LNB Bancorp (LNBB) 10-Q/A 2004 Q1 Quarterly report (amended)

Form 10-Q/A

AMENDMENT NO. 1

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 March 31, 2004

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 on its charter)

Ohio	34-1406303
(State of Incorporation)	(I.R.S. Employer 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, address and 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 by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2)       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 April 30, 2004: 6,617,892 shares
Class of Common Stock: $1.00 par value

LNB Bancorp, Inc.
Index

 CEO 302 CERT

 CFO 302 CERT

 906 CERTIFICATION

 906 CERTIFICATION

Item 1. Financial Statements

Registrant is hereby amending its periodic report on Form 10-Q for the period ended March 31, 2004, as filed with the Securities and Exchange Commission on April 30, 2004. In that report, Registrant inadvertently provided on its Statement of Cash Flows for the period ended March 31, 2003 the figure of $6,832 for its "Cash and Cash Equivalents at Beginning of Year" line item. The correct amount for this line item is $26,832, and such amount is now appropriately indicated on Registrant's Statement of Cash Flows. All dollar amounts in this report are reported in thousands of dollars, except per share amounts. Registrant is resubmitting this Part I, Item 1 in its entirety.

LNB Bancorp, Inc.

Condensed Consolidated Balance Sheets

For the Period Ended (unaudited)

	March 31,			December 31,
(Dollars in thousands)	2004			2003
Assets:
Cash and due from banks	$	27,363		$	24,646
Federal funds sold and short-term investments		7,913			3,103
Securities:
Available for sale, at fair value		127,208			143,459
Held to maturity, at cost (fair value $21,402 and $4,952 respectively		21,157			4,789
Other investments and equity stock, at cost		3,915			3,879
Total securities		152,280			152,127
Loans: (Note 8)
Portfolio loans		530,449			528,096
Loans held for sale		6,559			6,215
Total loans		537,008			534,311
Reserve for loan losses		(7,819	)		(7,730	)
Net loans		529,189			526,581
Bank owned life insurance		12,861			12,702
Bank premises and equipment, net		11,307			11,009
Intangible assets		3,217			3,245
Accrued interest receivable		2,728			2,818
Other assets		4,872			4,401
Foreclosed assets		662			589
Total Assets	$	752,392		$	741,221
Liabilities and Shareholders’ Equity:
Deposits:
Demand and other noninterest-bearing deposits	$	84,250		$	86,693
Savings, Market Access and passbook accounts		270,100			277,197
Certificates of deposit		209,463			217,454
Total deposits		563,813			581,344
Securities sold under repurchase agreements and other short-term borrowings		22,963			15,023
Federal Home Loan Bank advances		90,303			71,540
Accrued interest payable		940			875
Accrued taxes, expenses and other liabilities (Note 6)		4,830			4,304
Total liabilities		682,849			673,086
Shareholders’ Equity: (Note 3)
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 6,766,867 and 6,766,867, respectively, Shares outstanding 6,617,838 and 6,617,618 respectively		6,766			6,766
Additional capital		26,243			26,243
Retained earnings		39,779			38,715
Accumulated other comprehensive (loss)		(364	)		(704	)
Treasury stock at cost, 149,029 and 149,249 shares, respectively		(2,881	)		(2,885	)
Total Shareholders’ Equity		69,543			68,135
Commitments and contingencies
Total Liabilities and Shareholders’ Equity	$	752,392		$	741,221

See accompanying notes to the condensed consolidated financial statements.

LNB Bancorp, Inc.

Condensed Consolidated Statements of Income

For the Three Months Ended (unaudited)

	March 31,		March 31,
(Dollars in thousands, except per share amounts)	2004		2003
Interest Income:
Interest and fees on loans	$	7,793	$	8,202
Interest and dividends on securities:
U.S. Government agencies and corporations		952		1,238
States and political subdivisions		145		155
Other debt and equity securities		72		79
Interest on Federal funds sold and other interest-bearing instruments		14		12
Total interest income		8,976		9,686
Interest Expense:
Interest on deposits
Time certificates of $100,000 and over		334		375
Other deposits		1,280		1,676
Interest on securities sold under agreements to repurchase and other short-term borrowings		41		68
Interest on Federal Home Loan Bank advances		451		407
Total interest expense		2,106		2,526
Net Interest Income		6,870		7,160
Provision for Loan Losses		525		564
Net Interest Income after Provision for Loan Losses		6,345		6,596
Operating Income:
Service charges on deposits accounts		984		946
Electronic banking fees		631		627
Investment and Trust Services Income		586		454
Gain on sale of securities		223		203
Income from investment in life insurance		159		193
Other service charges, exchanges and fees		111		160
Gains on sale of loans		37		62
Other operating income		125		54
Total Operating Income		2,856		2,699
Operating Expenses:
Salaries and employee benefits (Notes 5 and 6)		3,038		3,157
Net occupancy expenses		374		412
Furniture and equipment expenses		670		549
Card-related expenses		332		292
Supplies and postage		252		282
Professional services		234		218
Marketing and advertising		179		240
Ohio franchise tax		188		181
Other operating expenses		709		808
Total Operating Expenses		5,976		6,139
Income Before Income Taxes		3,225		3,156
Income Taxes		969		965
Net Income	$	2,256	$	2,191
Net Income Available to Common Shareholders:
Basic Earnings Per Share (Note 2 *)	$	.34	$	.33
Diluted Earnings Per Share (Note 2 *)	$	34	$	.33

See accompanying notes to the condensed consolidated financial statements.
* All shares and or share amounts have been adjusted to reflect the three-for-two stock split in 2003.

LNB Bancorp, Inc.

Condensed Consolidated Statements of Cash Flows

For the Three Month Period Ended (unaudited)

(Dollars in thousands)	March 31, 2004			March 31, 2003
Cash Flows from Operating Activities:
Interest received	$	9,230		$	9,827
Other income received		2,131			2,161
Interest paid		(2,041	)		(2,526	)
Originations of loans held for sale		(1,207	)		(4,314	)
Proceeds from sale of loans held for sale		1,596			5,295
Gain on sale of loans held for sale		(37	)		(62	)
Cash paid for salaries and employee benefits		(3,366	)		(3,620	)
Net occupancy expense of premises paid		(302	)		(333	)
Furniture and equipment expenses paid		(309	)		(235	)
Cash paid for supplies and postage		(252	)		(282	)
Cash paid for other operating expenses		(1,993	)		(2,402	)
Net Cash Provided by Operating Activities		3,450			3,509
Cash Flows from Investing Activities:
Proceeds from maturities of securities held to maturity		338			5,325
Proceeds from sales and maturities of securities available for sale		33,155			30,190
Purchases of securities held to maturity		(16,442	)		0
Purchases of securities available for sale		(16,675	)		(38,352	)
Increase in loans available for sale		389			1,269
Net (increase) in loans made to customers		(3,960	)		(4,839	)
Purchases of bank premises and equipment		(741	)		(228	)
Proceeds from sales of bank premises and equipment		10			9
Proceeds from liquidation of other foreclosed assets		(242	)		22
Purchases of other foreclosed assets		192			0
Net Cash Used in Investing Activities		(3,976	)		(6,604	)
Cash Flows from Financing Activities:
Net increase (decrease) in demand and other noninterest- bearing deposits		(2,443	)		6,175
Net (decrease) in savings, Market Access and passbook deposits		(7,097	)		(4,076	)
Net increase (decrease) in certificates of deposit		(7,991	)		10,629
Net increase (decrease) in securities sold under repurchase agreements and other short-term borrowings		7,940			(10,027	)
Proceeds from Federal Home Loan Bank Advances		106,500			75,500
Cash paid on Federal Home Loan Bank Advances		(87,737	)		(72,000	)
Cash paid in lieu of fractional shares related to three-for-two stock split		0			(13	)
Proceeds from exercise of stock options		0			19
Issuance of Treasury stock		4			6
Dividends paid		(1,123	)		(1,188	)
Net Cash Provided by Financing Activities		8,053			5,025
Net Increase in Cash and Cash Equivalents		7,527			1,930
Cash and Cash Equivalents at Beginning of Year		27,749			26,832
Cash and Cash Equivalents at End of Quarter	$	35,276		$	28,762

See accompanying notes to the condensed consolidated financial statements.

(Dollars in thousands)	March 31, 2004			March 31, 2003
Reconciliation of Net Income to Net cash Provided by Operating Activities:
Net Income	$	2,256		$	2,191
Adjustments to reconcile net income to net cash provided by operating activities:
Originations of loans held for sale		(1,207	)		(4,314	)
Proceeds from sale of loans held for sale		1,596			5,295
Gain on sale of investments and loans		(260	)		(265	)
Depreciation and amortization		433			393
Amortization of intangible assets		28			29
Amortization of premiums on investment securities		249			280
Amortization of deferred loan fees and costs, net		(44	)		(80	)
Provision for loan losses		525			564
Increase in cash surrender value of BOLI		(159	)		(185	)
(Increase) decrease in accrued interest receivable		90			(61	)
(Increase) in other assets		(471	)		(26	)
Increase in accrued interest payable		65			0
Increase (Decrease) in accrued taxes, expenses and other liabilities		458			(239	)
Other, net		(109	)		(73	)
Net Cash Provided by Operating Activities	$	3,450		$	3,509

See accompanying notes to the condensed consolidated financial statements.

LNB Bancorp, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

1. Basis of Presentation

These consolidated financial statements include the accounts of LNB Bancorp, Inc. (the Parent Company) and it’s wholly-owned subsidiaries, Lorain National Bank (the “Bank”) and Charleston Insurance Agency, Inc. Charleston Title Agency, LLC, a 49%-owned subsidiary, is accounted for under the equity method. The term “the Corporation” refers to LNB Bancorp, Inc. and its wholly-owned subsidiaries, The Lorain National Bank and Charleston Insurance Agency, Inc., and a 49% interest in Charleston Title Agency, LLC. All significant inter-company balances and transactions have been eliminated in consolidation. Also included is the Bank’s wholly-owned subsidiary, North Coast Community Development Corporation (“NCCDC”). All dollar amounts in this report are reported in thousands of dollars, except per share amounts.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with instructions for Form 10-Q. Accordingly, they do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of management, all adjustments (all of which are normal and recurring in nature) considered necessary for a fair presentation have been included. Operating results for the three-month period ending March 31, 2004 are not necessarily indicative of the results that may be expected for the year ending December 31, 2004. The 2003 LNB Bancorp, Inc. Annual Report on Form 10-K should be read in conjunction with these statements.

2. Critical Accounting Policies and New Accounting and Regulatory Pronouncements

Critical Accounting Policies

The Corporation maintains critical accounting policies for reserve for loan losses, classification and evaluation of securities valuation and a deferred tax asset valuation reserve. Refer to notes 1,5,7 and 12 of the Notes to Consolidated Financial Statements for additional information incorporated by reference to the 2003 Annual Report to Shareholders on Form 10-K.

Impacts of Accounting and Regulatory Pronouncements:

Corporate management is not aware of any proposed regulations or current recommendations by the Financial Accounting Standards Board or by regulatory authorities, which, if they were implemented, would have a material effect on the liquidity, capital resources, or operations of the Corporation. However, the potential impact of certain accounting and regulatory pronouncements warrant further discussion.

Financial Accounting Standards Board:

The Financial Accounting Standards Board (FASB) has issued:

SFAS No. 132(Revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.”

In December 2003, the FASB issued SFAS No. 132 (Revised 2003), “Employers’ Disclosures about Pensions and Other Postretirement Benefits.” This Statement expands upon the existing disclosure requirements as prescribed under the original SFAS No. 132 by requiring more details about pension plan assets, benefit obligations, cash flows, benefit costs and related information. SFAS No. 132(R) also requires companies to disclose various elements of pension and postretirement benefit costs in interim-period financial statements beginning after December 15, 2003. This Statement is effective for financial statements with fiscal years ending after December 15, 2003. The Corporation adopted the additional year-end disclosure requirements under SFAS No. 132(R) during the fourth quarter of 2003 and the interim-period financial statement disclosure requirements in the first quarter of 2004 and its adoption did not have a material impact on our financial position, results of operation, or liquidity. SFAS No. 132(R) disclosures are included in Note 6.

FASB Interpretation No. 46 (FIN No. 46), “Consolidation of Variable Interest Entities.” and FASB Interpretation No. 46R (FIN No. 46R), “Consolidation of Variable Interest Entities— an interpretation of ARB 51 (revised December 2003),”

In January 2003, the FASB issued Interpretation No. 46 (FIN No. 46), “Consolidation of Variable Interest Entities.” This Interpretation clarifies the application of ARB No. 51, “Consolidated Financial Statements,” for certain entities in which equity investors do not have the characteristics of a controlling financial interest or do not have sufficient equity at risk for the entity to finance its activities without additional subordinated support from other parties. This Interpretation requires variable interest entities (VIE’s) to be consolidated by the primary beneficiary which represents the enterprise that will absorb the majority of the VIE’s expected losses if they occur, receive a majority of the VIE’s residual returns if they occur, or both. Qualifying Special Purpose Entities (QSPE) are exempt from the consolidation requirements of FIN No. 46. This Interpretation was effective for VIE’s created after January 31, 2003 and for VIE’s in which an enterprise obtains an interest after that date. In December 2003, the FASB issued Interpretation No. 46R (FIN 46R), Consolidation of Variable Interest Entities — an interpretation of ARB 51 (revised December 2003),” which replaces FIN No. 46. FIN No. 46(R) was primarily issued to clarify the required accounting for interests in VIE’s. Additionally, this Interpretation exempts certain entities from its requirements and provides for special effective dates for enterprises that have fully or partially applied FIN No. 46 as of December 24, 2003. Application of FIN No. 46(R) is required in financial statements of public enterprises that have interests in structures that are commonly referred to as special-purpose entities, or SPE’s, for periods ending after December 15, 2003. Application by public enterprises, other than small business issuers, for all other types of VIE’s (i.e., non-SPE’s) is required in financial statements for periods ending after March 15, 2004. As of December 31, 2003 and March 31, 2004, the Corporation had no variable interest entities and therefore, the interpretation of FIN No. 46(R) had no impact on the financial position, results of operations or liquidity.

Other Statements of Financial Accounting Standards

All other applicable Statements of Financial Accounting Standards that have been issued and have effective dates impacting 2004 and prior years financial statements were adopted by the Corporation. Corporate management believes there are no Statements of Financial Accounting

Standards, which have been issued and have implementation dates in the future that will materially impact the financial statements of future years. Significant actions by the Federal government and its agencies, affecting the financial institutions industry in general, are currently having and will continue to have an impact on the Corporation. A discussion of these actions follows:

SEC Staff Accounting Bulletin: No. 105 “Application of Accounting Principles to Loan Commitments”

In March 2004, the SEC issued Staff Accounting Bulletin No. 105 “Application of Accounting Principles to Loan Commitments.” This Staff Accounting Bulletin summarizes the views of the SEC staff regarding the application of generally accepted accounting principles to loan commitments accounted for as derivative instruments, a loan committed at a specified rate, but funded later. Presently, the Corporation does not make loan commitments that will be funded at a later date, and therefore, the SEC Staff Accounting Bulletin had no impact on the financial position, results of operations or liquidity.

Sarbanes-Oxley Act of 2002

On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of 2002, which contains important new requirements for public companies in the area of financial disclosure and corporate governance. Although portions of the act are still being fully implemented, we do not anticipate any significant changes in the operations of and reporting by the Corporation as a result of the act. In accordance with the requirements of the Sarbanes-Oxley Act, written certifications for this quarterly report on Form 10-Q by the chief executive officer and the chief financial officer of the Corporation are filed in this report under Exhibit index (31(a)), (31(b)), (32(a)), and (32(b)). See “Controls and Procedures” for the Corporation’s evaluation of disclosure controls and procedures.

3. Common Stock

On February 25, 2003, the Board of Directors of LNB Bancorp, Inc. declared a three-for-two split of common stock. Shareholders received one additional common share for every two shares owned on the stock-split record date of March 10, 2003. Shareholders participating in the Bancorp’s dividend reinvestment plan, LNBB Direct (the Plan), were issued fractional shares. Shareholders not participating in the Plan were issued cash in lieu of fractional shares. For additional information see Form 8-K filed on February 25, 2003.

On February 17, 2004, the Board of Directors of LNB Bancorp, Inc. declared a first quarter cash dividend of $.18 per share payable April 1, 2004, to shareholders of record on March 15, 2004. This represents a 5.9 percent increase from last year’s first quarter cash dividend of $.17 per share.

4. Earnings per Share

Basic earnings per common share is based upon weighted-average common shares outstanding. The reconcilement of basic earnings per share to earnings per diluted share follows:

	For the Three Months Ended
	March 31, 2004						March 31, 2003
Earnings per Share	Net		Average		Per Share		Net		Average		Per Share
(Dollars in thousands, except per share)	Income		Shares		Amounts		Income		Shares		Amounts
Net Income	$	2,256					$	2,191
Basic Earnings Per Share	$	2,256		6,617,715	$	.34	$	2,191		6,602,127	$	.33
Effect of Dilutive Securities				10,176						14,839
Diluted Earnings Per Share	$	2,256		6,627,891	$	.34	$	2,191		6,616,966	$	.33

5. Stock Option Plans

The FASB issued SFAS No. 148, “Accounting for Stock-Based Compensation - Transition and Disclosure.” SFAS No. 148 provides guidance on how to transition from the intrinsic value method of accounting for stock-based employee compensation under APB No. 25 to SFAS No. 123’s fair value method for accounting, if a company so elects. In accordance with the transitional guidance of SFAS No. 148, the fair value method of accounting for stock options should be applied prospectively to awards granted subsequent to January 1, 2003. As permitted, options granted prior to January 1, 2003, will continue to be accounted for under APB Opinion 25, and the pro forma impact of accounting for these options at fair value will continue to be disclosed in the notes to the consolidated financial statements. The Corporation did not issue any stock options during the first quarter of 2004 or during any quarter in 2003. All stock options issued were 100% vested at March 31, 2004 and 2003, and therefore had compensation cost for the Corporation’s stock- based compensation plans been determined consistent with SFAS No. 123, net income and net income per share would not have been impacted.

6. Retirement Pension Plan

The Bank’s non-contributory defined benefit pension plan (the “Plan”) covers substantially all of its employees. Effective December 31, 2002, the benefits under the Plan were frozen and no additional benefits will be accrued under the Plan after December 31, 2002. The 2003 loss recognized due to settlement in the amount of $5 results from significant lump sum distributions paid in 2003, but not actuarially projected for 2003.

The net periodic pension cost charged to salaries and benefits expense in the Income Statement amounted to $19 for the first quarter of 2004 and $29 for the first quarter of 2003.

Components of Net Periodic Pension Cost	For the Three Months Ended
(Dollars in thousands)	March 31, 2004			March 31, 2003
Service cost	$	113		$	119
Interest cost		(94	)		(95	)
Loss recognized due to settlement		0			5
Net Periodic Pension Cost		19			29

Employer Contributions

The Corporation previously disclosed in its 2003 Annual Report to Shareholders on Form 10-K, that it expected to contribute $500 to the Lorain National Bank Retirement Pension Plan in 2004. As of March 31, 2004, a $500 cash contribution was made to the Plan.

7. Comprehensive Income

The Corporation’s comprehensive income for the three months ended March 31, 2004 and 2003 are as follows:

Comprehensive Income
(Dollars in thousands)	For the Three Months Ended
	March 31, 2004		March 31, 2003
Net Income	$	2,256	$	2,191
Other comprehensive income:
Change in unrealized gain on securities available for sale, net of tax (credit) of $175 and $(169)		340		(328	)
Comprehensive Income	$	2,956	$	1,863
Disclosure of Reclassification Amount:
Unrealized holding gains (losses) arising during the period, net of tax (credit) of $251 and $(238)	$	487	$	(462	)
Less reclassification adjustment for gains included in net income, net of tax of $76 and $69		147		134
Change in unrealized gain (loss) on securities available for sale, net of tax (credit) of $175 and $(169)	$	340	$	(328	)

8. Components of the Loan Portfolio

The following table presents the components of total loans at March 31, 2004 and December 31, 2003.

Loan Portfolio
(Dollars in thousands)	For the Period Ended
	March 31,		December 31,
	2004		2003
Commercial	$	299,323	$	297,468
Mortgage		108,725		113,649
Installment		62,844		59,217
Home Equity		59,557		57,762
Loans held for sale		6,559		6,215
Total portfolio loans	$	537,008	$	534,311

9. Reclassifications

     Certain amounts appearing in the financial statements and notes thereto, for prior periods, have been reclassified to conform to the current presentation. The reclassification had no effect on net income or shareholders’ equity as previously reported.

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: May 11, 2004	/s/ Terry M. White
	Terry M. White
	Executive Vice President, Chief Financial Officer and Corporate Secretary

Date: May 11, 2004	/s/ Mitchell J. Fallis, CPA
	Vice President and
	Chief Accounting Officer

LNB Bancorp, Inc.
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K

S-K
Reference		Page
Number	Exhibit	Number
(3.1)	LNB Bancorp, Inc. Second Amended Articles of Incorporation. Previously filed under Item 6, Exhibit (3)(i) to Quarterly Report on Form 10-Q (Commission File No. 0-13202) for the quarter ended September 30, 2000, filed November 14, 2000 and incorporated herein by reference.	N/A
(3.2)	LNB Bancorp, Inc. Amended Code of Regulations. Previously filed under Item 7, Exhibit 3 to Form 8-K (Commission File No. 0-13203) filed January 4, 2001 and incorporated herein by reference.	N/A
(4.)	Instruments Defining the Rights of Security Holders. (See Exhibits 3.1 and 3.2)	N/A
(31(a))	Chief Executive Officer Sarbanes-Oxley Act 302 Certification dated May 11, 2004 for LNB Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
(31(b))	Chief Financial Officer Sarbanes-Oxley Act 302 Certification dated May 11, 2004 for LNB Bancorp, Inc.’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2004.
(32(a))	Certification pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.
(32(b))	Certification pursuant to 18 U.S.C. section 1350, as enacted pursuant to section 906 of the Sarbanes-Oxley Act of 2002.