commercial
|
7,980 | 2,422 | ||||||
|
Home
equity lines of credit
|
12,796 | — | ||||||
|
Consumer
installment
|
579 | 818 | ||||||
|
Purchased
auto loans
|
1,627 | — | ||||||
| 22,982 | 3,240 | |||||||
|
Net
loans charged-off
|
312,155 | 391,470 | ||||||
|
Provision
for loan losses
|
885,400 | 529,174 | ||||||
|
Balance
at end of period
|
$ | 2,316,715 | $ | 1,743,470 | ||||
|
Ratio
of net charge-offs during the period to average loans outstanding during
the period
|
0.20 | % | 0.29 | % | ||||
|
|
The
allowance for loan losses is maintained at a level considered by
management to be adequate to cover probable incurred credit losses in the
loan portfolio. Management’s determination of the appropriate
provision for loan losses and the adequacy of the allowance for loan
losses is based on the Company’s historical losses adjusted for
environmental factors which management believes are representative of the
probable expected loss experience of the Company. Other factors
considered by management include the composition of the loan portfolio,
economic conditions, the creditworthiness of the Company’s borrowers and
other related factors. The Company revised its methodology for
determining the provision for loan losses in 2009 to provide larger
allowances for loans with risk grades indicating increased risk
characteristics.
|
|
|
B.
|
The
following schedule is a breakdown of the allowance for loan losses
allocated by type of loan and related
ratios.
|
|
Percentage of Loans in
|
||||||||||||||||
|
Each Category to
|
||||||||||||||||
|
Allowance Amount
|
Total Loans
|
|||||||||||||||
|
2009
|
2008
|
2009
|
2008
|
|||||||||||||
|
Commercial
|
$ | 2,202,299 | $ | 1,597,420 | 95.0 | % | 88.9 | % | ||||||||
|
Home
equity lines of credit
|
51,058 | 78,240 | 2.2 | 5.4 | ||||||||||||
|
Residential
mortgage & construction
|
2,603 | 23,491 | 0.1 | 0.9 | ||||||||||||
|
Installment
and other
|
||||||||||||||||
|
loans
to individuals
|
31,850 | 17,522 | 1.4 | 2.3 | ||||||||||||
|
Purchased
auto loans
|
28,905 | 26,797 | 1.3 | 2.5 | ||||||||||||
|
Total
|
$ | 2,316,715 | $ | 1,743,470 | 100.0 | % | 100.0 | % | ||||||||
14
|
IV.
|
SUMMARY OF LOAN LOSS EXPERIENCE
(Continued)
|
|
|
While
management's periodic analysis of the adequacy of the allowance for loan
losses may allocate portions of the allowance for specific problem loan
situations, the entire allowance is available for any loan charge-offs
that occur.
|
|
V.
|
DEPOSITS
|
|
|
The
average amount of deposits and average rates paid are summarized as
follows for the year ended December
31:
|
|
2009
|
2008
|
|||||||||||||||
|
Average
|
Average
|
Average
|
Average
|
|||||||||||||
|
Amount
|
Rate
|
Amount
|
Rate
|
|||||||||||||
|
Noninterest
bearing demand deposits
|
$ | 19,046,406 | 0.00 | % | $ | 17,228,875 | 0.00 | % | ||||||||
|
Interest
bearing demand deposits
|
8,344,012 | 0.57 | 7,010,024 | 0.99 | ||||||||||||
|
Savings
and money market accounts
|
67,941,295 | 0.90 | 76,519,854 | 2.47 | ||||||||||||
|
Certificates
of deposit and IRAs
|
71,292,805 | 2.77 | 43,999,451 | 3.65 | ||||||||||||
| $ | 166,624,518 | 1.78 | $ | 144,758,204 | 2.80 | |||||||||||
At
December 31, 2009, the Bank had $44,942,345 of time certificates of deposit of
$100,000 or more outstanding. Remaining maturities of these time
deposits are as follows:
|
Three
months or less
|
$ | 5,105,049 | ||
|
Over
three through six months
|
10,478,149 | |||
|
Over
six through twelve months
|
16,495,187 | |||
|
Over
twelve months
|
12,863,960 | |||
| $ | 44,942,345 |
|
VI.
|
RETURN
ON EQUITY AND ASSETS
|
|
|
The
ratio of net income to average shareholders' equity and average total
assets and certain other ratios are as
follows:
|
|
2009
|
2008
|
|||||||
|
Average
total assets
|
$ | 189,388,000 | $ | 165,171,000 | ||||
|
Average
shareholders’ equity
|
$ | 17,922,000 | $ | 14,294,000 | ||||
|
Net
income
|
$ | 189,220 | $ | 453,308 | ||||
|
Net
income (loss) available to common shareholders
|
$ | (5,029 | ) | $ | 453,308 | |||
|
Return
on average total assets
|
0.10 | % | 0.27 | % | ||||
|
Return
on average shareholders' equity
|
1.06 | % | 3.17 | % | ||||
|
Cash
dividends declared on common stock
|
$ | 0.00 | $ | 0.00 | ||||
|
Dividend
payout percentage
|
n/a | n/a | ||||||
|
Average
shareholders’ equity to average total assets
|
9.46 | % | 8.65 | % | ||||
|
VII.
|
SHORT-TERM
BORROWINGS
|
|
|
The
Company did not have any reportable categories of short-term borrowings
during or at the end of the reported
periods.
|
15
Item
1A. Risk
Factors
This item
is not applicable to smaller reporting companies.
Item
1B. Unresolved Staff
Comments
This item
is not applicable to smaller reporting companies.
Item
2. Description of
Property
The
Company leases premises for the Bank's main office at 4015 Medina Road, Suite
100, Medina, Ohio, from a person who was a related party until December 17,
2009. The facility serves as the Company’s corporate
headquarters. The leased premises consist of approximately 11,784
square feet of a three-story multi-tenant brick building constructed in 1998
with ample parking. The building is located on State Route 18, a
major thoroughfare in Medina, approximately 1.5 miles west of Interstate 71
and 1 mile east of downtown Medina. The Bank has five interior teller
stations (two of which are sit-down teller desks and three of which are
traditional stand-up teller counters), a two-lane drive-through, a drive-up ATM,
a night depository facility, and lending, accounting and operations
offices.
The
facility is leased under an operating lease with a primary term of ten years
which expired in October 2008 and options for two five-year
extensions. The Company exercised the first option for a five-year
extension expiring in October 2013. The annual lease payment was
$246,302 for 2009 and $257,248 for 2008, and is subject to annual
increases. Refer to Note 6 in the Company’s 2009 Annual Report to
Shareholders (incorporated herein by reference) for additional discussion about
the lease.
On
October 4, 2004, the Company opened a second full-service facility located at
8751 Brecksville Road, Brecksville, Ohio. The Bank entered into an
operating lease agreement for approximately 5,600 square feet of space for this
location from an unrelated party. The lease is for a term of ten
years beginning October 1, 2004, with two five-year renewal
options. The annual lease payment was $163,909 for 2009 and $160,962
for 2008, and is subject to annual increases.
The Bank
occupies a small, full-service, limited-hours office inside Western Reserve
Masonic Community, a retirement community at 4931 Nettleton Road, Medina. The
Bank also occupies a small, full-service, limited-hours office inside
Summerville at Camelot (formerly Camelot Place), an assisted living facility
located at 49 Leisure Lane, Medina; however, this office is expected to be
discontinued and its operations merged into the main office in March
2010. Rent for both offices is de minimis.
On
December 18, 2009, the Company opened a lending office located at 148 E. Liberty
Street, Wooster, Ohio. The Bank entered into an operating lease
agreement for approximately 820 square feet of space for this location from a
person who was a related party until December 17, 2009. The lease is
for a term of one year beginning December 1, 2009, with annual renewal
options. Rent for 2009 and 2008 was $8,168 and $675,
respectively.
Item
3. Legal
Proceedings
The
Company is not aware of any legal proceedings against it or the
Bank.
Item
4. Removed
and Reserved
16
PART
II
Item
5. Market
for Common Equity and Related Stockholder Matters and Issuer Purchases of Equity
Securities
The
Company's Common Stock was held by approximately 495 holders of record as of
December 31, 2009. Howe Barnes Hoefer & Arnett, Inc. (Howe
Barnes) makes a market in the Company’s shares of stock. Howe Barnes
is a Chicago based investment firm that specializes in the research and trading
of small and medium sized community bank stocks. The Company’s shares
are quoted on the OTC “Pink Sheets” under the symbol WRBO. To date
there has been no regular and liquid market for the common stock, and there can
be no assurance that a regular and liquid trading market will develop in the
foreseeable future although management believes the arrangement with Howe Barnes
will provide shareholders with improved liquidity of their
shares. The high and low bid information in the table below has been
compiled from NASDAQ.com. These quotations reflect inter-dealer
prices, without retail mark-up, mark-down or commission, and may not represent
actual transactions.
|
2009
|
High
|
Low
|
||||||
|
Fourth
quarter
|
$ | 15.00 | $ | 10.02 | ||||
|
Third
quarter
|
$ | 17.00 | $ | 15.00 | ||||
|
Second
quarter
|
$ | 15.00 | $ | 15.00 | ||||
|
First
quarter
|
$ | 15.00 | $ | 15.00 | ||||
|
2008
|
High
|
Low
|
||||||
|
Fourth
quarter
|
$ | 15.00 | $ | 15.00 | ||||
|
Third
quarter
|
$ | 19.50 | $ | 19.50 | ||||
|
Second
quarter
|
$ | 19.25 | $ | 19.25 | ||||
|
First
quarter
|
$ | 22.50 | $ | 22.50 | ||||
No cash
or other dividends were declared or paid since the Company’s inception on
February 25, 1997. The Company expects that all Company and Bank
earnings, if any, will be retained to finance the growth of the Company and the
Bank and that no cash dividends will be paid for the foreseeable
future. If and when dividends are declared, the Company will probably
be largely dependent upon dividends paid by the Bank for funds to pay dividends
on the Common Stock. It is also possible, however, that the Company
could pay dividends in the future generated from investment income and other
activities of the Company. As part of the conditions for renewal of a
line of credit with another financial institution described in Note 8 of the
Company’s 2009 Annual Report to Shareholders, the Company may, over the life of
the loan agreement, declare or pay dividends subject to an aggregate limit of
$100,000.
Under
Ohio law, the Bank will be restricted as to the maximum amount of dividends it
may pay on its Common Stock. For additional discussion regarding
dividend restrictions, please refer to the discussion regarding Supervision and
Regulation in Part I of this Form 10-K.
Because
the Company sold senior preferred stock to the U.S. Treasury under the CPP, the
Company may not pay dividends to common shareholders until all dividends on the
senior preferred stock have been paid in full. In addition, the U. S.
Treasury must consent to any increase in dividends paid in the first three years
and for any increase in dividend payments exceeding 3% per year
thereafter. The senior preferred stock is expected to be redeemed
after no more than ten years, therefore, no dividends may be paid to common
shareholders after ten years if the senior preferred stock has not been
redeemed. Refer to Note 17 in the Company’s 2009 Annual Report to
Shareholders (incorporated herein by reference) for additional discussion about
the Company’s participation in the CPP and related requirements and
restrictions.
Item
6. Selected
Financial Data.
N/A
Item
7. Management’s Discussion and
Analysis and Results of Operations
The
information contained in the Company’s 2009 Annual Report to Shareholders under
the caption “Management’s Discussion and Analysis” is incorporated by
reference.
17
Item
7A. Quantitative and Qualitative
Disclosures about Market Risk
This item
is not applicable to smaller reporting companies.
Item
8. Financial
Statements
The
following financial statements and related notes are incorporated by reference
to the Company’s 2009 Annual Report to Shareholders under the following
captions:
|
Report
of Independent Registered Public Accounting Firm
|
4
|
|
Consolidated
Balance Sheets
|
5
|
|
Consolidated
Statements of Income
|
6
|
|
Consolidated
Statements of Changes in Shareholders’ Equity
|
7
|
|
Consolidated
Statements of Cash Flows
|
8
|
|
Notes
to Consolidated Financial Statements
|
9
|
Item
9. Changes
in, and Disagreements With, Accountants on Accounting and Financial
Disclosure
None.
Item
9A(T). Controls and
Procedures
As of the
end of the period covered by this report, an evaluation was carried out under
the supervision and with the participation of Western Reserve Bancorp, Inc.’s
management, including the Company’s Chief Executive Officer and Chief Financial
Officer, of the effectiveness of the Company’s disclosure controls and
procedures (as defined in Rule 13a-15(e)/15d-15(e) under the Securities Exchange
Act of 1934). Based on their evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that the Company’s
disclosure controls and procedures are, to the best of their knowledge,
effective to ensure that information required to be disclosed by Western Reserve
Bancorp, Inc. in reports that it files or submits under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in Securities and Exchange Commission rules and forms. There was no
change in the Company’s internal control over financial reporting that occurred
during the Company’s fiscal quarter ended December 31, 2009 that has materially
affected, or is reasonably likely to materially affect, the Company’s internal
control over financial reporting.
The
Company’s management is responsible for establishing and maintaining adequate
internal control over financial reporting for the Company. With the
participation of the President and Chief Executive Officer and the Chief
Financial Officer, management conducted an evaluation of the effectiveness of
internal control over financial reporting based on the framework and the
criteria established in Internal Control—Integrated
Framework, issued by the Committee of Sponsoring Organizations of the
Treadway Commission (“COSO”) as well as COSO’s Guidance for Smaller Public
Companies. Based on this evaluation, management has concluded
that internal control over financial reporting was effective as of December 31,
2009.
This
annual report does not include an attestation report of the Company’s registered
public accounting firm, Crowe Horwath LLP, regarding internal control over
financial reporting. Management’s report was not subject to
attestation by the Company’s registered public accounting firm pursuant to
temporary rules of the Securities and Exchange Commission that permit the
Company to provide only management’s report in this annual report.
|
/s/ Edward J. McKeon
|
/s/ Cynthia A. Mahl
|
|
|
Edward
J. McKeon
|
Cynthia
A. Mahl
|
|
|
President
and
|
Executive
Vice President and
|
|
|
Chief
Executive Officer
|
Chief
Financial Officer
|
March 23,
2010
18
Item
9B. Other
Information
None.
PART
III
Item
10. Directors, Executive
Officers and Corporate Governance
Directors,
Executive Officers, Promoters and Control Persons:
|
A.
|
Directors. The
information contained in the Company’s Proxy Statement under the caption
“Election of Directors” is incorporated by
reference.
|
|
B.
|
Executive
Officers. The information contained in the Company’s Proxy
Statement under the caption “Summary Compensation Table” is incorporated
by reference.
|
|
C.
|
Certain
Significant
Employees. None.
|
|
D.
|
Family
Relationships. None.
|
|
E.
|
Business
Experience. The information contained in the Company’s Proxy
Statement under the caption “Election of Directors” is incorporated by
reference.
|
|
F.
|
Involvement
in Certain Legal
Proceedings. None.
|
|
G.
|
Promoters
and Control
Persons. None.
|
Section
16(a) Beneficial Ownership Reporting Compliance.
The
information contained in the Company’s Proxy Statement under the caption
“Section 16(a) Beneficial Ownership Reporting Compliance is incorporated by
reference.
Code
of Ethics
Code of
Ethics. As noted above in Part I, Item 1, the Company has adopted a
Code of Ethics and Business Conduct applicable to the Company’s Chief Executive
Officer, the Chief Financial Officer, the principal accounting officer and other
senior financial officers performing accounting, auditing, financial management
or similar functions. A copy of the Code of Ethics and Business
Conduct is available free of charge upon request. Shareholders
desiring a copy of the Code should address written requests to Ms. Cynthia A.
Mahl, Senior Vice President, Chief Financial Officer and Secretary, Western
Reserve Bancorp, Inc., 4015 Medina Road, P.O. Box 585, Medina,
Ohio 44258-0585. A copy of the Company’s Code is available
on the Company’s website at www.westernreservebank.com.
Corporate
Governance
Audit
Committee Financial Expert. The Company’s Board of Directors has
determined that C. Richard Lynham, Chairman of the Audit Committee, is a
“financial expert” as defined under the regulations promulgated under the
Sarbanes-Oxley Act and is “independent” defined under Rule 4200 of the National
Association of Securities Dealers (“NASD”) Marketplace Rules.
Identification
of the Audit Committee. The information contained in the Company’s
Proxy Statement under the caption “Board Structure and Committees” is
incorporated by reference.
19
Item
11. Executive
Compensation
The
information contained in the Company’s Proxy Statement under the caption
“Executive Compensation” is incorporated by reference.
Item
12. Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder
Matters
The
information contained in the Company’s Proxy Statement under the caption
“Beneficial Ownership” is incorporated by reference.
The
information contained in the Company’s Proxy Statement under the caption
“Election of Directors” is incorporated by reference.
The
Company has a nonqualified stock option plan that provides for up to 125,000
shares of the Company’s common stock to be available for grant to officers,
employees, directors and others. The exercise price is at least the
market price at date of grant. The maximum option term is ten years,
and options generally vest over three years as follows: 25% one year from the
grant date, 50% after two years, and 100% after three years. Options
granted after 2004 generally vest 100% after five years. As of
December 31, 2009, the following equity securities are authorized for issuance
under the plan:
Equity
Compensation Plan Information
|
Number of securities
to be issued upon
exercise of outstanding
options, warrants and
rights
|
Weighted-average
exercise price of
outstanding options,
warrants and rights
|
Number of securities
remaining available for
future issuance under
equity compensation
plans (excluding
securities reflected in
column (a))
|
||||||||||
|
(a)
|
(b)
|
(c)
|
||||||||||
|
Equity
compensation plans approved by security holders
|
0 | n/a | 0 | |||||||||
|
Equity
compensation plans not approved by security holders
|
104,387 | $ | 18.62 | 0 | ||||||||
|
Total
|
104,387 | $ | 18.62 | 0 | ||||||||
The
Plan’s ten-year term ended in 2008 and, accordingly, there were no options
available to be awarded under the plan at December 31, 2009.
The Plan
provides for adjustment of the number of shares in the event the outstanding
shares of stock of the Company are changed into or exchanged for a different
number or kind of shares by reason of any merger, consolidation, reorganization,
recapitalization, combination, stock split or stock dividend.
Item
13. Certain
Relationships and Related Transactions, and Director
Independence
The
information contained in the Company’s Proxy Statement under the caption
"Transactions with Related Persons, Promoters and Certain Control Persons" is
incorporated by reference. The Company has determined that the
following members of its Board of Directors qualify as “independent” under Rule
4200(a)(15) of the NASDAQ Marketplace Rules: Roland H. Bauer, Bijay
K. Jayaswal, Ray E. Laribee, C. Richard Lynham, R. Hal Nichols, Rory H. O’Neil,
Glenn M. Smith and Thomas A. Tubbs.
Item
14. Principal Accountant Fees
and Services
The
information contained in the Company’s Proxy Statement under the caption "Audit
Fees" is incorporated by reference.
20
PART
IV
Item
15. Exhibits, Financial
Statement Schedules
The
Exhibit Index that immediately follows the signature page to this Form 10-K is
incorporated by reference. The exhibits required to be filed with
this Form 10-K are included with this Form 10-K and are located immediately
following the Exhibit Index to this Form 10-K.
21
SIGNATURES
In
accordance with Section 13 or 15(d) of the Exchange Act, as amended, the Issuer
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized, on March 23, 2010.
|
WESTERN
RESERVE BANCORP, INC.
|
||
|
By:
|
/s/
Edward J. McKeon
|
|
|
Edward
J. McKeon, President, Chief
|
||
|
Executive
Officer and Director
|
||
In
accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the Issuer and in the capacities noted below and
on March 23, 2010.
|
/s/ P.M. Jones
|
/s/ Edward J. McKeon
|
|
|
P.M.
Jones, Chairman of the Board
|
Edward
J. McKeon, President, Chief Executive
Officer
and Director
|
|
|
/s/ Roland H. Bauer
|
/s/ Bijay K. Jayaswal
|
|
|
Roland
H. Bauer, Director
|
Bijay
K. Jayaswal, Director
|
|
|
/s/ Ray E. Laribee
|
/s/ C. Richard Lynham
|
|
|
Ray
E. Laribee, Director
|
C.
Richard Lynham, Director
|
|
|
/s/ R. Hal Nichols
|
/s/ Rory H. O’Neil
|
|
|
R.
Hal Nichols, Director
|
Rory
H. O’Neil, Director
|
|
|
/s/ Thomas A. Tubbs
|
/s/ Glenn M. Smith
|
|
|
Thomas
A. Tubbs, Director
|
Glenn
M. Smith, Director
|
|
|
/s/ Cynthia A. Mahl
|
||
|
Cynthia
A. Mahl, Executive Vice President and
Principal
Financial and Accounting
Officer
|
22
WESTERN
RESERVE BANCORP, INC.
EXHIBIT
INDEX
|
Exhibit No.
|
Description of Exhibits
|
|
|
3.1
|
Amended
and Restated Articles of Incorporation of Western Reserve Bancorp, Inc.
(incorporated by reference to the Company’s Report on Form 10-Q filed with
the Commission on August 14, 2008 and Form 8-K filed with the Commission
on May 21, 2009)
|
|
|
3.2
|
Code
of Regulations of Western Reserve Bancorp, Inc. (incorporated by reference
to the Company’s Report on Form SB-2 filed with the Commission on December
29, 1997)
|
|
|
10.1
|
Employment
Agreement of Edward J. McKeon, Dated December 15, 2005, as amended
November 19, 2009 (incorporated by reference to the Company’s Report on
Form 8-K filed with the Commission on December 19, 2005 and
the Company’s Report on Form 8-K filed with the Commission on
November 25, 2009)
|
|
|
10.2
|
Lease
Agreement by and between Michael Rose DBA Washington Properties and
Western Reserve Bancorp, Inc. (incorporated by reference to the Company’s
Report on Form 10-KSB filed with the Commission on March 31,
1999)
|
|
|
10.3
|
Western
Reserve Bancorp, Inc. 1998 Stock Option Plan, Amended and Restated as of
August 21, 2008 (incorporated by reference to the Company’s Report on Form
8-K filed with the Commission on August 26, 2008)
|
|
|
10.4
|
Agreement
by and between Western Reserve Bancorp, Inc. and Brian K. Harr, dated June
18, 2001, as amended February 20, 2002 and November 19, 2009 (incorporated
by reference to the Company’s Report on Form 10-KSB filed with the
Commission on March 28, 2003 and the Company’s Report on Form
8-K filed with the Commission on November 25, 2009 )
|
|
|
10.5
|
Agreement
by and between Western Reserve Bancorp, Inc. and Cynthia A. Mahl, dated
June 18, 2001, as amended February 20, 2002 and November 19, 2009
(incorporated by reference to the Company’s Report on Form 10-KSB filed
with the Commission on March 28, 2003 and the Company’s Report
on Form 8-K filed with the Commission on November 25, 2009
)
|
|
|
10.6
|
Loan
Agreement between Western Reserve Bancorp, Inc. and TCF National Bank,
dated May 5, 2003 (incorporated by reference to the Company’s Report on
Form 10-QSB filed with the Commission on August 14,
2003)
|
|
|
10.7
|
Western
Reserve Bank Supplemental Executive Retirement Plan, Amended and Restated
as of December 21, 2006 (incorporated by reference to the Company’s Report
on Form 8-K filed with the Commission on December 27,
2006)
|
|
|
10.8
|
Western
Reserve Bancorp, Inc. Employee Stock Purchase Plan (incorporated by
reference to the Company’s Report on Form 10-QSB filed with the Commission
on November 14, 2003)
|
|
|
10.9
|
Lease
Agreement by and between Western Reserve of Brecksville, LLC and Western
Reserve Bank (incorporated by reference to the Company’s Report on Form
10-KSB filed with the Commission on March 30, 2005)
|
|
|
|
||
|
10.10
|
First
amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated March 31, 2005 (incorporated by
reference to the Company’s Report on Form 10-QSB filed with the Commission
on May 16, 2005)
|
|
|
10.11
|
Second
amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated June 30, 2005 (incorporated by reference
to the Company’s Report on Form 10-QSB filed with the Commission on August
15, 2005)
|
|
|
10.12
|
|
Western
Reserve Bancorp, Inc. and Western Reserve Bank Executive Incentive
Compensation Plan, Amended and Restated as of May 1, 2008 (incorporated by
reference to the Company’s Report on Form 8-K filed with the Commission on
May 7, 2008)
|
23
|
Exhibit No.
|
Description of Exhibits
|
|
|
10.13
|
Third
amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated July 20, 2006 (incorporated by reference
to the Company’s Report on Form 10-QSB filed with the Commission on
November 14, 2006)
|
|
|
10.14
|
Fourth
amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated February 6, 2008 (incorporated by
reference to the Company’s Report on Form 10-QSB filed with the Commission
on August 14, 2007)
|
|
|
10.15
|
Fifth
Amendment to the Loan Agreement and Waiver by and between Western Reserve
Bancorp, Inc. and TCF National Bank, dated June 21, 2008 (incorporated by
reference to the Company’s Report on Form 10-QSB filed with the Commission
on August 14, 2007)
|
|
|
10.16
|
Sixth
Amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated September 28, 2008 (incorporated by
reference to the Company’s Report on Form 10-QSB filed with the Commission
on November 14, 2007)
|
|
|
10.17
|
Seventh
Amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated July 18, 2008 (incorporated by reference
to the Company’s Report on Form 10-Q filed with the Commission on November
14, 2008)
|
|
|
10.18
|
Form
of Amendment to the Western Reserve Bancorp, Inc. Stock Option Grant
Agreement as of October 16, 2008 (incorporated by reference to the
Company’s Report on Form 8-K filed with the Commission on October 22,
2008)
|
|
|
10.19
|
Eighth
Amendment to the Loan Agreement by and between Western Reserve Bancorp,
Inc. and TCF National Bank, dated July 1, 2009 (incorporated by reference
to the Company’s Report on Form 10-Q filed with the Commission on August
14, 2009)
|
|
|
11
|
Statement
re: Computation of Per Share Earnings (incorporated by reference to the
Company’s 2009 Annual Report to Shareholders)
|
|
|
13
|
2009
Annual Report to Shareholders (Except for sections incorporated by
reference into this Form 10-K, the Annual Report to Shareholders shall not
be deemed to be “filed” with the Commission.)
|
|
|
21
|
Subsidiary
of Western Reserve Bancorp, Inc.
|
|
|
23
|
Consent
of Crowe Horwath LLP
|
|
|
31.1
|
Certification
under Section 302 of the Sarbanes-Oxley Act by Edward J. McKeon, President
and Chief Executive Officer
|
|
|
31.2
|
Certification
under Section 302 of the Sarbanes-Oxley Act by Cynthia A. Mahl, Executive
Vice President and Chief Financial Officer
|
|
|
32.1
|
Certification
under Section 906 of the Sarbanes-Oxley Act by Edward J. McKeon, President
and Chief Executive Officer
|
|
|
32.2
|
Certification
under Section 906 of the Sarbanes-Oxley Act by Cynthia A. Mahl, Executive
Vice President and Chief Financial Officer
|
|
|
99.1
|
Certifications
Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act
of 2008 (EESA) by Edward J. McKeon, President and Chief Executive
Officer
|
|
|
99.2
|
Certifications
Pursuant to Section 111(b)(4) of the Emergency Economic Stabilization Act
of 2008 (EESA) by Cynthia A. Mahl, Executive Vice President and Chief
Financial Officer
|
24