1
Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number: 0-13203
LNB Bancorp, Inc.
(Exact name of the registrant as specified on its charter)
Ohio 34-1406303
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
457 Broadway, Lorain, Ohio 44052 - 1769
(Address of principal executive offices) (Zip Code)
(440) 244 - 6000
Registrant's telephone number, including area code
Not Applicable
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months,
and (2) has been subject to such requirements for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Outstanding at May 13, 2002: 4,317,558 shares
Class of Common Stock: $1.00 par value
2
LNB Bancorp, Inc.
Quarterly Report on Form 10-Q
Quarter Ended March 31, 2002
Part I - Financial Information
Item 1 - Financial Statements
Interim financial information required by Rule 10-01 of
Regulation S-X is included in this Form 10-Q as referenced below:
Page
Number(s)
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Income 5
Condensed Consolidated Statements
of Cash Flows 7
Notes to Condensed Consolidated Financial
Statements 9
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 13
Item 3 - Quantitative and Qualitative Disclosures
about Market Risk 19
Part II - Other Information
Item 1 - Legal Proceedings 20
Item 2 - Changes in Securities 20
Item 3 - Defaults upon Senior Securities 20
Item 4 - Submission of matters to a Vote of
Security Holders 20
Item 5 - Other Information 21
Item 6 - Exhibits and Reports on Form 8-K 21
Signatures 21
Exhibit Index 22
3
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
MARCH 31, DECEMBER 31,
CONDENSED CONSOLIDATED BALANCE SHEETS 2002 2001
------------- --------------
(Unaudited) (See Note 1)
ASSETS:
Cash and due from banks $ 20,164,000 $ 28,017,000
Federal funds sold and
short-term investments 3,453,000 3,488,000
Securities:
Available for sale, at fair value 115,396,000 117,628,000
Held to maturity, at cost (fair
value $13,334,000 and $17,485,000,
respectively) 13,177,000 17,191,000
Federal Home Loan Bank, Federal Reserve
Bank and other equity stock, at cost 3,619,000 3,582,000
-------------- --------------
Total securities 132,192,000 138,401,000
-------------- --------------
Loans:
Portfolio loans 481,019,000 465,029,000
Loans available for sale 8,558,000 12,459,000
-------------- --------------
Total loans 489,577,000 477,488,000
Reserve for loan losses (6,269,000) (5,890,000)
-------------- --------------
Net loans 483,308,000 471,598,000
-------------- --------------
Bank premises and equipment, net 10,245,000 10,520,000
Intangible assets 3,376,000 3,470,000
Accrued interest receivable 3,179,000 3,796,000
Other assets 5,518,000 5,113,000
Foreclosed assets 141,000 123,000
-------------- --------------
TOTAL ASSETS $661,576,000 $664,526,000
============== ==============
STATEMENT CONTINUED ON NEXT PAGE
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STATEMENT CONTINUED FROM PREVIOUS PAGE
LIABILITIES AND STOCKHOLDERS' EQUITY:
Deposits:
Demand and other noninterest-bearing
deposits $ 76,982,000 $ 87,488,000
Savings, Market Access and passbook
accounts 264,876,000 253,506,000
Certificates of deposit 180,464,000 177,273,000
-------------- --------------
Total deposits 522,322,000 518,267,000
-------------- --------------
Securities sold under repurchase agreements
and other short-term borrowings 20,763,000 29,170,000
Federal Home Loan Bank advances, short-term 26,450,000 15,080,000
Federal Home Loan Bank advances, long-term 23,925,000 34,265,000
Accrued interest payable 1,056,000 1,131,000
Accrued taxes, expenses, and
other liabilities 4,718,000 4,475,000
-------------- --------------
TOTAL LIABILITIES 599,234,000 602,388,000
-------------- --------------
SHAREHOLDERS' EQUITY:
Preferred stock, no par value: Shares
authorized 1,000,000, and shares
outstanding, none
Common stock $1.00 par: Shares authorized
15,000,000, Shares issued 4,417,558 and
4,417,558, respectively and Shares
outstanding 4,317,558 and 4,317,558,
respectively 4,418,000 4,418,000
Additional capital 26,238,000 26,238,000
Retained earnings 34,136,000 33,125,000
Accumulated other comprehensive income 450,000 1,257,000
Treasury stock at cost, 100,000 shares (2,900,000) (2,900,000)
-------------- --------------
TOTAL SHAREHOLDERS' EQUITY 62,342,000 62,138,000
-------------- --------------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $661,576,000 $664,526,000
============== ==============
See notes to unaudited condensed consolidated financial statements.
5
FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THREE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS MARCH 31,
OF INCOME (UNAUDITED) ----------------------------
2002 2001
INTEREST INCOME: ----------------------------
Interest and fees on loans:
Taxable $ 8,372,000 $ 9,833,000
Tax-exempt -0- 3,000
Interest and dividends on securities:
U.S. Treasury securities 6,000 30,000
U.S. Government agencies and corporations 1,535,000 1,673,000
States and political subdivisions 134,000 72,000
Other debt and equity securities 123,000 72,000
Interest on Federal funds sold and other
interest-bearing instruments 19,000 41,000
------------- ------------
TOTAL INTEREST INCOME 10,189,000 11,724,000
------------- ------------
INTEREST EXPENSE:
Interest on Deposits:
Time certificates of $100,000 and over 298,000 778,000
Other deposits 2,276,000 3,401,000
Interest on securities sold under
repurchase agreements and other
short-term borrowings 151,000 396,000
Interest on Federal Home Loan Bank
advances 381,000 328,000
------------- ------------
TOTAL INTEREST EXPENSE 3,106,000 4,903,000
------------- ------------
NET INTEREST INCOME 7,083,000 6,821,000
Provision for loan losses 600,000 450,000
NET INTEREST INCOME AFTER PROVISION ------------- ------------
FOR LOAN LOSSES 6,483,000 6,371,000
------------- ------------
NONINTEREST INCOME:
Investment and Trust Services Division income 575,000 558,000
Service charges on deposit accounts 916,000 799,000
Other service charges, exchanges and fees 731,000 644,000
Gains from sales of securities 275,000 23,000
Other operating income 141,000 19,000
------------- ------------
TOTAL NONINTEREST INCOME 2,638,000 2,043,000
------------- ------------
STATEMENT CONTINUED ON NEXT PAGE
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STATEMENT CONTINUED FROM PREVIOUS PAGE
NONINTEREST EXPENSES:
Salaries and employee benefits 2,917,000 2,600,000
Net occupancy expense of premises 381,000 386,000
Furniture and equipment expenses 531,000 519,000
Supplies and postage 276,000 275,000
Ohio franchise tax 61,000 162,000
Credit card and merchant expenses 302,000 282,000
Other operating expenses 1,526,000 1,175,000
------------- ------------
TOTAL NONINTEREST EXPENSES 5,994,000 5,399,000
------------- ------------
INCOME BEFORE INCOME TAXES 3,127,000 3,015,000
INCOME TAXES 1,022,000 1,009,000
------------- ------------
NET INCOME $ 2,105,000 $ 2,006,000
============= ============
PER SHARE DATA:
BASIC EARNINGS PER SHARE $ .49 $ .47
======= =======
DILUTED EARNINGS PER SHARE $ .49 $ .47
======= =======
DIVIDENDS DECLARED PER SHARE $ .25 $ .25
======= =======
See notes to unaudited condensed consolidated financial statements.
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FORM 10-Q LNB BANCORP, INC.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
THREE MONTHS ENDED
CONDENSED CONSOLIDATED STATEMENTS MARCH 31,
OF CASH FLOWS (UNAUDITED) ----------------------------
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES: ----------------------------
Interest received $10,905,000 $12,603,000
Other income received 1,983,000 1,962,000
Interest paid (3,181,000) (4,881,000)
Cash paid for salaries and
employee benefits (2,796,000) (3,211,000)
Net occupancy expense of premises paid (305,000) (306,000)
Furniture and equipment expenses paid (215,000) (181,000)
Cash paid for supplies and postage (276,000) (275,000)
Cash paid for other operating expenses (1,911,000) (1,249,000)
Federal income taxes paid (250,000) -0-
------------- -------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES 3,954,000 4,462,000
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from maturities of securities
held to maturity 4,300,000 7,000,000
Proceeds from sales and maturities of
securities available for sale 27,332,000 13,915,000
Purchases of securities held to maturity (1,499,000) (442,000)
Purchases of securities available
for sale (25,125,000) (23,140,000)
Net (increase) in loans made to customers (12,252,000) (896,000)
Purchases of bank premises and equipment
and intangible assets (93,000) (224,000)
Proceeds from liquidation of other
foreclosed assets 33,000 296,000
Purchases of other foreclosed assets (51,000) (247,000)
------------- -------------
NET CASH USED IN INVESTING ACTIVITIES (7,355,000) (3,738,000)
------------- -------------
STATEMENT CONTINUED ON NEXT PAGE
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STATEMENT CONTINUED FROM PREVIOUS PAGE
CASH FLOWS FROM FINANCING ACTIVITIES:
Net (decrease) in demand and
other noninterest-bearing deposits (10,506,000) (3,244,000)
Net increase in savings and
passbook deposits 11,370,000 3,744,000
Net increase in certificates of deposit 3,191,000 11,798,000
Net (decrease) in securities sold
under repurchase agreements and other
short-term borrowings (27,407,000) (2,774,000)
Proceeds from Federal Home Loan
Bank advances 22,330,000 -0-
Payment on Federal Home Loan advances (2,300,000) (9,000,000)
Dividends paid (1,165,000) (1,137,000)
------------- -------------
NET CASH (USED) BY FINANCING ACTIVITIES (4,487,000) (613,000)
------------- -------------
NET INCREASE(DECREASE) IN CASH AND
CASH EQUIVALENTS (7,888,000) 111,000
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 31,505,000 25,136,000
------------- -------------
CASH AND CASH EQUIVALENTS AT END OF
QUARTER $23,617,000 $25,247,000
============= =============
RECONCILIATION OF NET INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES:
NET INCOME $2,105,000 $2,006,000
Adjustments to reconcile net income to net
cash provided by operating activities:
Gain on sale of investments & loans 307,000 29,000
Depreciation and amortization 392,000 418,000
Amortization of intangible assets 94,000 94,000
Amortization of deferred loan fees
and costs, net (17,000) 112,000
Provision for loan losses 600,000 450,000
Decrease in accrued interest receivable 617,000 876,000
(Increase) in other assets (58,000) (613,000)
Increase (decrease) in accrued interest
payable (75,000) 22,000
Increase in accrued taxes,
expenses and other liabilities 329,000 1,104,000
Others, net (340,000) (36,000)
-------------- -------------
NET CASH PROVIDED BY OPERATING ACTIVITIES $3,954,000 $4,462,000
============== ==============
See notes to unaudited condensed consolidated financial statements.
9
FORM 10-Q LNB Bancorp, Inc.
PART I - FINANCIAL INFORMATION
ITEM 1 - FINANCIAL STATEMENTS
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
INTRODUCTION
The following areas of discussion pertain to the unaudited condensed
consolidated balance sheets of LNB Bancorp, Inc. (The Parent Company)
and its wholly-owned subsidiaries, Lorain National Bank (The Bank) and
Charleston Insurance Agency, Inc. and a 49% interest in Charleston Title
Insurance Agency, LLC., at March 31, 2002, compared to December 31, 2001 and
the results of its operations and cash flows for the three months ended March
31, 2002 compared to the same period in 2001. The term "the Corporation"
refers to LNB Bancorp, Inc. and its wholly-owned subsidiaries. It is the
intent of this discussion to provide the reader with a more thorough
understanding of the unaudited condensed consolidated financial statements
and should be read in conjunction with those unaudited condensed consolidated
financial statements and the Corporation's December 31, 2001 Annual Report.
LNB Bancorp, Inc. is not aware of any trends, events, or uncertainties
that might have a material effect on the soundness of operations;
neither is LNB Bancorp, Inc. aware of any proposed recommendations by
regulatory authorities which would have a similar effect if implemented.
BASIS OF PRESENTATION
The unaudited condensed consolidated balance sheet as of March 31, 2002 and
the unaudited condensed consolidated statements of income and cash flows for
the three months ended March 31, 2002 and 2001 are prepared in accordance
with accounting principles generally accepted in the united States of
America. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with accounting principles
generally accepted in the United States of America have been condensed or
omitted. The above mentioned statements reflect all normal and recurring
adjustments which are, in the opinion of Management, necessary for a fair
presentation of the financial position and the results of operations for the
interim periods presented.
The consolidated balance sheet at December 31, 2001 has been taken from
the audited Financial Statements and condensed. It is suggested that
these condensed consolidated financial statements be read in conjunction with
the financial statements and notes thereto included in the Corporation's
December 31, 2001 Annual Report to Shareholders.
10
The results of operations for the period ended March 31, 2002 are not
necessarily indicative of the operating results for the full year.
RESERVE FOR LOAN LOSSES
Because some loans may not be repaid in full, a reserve for loan losses is
recorded. This reserve is increased by provisions charged to earnings and is
reduced by loan charge-offs, net of recoveries. Estimating the risk of loss
on any loan is necessarily subjective. Accordingly, the reserve is
maintained by Management at a level considered adequate to cover loan losses
that are currently anticipated based on Management's evaluation of several
key factors including information about specific borrower situations, their
financial position and collateral values, current economic conditions,
changes in the mix and levels of the various types of loans, past charge-off
experience and other pertinent information. The reserve for loan losses is
based on estimates using currently available information, and ultimate losses
may vary from current estimates due to changes in circumstances. These
estimates are reviewed periodically and, as adjustments become necessary,
they are reported in earnings in the periods in which they become known.
While Management may periodically allocate portions of the reserve for
specific problem situations, the entire reserve is available for any charge-
offs that may occur. Charge-offs are made against the reserve for loan
losses when Management concludes that it is probable that all or a portion of
a loan is uncollectible. After a loan is charged-off, collection efforts
continue and future recoveries may occur.
A loan is considered impaired, based on current information and events, if it
is probable that the Bank will be unable to collect the scheduled payments of
principal or interest when due according to the contractual terms of the loan
agreement. The measurement of impaired loans is generally based on the
present value of the expected future cash flows discounted at the loans
initial effective interest rate, except that all collateral-dependent loans
are measured for impairment based on the fair value of the collateral. If
the loan valuation is less than the recorded value of the loan, an impairment
reserve is established for the difference. The impairment reserve is
established by either an allocation of the reserve for loan losses or by a
provision for loan losses, depending upon the adequacy of the reserve for
loan losses.
11
RECLASSIFICATIONS
Certain 2001 amounts have been reclassified to conform to 2002 presentation.
2. EARNINGS PER SHARE
Earnings per share is calculated as follows:
For the Quarter ended March 31, 2002
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $2,105,000
Basic EPS
Income available to
common shareholders $2,105,000 4,315,558 $ .49
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 1,462
---------- ---------
Diluted EPS
Income available to common
shareholders + assumed
conversions $2,105,000 4,317,020 $ .49
========== ========= =====
For the Quarter ended March 31, 2001
Income Shares Per-Share
(Numerator) (Denominator) Amount
Net Income $2,006,000
Basic EPS
Income available to
common shareholders $2,006,000 4,295,268 $ .47
=====
Effect of Dilutive Securities
Incentive Stock Options -0- 3,653
---------- ---------
Diluted EPS
Income available to common
shareholders + assumed
conversions $2,006,000 4,298,921 $ .47
========== ========= =====
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3. COMPREHENSIVE INCOME
The Corporation's comprehensive income for the quarters ended March 31, 2002
and 2001 are as follows:
For the quarters ended March 31,
2002 2001
--------------------------------
Net income $2,105,000 $2,006,000
Other comprehensive income:
Unrealized gain(loss) on
securities available for
sale, net of tax (benefit)of
$(415,000) and $392,000 (807,000) 760,000
------------ ------------
Comprehensive Income $1,298,000 $2,766,000
============ ============
For the quarters ended March 31,
2002 2001
--------------------------------
Disclosure of Reclassification Amount
Unrealized holding gains (losses)
arising during the period,
net of tax $ (596,000) $ 755,000
Less reclassification adjustment
for gains included in the net income,
net of tax of $94,000 and $8,000 181,000 15,000
------------ ------------
Change in unrealized gain (loss)
on securities available for sale,
net of tax $ (415,000) $ 760,000
============ ============
4. CRITICAL ACCOUNTING POLICIES
The Corporation maintains critical accounting policies for reserve for loan
losses, classification and evaluation of securities and a deferred tax asset
valuation allowance. Refer to notes 1,5,7 and 12 of Notes to Consolidated
Financial Statements for additional information incorporated by reference to
the 2001 Annual Report to Shareholders for the year ended December 31, 2001.
13
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL
CONDITION & RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain statements contained herein are not based on historical facts and are
"forward-looking statements" within the meaning of Section 21A of the
Securities Exchange Act of 1934. Forward-looking statements which are based
on various assumptions (some of which are beyond the Corporation's control),
may be identified by reference to a future period or periods, or by the use
of forward-looking terminology, such as "may," "will," "believe," "expect,"
"estimate," "anticipate," "continue," or similar terms or variations on those
terms, or the negative of these terms. Actual results could differ
materially from those set forth in forward-looking statements, due to a
variety of factors, including, but not limited to, those related to the
economic environment, particularly in the market areas in which the Company
operates, competitive products and pricing, fiscal and monetary policies of
the U.S. Government, changes in government regulations affecting financial
institutions, including regulatory fees and capital requirements, changes in
prevailing interest rates, acquisitions and the integration of acquired
businesses, credit risk management, asset/liability management, the financial
and securities markets and the availability of and costs associated with
sources of liquidity.
The Corporation does not undertake, and specifically disclaims any
obligation, to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect the occurrence of anticipated or
unanticipated events or circumstances after the date of such statements.
FINANCIAL CONDITION
Total assets of the Corporation decreased $2,950,000 during the first
quarter, to $661,576,000. Federal funds sold and short-term
investments decreased by $35,000 during the first quarter of 2002.
The total securities portfolio decreased $6,209,000 ending the first quarter
at $132,192,000. At March 31, 2002 gross unrealized gains (losses) in the
held to maturity securities portfolio were approximately $225,000 and
$(68,000), respectively.
Net loans increased $11,710,000 during the first quarter to $483,308,000
at March 31, 2002. This increase was a result of good loan demand in
our market. Commercial and consumer loan growth was particularly strong,
showing first quarter increases of $14,146,000 and $4,158,000, respectively.
Mortgage loans decreased by $6,215,000, during the first quarter of 2002.
The consumer loan portfolio has increased because of increases in quality
indirect automobile credits while mortgages decreased due to the seasonality
factors.
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The reserve for loan losses ended the quarter at $6,269,000 supported by a
provision for loan losses of $600,000, recoveries of $107,000 and loan
charge-offs of $328,000. The reserve for loan losses as a percentage of
ending loans was 1.28% at March 31, 2002 and 1.23% at December 31, 2001.
Corporate management believes that the reserve for loan losses as a
percentage of ending loans at March 31, 2002 remains at an appropriate level.
The ratio of the reserve for loan losses to nonperforming assets decreased
to 247.7% as of March 31, 2002 from 409.3% at December 31, 2001. Corporate
management believes that the current level of the reserve for loan losses is
adequate based upon quantitative analysis of identified risks and analysis of
historical trends.
The level of nonperforming assets increased by $114,000 during the first
quarter of 2002. This increase is the result of an increase in nonaccrual
loans of $97,000 as well as by an increase in other foreclosed assets owned
in the amount of $17,000. The increase in nonaccrual loans is due to
decreases in nonaccrual principal balances of $366,000 which have been paid
off or brought current, loans charged-off in the amount of $13,000 and
liquidations of nonaccrual loans of $113,000 and increases in nonaccrual
principal balances of $608,000 which includes three large commercial loan
credits of $359,000 and 16 small consumer loan credits. The increase in
nonaccrual loans in the first quarter of 2002 was due primarily to three
commercial loan customer and 12 personal loan customers. The increase in
Other Foreclosed Assets resulted from the net acquisition of repossessions
in the amount of $17,000.
The level of nonperforming assets remains at relatively low levels and
Corporate management believes nonperforming assets are well collateralized.
15
The table below presents the level of nonperforming assets at the end of the
last four calendar quarters.
Amounts in thousands 03/31/02 12/31/01 09/31/01 06/30/01
-------- -------- -------- --------
Nonperforming Assets:
Nonaccrual $1,413 $1,316 $2,518 $2,001
Restructured 0 0 0 0
Other Foreclosed Assets 141 123 0 19
------ ------ ------ ------
Total Nonperforming Assets $1,554 $1,439 $2,518 $2,020
====== ====== ====== ======
Reserve for loan losses
to nonperforming assets 247.7% 409.3% 214.9% 257.2%
====== ====== ====== ======
Accruing loans past due
90 days $ 151 $ 149 $ 66 $ 119
====== ====== ====== ======
Potential problem loans are those loans identified on Management's watch list
in which Management has some doubt as to the borrower's ability to comply
with the present repayment terms and loans which Management is actively
monitoring due to changes in the borrower's financial condition. At March 31,
2002, potential problem loans totaled $8,983,000, an increase of $404,000
from the December 31, 2001 balance.
The Corporation's credit policies are reviewed and modified on an ongoing
basis in order to remain suitable for the management of credit risk within
the loan portfolio as conditions change. At March 31, 2002 there are no
significant concentrations of credit in the loan portfolio.
The Corporation had outstanding loan and credit commitments to make loans
totaling $132,530,000 and $114,342,000 at March 31, 2002 and 2001,
respectively. The increase in outstanding loan commitments results in part
from an increase in the unused portion of home equity lines of credits from
home equity loan sale programs during 2001 plus increase in loan demand
during the first quarter of 2002. Mortgage and commercial construction loan
demand is expected to increase in the second quarter of 2002 as seasonal
weather conditions improve and the construction season begins. Consumer loan
demand is expected to increase in the second quarter for home improvement and
automobile loans as weather conditions improve.
Total deposits increased $4,055,000 during the first quarter to
$522,322,000. Noninterest-bearing deposits decreased to $76,982,000, at
March 31, 2002 for a decrease of $10,506,000, while interest-bearing deposits
increased to $445,340,000 for an increase of $14,561,000. Federal funds
purchased and securities sold under agreements to repurchase decreased
$8,407,000 during the first quarter of 2002, mainly by decreases
in short-term Federal home Loan bank advances. Due to the
16
volatility of customer repurchase agreements, most funds generated by
repurchase activity enter the Corporation's earning assets as short-term
investments.
LIQUIDITY
Liquidity measures a corporation's ability to generate cash or otherwise
obtain funds at reasonable prices to fund commitments to borrowers as well as
the demand of depositors and debt holders. Principal internal sources of
liquidity for the Corporation and the Bank are cash and cash equivalents,
Federal funds sold, and the maturity structures of investment securities and
portfolio loans. Securities and loans available for sale provide another
source of liquidity through the cash flows of these interest bearing assets
as they mature or are sold.
The Corporation continues to maintain a relatively liquid position in order
to take advantage of interest rate fluctuations. As of March 31, 2002 short-
term security investments with maturities of one year or less totaled
$12,314,000 which represented 9.3% of total securities. Adding cash and due
from banks of $20,164,000 and Federal Funds sold and other short-term
investments of $3,453,000, total liquid assets represented 5.4% of total
assets. The Corporation's subsidiary bank has established short-term lines
of credit at correspondent banks, the Federal Home Loan Bank and the Federal
Reserve Bank of Cleveland in the amounts of $20,000,000, $30,000,000 and
$31,443,000, respectively, with credit available in the amounts of
$20,000,000, $30,000,000 and $31,443,000, respectively.
CAPITAL RESOURCES
LNB Bancorp, Inc. continues to maintain a strong capital position. Total
shareholders' equity increased to $62,342,000, at March 31, 2002. The
increase resulted primarily from $2,105,000 of net income generated from the
first quarter of operations less a dividend payable to shareholders of
$1,079,000. The increase in interest rates experienced in the first quarter
of 2002 has caused a decrease in the overall market value of available for
sale securities which resulted in a decrease of shareholders' equity by
$807,000 for the quarter ended March 31, 2002. As of March 31, 2002, the LNB
Bancorp, Inc. held 100,000 shares of common stock as treasury stock at a cost
of $2,900,000.
The Corporation continues to monitor growth to stay within the constraints
established by the regulatory authorities. Under Federal banking
regulations, an institution is deemed to be well-capitalized if it has a
Risk-based Tier 1 capital ratio of 6.00 percent or greater, a Risk-based
Total capital ratio of 10.00 percent or greater and a Leverage ratio of
5.00 percent or greater. The Corporation's Risk-based capital and Leverage
ratios have exceeded the ratios for a well-capitalized financial institution
for all periods presented. The Corporation's capital and leverage ratios as
of March 31, 2002 and 2001 follow together with those ratios required for the
17
Corporation to be considered well capitalized.
MARCH 31,
---------------------
2002 2001
------- -------
Tier I capital ratio 12.60% 11.99%
Required Tier I capital ratio 4.00% 4.00%
Total capital ratio 13.87% 13.12%
Required total capital ratio 8.00% 8.00%
Leverage ratio 9.48% 8.67%
Required leverage ratio 3.00% 3.00%
On an ongoing basis the Corporation analyzes acquisition opportunities in
markets which are adjacent to or within the Corporation's current
geographical market. Corporate management believes that it's current capital
resources are sufficient to support any foreseeable acquisition activity.
RESULTS OF OPERATIONS
Interest and fees on loans decreased $1,464,000 when compared to the first
quarter of 2001. This was the result of the impact of increases in the loan
portfolio plus decreases in rates. Interest and dividends on securities was
$1,798,000 for the first quarter of 2002 for a decrease of $49,000 over the
same period in 2001. The first quarter decrease in interest and dividends on
securities results from a net increase in the securities portfolio of
$6,209,000 which was more than offset by decreases in the average yield of
the securities portfolio. Interest and dividends on securities represented
17.6% of total interest income at March 31, 2002 compared to 15.7% at March
31, 2001. Interest on Federal funds sold and other interest-bearing
instruments was $19,000 at March 31, 2002 compared to $41,000 at March 31,
2001. The decrease resulted from lower average balances invested
in this form of financial instrument.
Total interest expense increased by $1,797,000 when compared to the first
quarter of 2001. The interest expense decrease was fueled by a decrease in
interest expense from certificates of deposit greater than $100,000 in the
amount of $1,125,000, plus decreases in deposit account interest of $480,000
plus decreases in securities sold under repurchase agreements and federal
funds purchased of $245,000 offset in part by increases in interest on
Federal Home Loan Bank advances of $53,000.
The Corporation increased its loan loss provision by $150,000 to $600,000 for
the first quarter of 2002. The increased loan loss provision results from
the growth of the loan portfolio.
Total noninterest income increased by $595,000 when compared to the first
quarter of 2001. This increase resulted from increases in Investment and
Trust Services Division Income of $17,000, increases in service charges of
$117,000, increases in other service charges, exchanges and fees of $87,000,
18
increases in gains on sales of securities of $275,000 and other operating
income of $122,000.
The Corporation continuously monitors noninterest expenses for greater
profitability. The entire staff is geared to improving productivity at all
levels. Noninterest expense for the quarter ended March 31, 2002 was
$5,994,000, 11.0% more than the first quarter of 2001. This increase was
due primarily to increases in salary expenses, outside services, marketing
expense and credit card and merchant expenses.
The effective tax rate was 32.7% and 33.5% during the first quarter of 2002
and 2001, respectively. The effective tax rate decreased due to increases in
holdings of tax-exempt securities. Net income was $2,105,000 and $2,006,000
for the quarters ended March 31, 2002 and 2001, respectively. Net income per
basic and diluted share was $.49 and $.47 for the quarters ended March 31,
2002 and 2001, respectively.
IMPACTS OF ACCOUNTING AND REGULATORY PRONOUNCEMENTS
Corporate management is not aware of any current recommendations by the
Financial Accounting Standards Board or by regulatory authorities which, if
they were implemented, would have a material effect on the liquidity, capital
resources or operations of the Corporation. However, the potential impact of
certain accounting and regulatory pronouncements warrant further discussion.
On July 20, 2001, The Financial Accounting Standards Board issued Statement
SFAS No. 142, "Accounting for Goodwill and Other Intangible Assets." SFAS
No. 142 eliminates amortization of goodwill associated with business
combinations completed after June 30, 2001. Effective January 1, 2002, all
goodwill amortization expenses will cease and goodwill will be assessed (at
least annually) for impairment at the reporting unit level by applying a
fair-value-based test. SFAS No. 142 also provides additional guidance on
acquired core deposit intangible requiring separate disclosure and
amortization with impairment testing at least annually. LNB Bancorp, Inc.
adopted SFAS No. 142 as of January 1, 2002 and reports Branch Goodwill and
Core Deposit intangibles separately. The Corporation has determined that the
provisions of SFAS No. 142 will have no effect on our financial position,
results of operations or liquidity.
In August 2001, the FASB issued Statement No. 143, "Accounting for Asset
Retirement Obligations." Statement 143 addresses financial accounting
and reporting for obligations associated with the retirement of intangible
long-lived assets and the associated asset retirement costs. Statement
143 is effective for fiscal years beginning after June 14, 2001. The
Corporation has reviewed the provisions of Statement 143, and believes that
upon adoption, it does not have a material impact on its financial position,
results of operations or liquidity.
In August 2001, the Financial Accounting Standards Board issued Statement
19
SFAS No. 144, "Accounting for the Impairment or Disposal of Long-Lived
Assets." SFAS No. 144 addresses the accounting and reporting for the
impairment or disposal of long-lived assets. The statement provides a
single accounting model for long-lived assets to be disposed of. New
criteria must be met to classify the asset as an asset held-for-sale. This
statement also focuses on reporting the effects of disposal of a segment of a
business. The provisions of SFAS No. 144 are effective for the Corporation
January 1, 2002 and did not have a material impact on our financial position,
results of operations or liquidity
USA PATRIOT ACT
On October 26, 2001, President Bush signed into law the Uniting and
Strengthening America by Providing Appropriate Tools Required to Intercept
And Obstruct Terrorism Act of 2001 (the "USA PATRIOT Act"). During the first
quarter of 2002, the Financial Crimes Enforcement Network (FinCEN), a bureau
of the Department of the Treasury, issued proposed and interim regulations as
mandated by the USA PATRIOT Act that would: (i) prohibit certain financial
institutions from providing correspondent accounts to foreign shell banks;
(ii) require such financial institutions to take reasonable steps to ensure
that correspondent accounts provided to foreign banks are not being used to
indirectly provide banking services to foreign shell banks; (iii) require
certain financial institutions that provide correspondent accounts to foreign
banks to maintain records of the ownership of such foreign banks and their
agents in the United States; (iv) require the termination of correspondent
accounts of foreign banks that fail to turn over their account records in
response to a lawful request from the Secretary of the Treasury or the
Attorney General. Additionally the USA PATRIOT Act encourages information
sharing among financial institutions and federal law enforcement agencies to
identify, prevent, deter and report money laundering and terrorist activity.
Management does not believe that the USA PATRIOT Act will have a material
impact on the financial position, results of operation or liquidity of the
Corporation
20
PART I - OTHER INFORMATION
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market Risk
Market risk is the risk of loss in a financial instrument arising from
adverse changes in market indices such as interest rates, foreign exchange
rates and equity prices. The Corporation's principal market risk exposure
is interest rate risk, with no material impact on earnings from changes in
foreign exchange rates or equity prices. There have been no material
changes in the asset and liability mix of the Corporation since December
31, 2001, which would impact the Corporation's level of market risk.
Interest rate risk is the exposure to changes in market interest rates.
Interest rate sensitivity is the relationship between market interest
rates and net interest income due to the repricing characteristics of
assets and liabilities. The Corporation monitors the interest rate
sensitivity of its on - and - off balance sheet positions by examining its
near-term sensitivity and its longer term gap position. Corporate
management has determined no significant changes in the Corporation's
interest rate risk profile since December 31, 2001.
21
PART II - OTHER INFORMATION
ITEM 1 - Legal Proceedings
None
ITEM 2 - Changes in Securities
See item 4, (c), (1)
ITEM 3 - Defaults Upon Senior Securities
None
ITEM 4 - Submission of Matters to a Vote of Security Holders
(a) LNB Bancorp Inc.'s 2002 Annual Meeting of Shareholders
was held on April 16, 2002.
(b) Proxies were solicited by LNB Bancorp Inc.`s management
pursuant to Regulation 14 under the Securities Exchange
Act of 1934, there was no solicitation in opposition to
management's nominees for election to the board of
directors as listed in the proxy statement, and all
such nominees were elected to the classes in the proxy
statement pursuant to the vote of the shareholders.
(c) Other matters voted upon
(1)Election of directors to serve as Class II Directors
until April 19, 2005 Annual Meeting of Shareholders as
follows:
ABSTAIN/
FOR WITHHELD NON-VOTES
Terry D. Goode 2,579,693.78 65,426.27 1,670,438
Wellsley O. Gray 2,593,608.25 51,511.80 1,670,438
James R. Herrick 2,589,956.46 55,163.59 1,370,438
Benjamin G. Norton 2,595,106.57 50,013.48 1,370,438
John W. Schaeffer,M.D. 2,592,524.57 52,595.48 1,370,438
Gary C. Smith 2,589,725.78 55,394.27 1,370,438
The total number of shares of LNB Bancorp, Inc. Common Stock,
$1.00 par value, outstanding as of March 5, 2002, the record
date of the Annual Meeting, was 4,315,558.
22
ITEM 5 - Other Information
(a) None
ITEM 6 - Exhibits and Reports on Form 8-K
(a) Exhibit (10) - Computation of Shares Used for Earnings
Per Share Calculations.
(b) Exhibit (13) - First Quarter Report to Shareholders of
LNB Bancorp, Inc. - March 31, 2002 - EDGAR Version.
(c) Reports on Form 8-K
There were no reports on Form 8-K filed for the three
months ended March 31, 2002.
Also, see the Exhibit Index which is found on the next page
of this Form.
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)
/s/ Gregory D. Friedman
Date: May 15, 2002 --------------------------
Gregory D. Friedman, CPA
Executive Vice President,
Chief Financial Officer and
Corporate Secretary
(Principal Financial Officer)
/s/ Mitchell J. Fallis
Date: May 15, 2002 --------------------------
Mitchell J. Fallis, CPA
Vice President and
Chief Accounting Officer
(Principal Accounting Officer)
23
LNB Bancorp, Inc.
Form 10-Q
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K
S-K Reference Exhibit
Number
(10a) Material Contracts - Employment Agreement by and
between Terry M. White and LNB Bancorp, Inc. and
the Lorain National Bank dated January 23, 2002.
24
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(for the three months ended March 31, 2002)
S - K Reference Number (10a)
Employment Agreement by and between Terry M. White
and LNB Bancorp, Inc, and The Lorain National Bank
dated January 23, 2002.
25
TERRY M. WHITE
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), made at Lorain, Ohio, as of
the 23rd day of January, 2002, by and among TERRY M. WHITE, herein referenced
as "Employee", and LNB BANCORP, INC. (an Ohio corporation) and THE LORAIN
NATIONAL BANK (a banking organization organized and existing under the laws
of the United States of America), which together with their respective
successors and assigns are collectively herein referenced as "Employer", is
to EVIDENCE THAT:
WHEREAS Employer desires to secure and retain the employment services of
Employee as its Executive Vice President and Chief Investment Officer, and
Employee desires to accept employment as Employer's Executive Vice President
and Chief Investment Officer; and
WHEREAS, but for Employee's promises made in this Agreement, especially
in Section 8, Employer would not employ Employee under the terms and
conditions of this Agreement and, therefore, expressly to induce Employer to
execute this Agreement, Employee represents that Employee fully understands
and accepts the restrictive covenants in Section 8 and agrees to be bound
thereby;
NOW, THEREFORE, in consideration of the mutual covenants and promises
herein, Employer and Employee (collectively the "Parties" and individually a
"Party") hereby agree as follows:
1. Employment and Term.
1.1 Employee will render management services to Employer in the
capacity as Employer's Executive Vice President and Chief Investment Officer
for the term of this Agreement (herein called the "Agreement Term")
commencing on or about April 1, 2002, and continuing thereafter until
terminated pursuant to the termination provisions of this Agreement,
including the provisions of Section 7.
1.2 Employee will devote Employee's full business-time and best
efforts to performing conscientiously, faithfully and loyally all duties:
(i) required of Employee by virtue of Employee's position as Employer's
Executive Vice President and Chief Investment Officer, including (but not
limited to) chairing the Asset/Liability Committee, providing cash management
coordination services and strategic engineering services, and serving as
Employer's Merger and Acquisition Analyst, (ii) set forth in Employer's Code
of Regulations, Bylaws and policies as adopted by Employer's Board of
Directors, and (iii) assigned or delegated to Employee by Employer's
President and Chief Executive Officer and/or the Chairman of the Board of
Directors.
26
1.3 Except as otherwise expressly provided herein, this Agreement
represents the entire agreement between Employee and Employer regarding
Employee's employment by Employer.
1.4 Except as otherwise expressly provided herein, this Agreement
may be changed or amended only by a written document which is clearly
designated as an amendment to this specific Agreement and only if such
document is signed by all Parties.
1.5 No action by any Party and no refusal or neglect of any Party
to exercise a right granted under this Agreement or to enforce compliance
with any provision of this Agreement shall constitute a waiver of any
provision of or any right under this Agreement, unless such waiver is
expressed in a written document which is clearly designated as a waiver to a
specific provision(s) of this Agreement and unless such document is signed by
all Parties.
2. Compensation
2.1 In consideration for the services rendered by Employee as
Executive Vice President and Chief Investment Officer, Employer agrees to pay
Employee a basic salary (herein called the "Basic Salary") equal to the sum
of One Hundred Thirty Thousand Dollars ($130,000.00) for each twelve (12)
consecutive monthly period (a "Contract Year") of the Agreement Term. The
Basic Salary shall be payable in twenty-six (26) equal bi-weekly payments and
prorated if the Agreement Term is terminated prior to the completion of any
Contract Year.
2.2 As additional consideration for Employee's services performed
hereunder, Employee may (but shall not be entitled to) receive a
discretionary bonus from time to time. Such bonus (and Employee's
eligibility therefor) shall be determined by Employer's Board of Directors in
its sole discretion.
2.3 There shall be an annual review of Employee's performance and
compensation by Employer's Board of Directors (or a committee thereof). The
annual review shall occur not less than sixty (60) days prior to the end of
Employer's fiscal year for the express purpose of reviewing the current
fiscal year's performance of Employee. Any change in compensation as a
result of the annual review shall immediately act as an amendment of Section
2.1 above, effective as of the date of the compensation change.
2.4 The obligations of Employer to pay Employee's Basic Salary,
bonuses (if any), and other benefits under this Agreement are expressly
conditioned upon Employee's continued and faithful performance of and
adherence to each and every material promise, duty and obligation assigned to
or made by Employee under this Agreement.
27
3. Vacations and Time-Off.
3.1 Employee shall be entitled to twenty (20) working days of
compensated vacation through December 31, 2002, and, thereafter, Employee
shall be entitled to twenty-seven (27) working days of compensated vacation
for each Contract Year, pursuant to the terms and conditions of Employer's
vacation time-off policy (as may be periodically changed in Employer's sole
discretion), to be taken at times as mutually agreed in advance between
Employee and Employer's President and Chief Executive Officer or Chairman of
the Board of Directors.
3.2 Except as may be periodically changed in Employer's sole
discretion, all vacation time-off shall be non-cumulative if not taken within
the Contract Year or within the first quarter of the succeeding Contract
Year; provided, however, that unused vacation time may be redeemed as
compensation pursuant to the terms and conditions of Employer's vacation
time-off policy.
3.3 Employee's vacation time-off may be increased by Employer in
its sole discretion.
3.4 Employee shall be permitted additional time-off to attend
professional meetings, seminars, and conventions and to satisfy professional
educational and licensure requirements as have been mutually agreed upon
between Employee and Employer's President and Chief Executive Officer or
Chairman of the Board of Directors. Attendance at such approved meetings,
seminars, and conventions and accomplishment of approved professional
educational and licensure requirements shall be fully compensated and shall
not be considered vacation. Employer shall reimburse Employee for all
reasonable expenses incurred by Employee incident to attendance at approved
professional meetings, seminars and conventions and such reasonable
entertainment expenses incurred by Employee in furtherance of Employer's
interest.
3.5 Employee shall also be entitled to additional days of time-off
with full compensation for holidays in accordance with Employer's holiday
time-off policy (which may be periodically changed in Employer's sole
discretion).
3.6 Employee shall further be entitled to additional days of
time-off with full compensation for personal matters in accordance with
Employer's personal time-off policy (which may be periodically changed in
Employer's sole discretion).
4. Fringe Benefits
4.1 Employee shall be entitled to all fringe benefits to which
other employees of Employer in Employee's classification are entitled.
28
4.2 As additional consideration for Employee's performance of
Employee's duties and responsibilities as Executive Vice President and Chief
Investment Officer of Employer, Employer agrees:
(A) To provide Employee with (i) short-term disability
benefits pursuant to Employer's short-term disability program (which may be
periodically changed or terminated in Employer's sole discretion), and (ii)
long-term disability insurance benefits commencing one hundred eighty (180)
days after Employee incurs a Disability, as defined in Section 11.1(E) of
this Agreement, and continuing pursuant to the terms of Employer's long-term
disability program (which may be periodically changed or terminated in
Employer's sole discretion); and
(B) To include Employee in Employer's defined benefit
retirement pension plan, stock option plan (if any), stock ownership plan,
section 401(k) plan, and flexible benefit plan, as such plans may be
periodically changed or terminated in Employer's sole discretion; and
(C) To provide Employee with such plan of hospitalization,
health and dental insurance as maintained by Employer and as may be
periodically changed or terminated in Employer's sole discretion; and
(D) To provide (i) a term life insurance policy on the life
of Employee (provided that Employee is insurable under the standard rate
criteria of a commercial life insurance company) in an amount equal to 2.75
times the Basic Salary of Employee, but not to exceed Three Hundred Thousand
Dollars ($300,000.00), as may be periodically increased in Employer's sole
discretion, and payable to the beneficiary or beneficiaries of Employee's
choice, and (ii) an accidental death and dismemberment insurance policy upon
Employee in an amount equal to 2.75 times the Basic Salary, but not to exceed
One Hundred Fifty Thousand Dollars ($150,000.00), as may be increased in
Employer's sole discretion, and payable to the beneficiary or beneficiaries
of Employer's choice; and
(E) To provide Employee with such sick leave as presently in
force by Employer and as may be periodically changed or terminated in
Employer's sole discretion; and
(F) To purchase or lease for the use of Employee an
automobile as selected by Employee and approved by Employer, to reimburse
Employee for expenses related to its operation for business purposes upon
presentation of appropriate itemization and receipts, and to replace such
automobile after three (3) years of use by Employee; provided, however, that
upon termination of the Agreement Term for any reason, Employer shall be
immediately entitled to possession of said automobile; and
(G) To pay the initiation fee and monthly dues for a
corporate membership for Employee at Spring Valley Country Club, Elyria,
Ohio, and to reimburse Employee for all future assessments and reasonable
29
expenses incurred by Employee at such Club in furtherance of Employer's
business interests upon presentation of appropriate itemizations and
receipts; and
(H) To reimburse Employee for all reasonable and approved
expenses related to the performance of Employee's duties as Executive Vice
President and Chief Investment Officer, including (but not limited to):
entertainment and promotional expenses; educational expenses incurred for the
purpose of maintaining or improving Employee's skills directly related to the
performance of Employee's duties and obligations hereunder (including, but
not limited to, professional continuing educational requirements); expenses
of membership in civic groups, clubs and fraternal organizations; and all
other items of reasonable and necessary expenses incurred by Employee in the
performance of Employee's duties as Employer's Vice President and Chief
Investment Officer.
4.3 Relocation Expenses. Employer shall pay for any and all
reasonable and necessary: (i) moving and relocation expenses incurred by
Employee to move Employee, Employee's family and Employee's household
possessions to the Lorain, Ohio area, and (ii) housing lease expenses until
Employee purchases a residence in the Lorain, Ohio area; provided, however,
that the aggregate of all such moving, relocation and housing expenses shall
not exceed $20,000.00 but shall include a "gross-up" for any Federal and
State income taxes Employee pays as a result of Employer's payment or
reimbursement of such expenses. Employer shall either directly pay or
reimburse Employee for such expenses within ten (10) days after Employee
presents Employer with an invoice, receipt or other evidence satisfactory to
Employer covering the expenses to be reimbursed.
5. Stock Options. If determined by Employer's Board of Directors,
Employee shall participate in any and all incentive stock option plans and
programs currently in existence or adopted by Employer after commencement of
the Agreement Term in accordance with all applicable eligibility
requirements, terms and conditions of such plans and programs (as may be
periodically changed or terminated in Employer's sole discretion).
6. Prohibition Against Transfer. Employee's duties, obligations and
services rendered under this Agreement are personal in nature and are unique
to Employer. Therefore, without Employer's prior written consent, Employee
shall not assign or otherwise transfer any of Employee's duties, obligations
or responsibilities hereunder.
7. Termination of the Agreement Term
7.1 If either Employer or Employee materially violates the term
and conditions of this Agreement, the other Party shall give the breaching
Party notice of said violation and, if the breaching Party does not cure such
violation within sixty (60) days after notice, then the other Party shall
have the continuing right to terminate the Agreement Term without further
30
notice; provided, however, that Employer may immediately terminate the
Agreement Term if Employee violates or fails to adhere to any provision of
Section 8 (pertaining to non-disclosure and non-competition).
7.2 Through its Board of Directors, Employer may terminate the
Agreement Term without cause at any time upon ninety (90) days prior written
notice to Employee.
7.3 Subject to the terms and conditions of Section 11, Employee
may terminate the Agreement Term upon the occurrence of a "Change in Control"
as defined in Section 11.1(C) for "Good Reason" as defined in Section
11.1(F).
7.4 The Agreement Term shall automatically and immediately
terminate upon the death of Employee.
7.5 In the event of the Disability of Employee as defined in
Section 11.1(E) of this Agreement, the Agreement Term shall terminate and
Employee shall be entitled to benefits provided by Employer under Employer's
long-term disability program as designated in Section 4.2(A)(ii) of this
Agreement.
7.6 In Employee's sole discretion, Employee may terminate the
Agreement Term by giving the Board of Directors of Employer at least ninety
(90) days written notice of Employee's decision to terminate the Agreement
Term.
7.7 Employer shall have the sole discretion to determine whether
Employee shall continue to render services hereunder during such notice
periods as provided for in this Section 7.
7.8 Upon the termination of the Agreement Term pursuant to Section
7.1 (but only if Employee terminates the Agreement Term due to the Employer's
breach) or Section 7.2, Employer shall continue to pay Employee's total
compensation (as reflected on Employee's W-2 Federal Income Tax Statement
from Employer for the prior calendar year) for a period of one (1) year from
the date of termination of the Agreement Term; provided, however, that if
Employer chooses a two (2)-year Restricted Period under Section 8.1(G), then
Employer shall continue to pay such compensation for a period of two (2)
years from the date of termination of the Agreement Term. Any termination
payments payable to Employee shall survive Employee's death if Employee dies
during the period Employee is receiving termination payments as provided in
this Section 7.8.
8. Employee's Non-Disclosure and Non-Competition Promises
8.1 For purposes of this Section 8, the Parties agree to and
understand the following definitions:
31
(A) "Competitive Act" means any of the following: (i)
Employee's rendering services (whether or not for compensation) to, for or on
behalf of a Competitor (as defined herein) as an employee, independent
contractor, consultant, advisor, representative, agent or in any other
capacity; and (ii) Employee's investment in or ownership (partial or total)
of a Competitor, unless the Competitor's stock is publicly traded on a
national exchange and Employee owns less than two percent (2%) of such stock.
(B) "Competitive Activity" means the performance or rendering
of any banking services; trust services and investment services; portfolio
management; retirement planning; administration of employee benefit plans;
administration of decedents' estates and court-supervised accounts,
guardianships, and custodial arrangements; personal tax and estate tax
planning; financial consulting services; investment advising services; and
any other business activity, service or product which competes with any
existing or future business activity, service or product of Employer.
(C) "Competitor" means any of the following: (i) any person,
sole proprietorship, partnership, association (other than Employer),
organization, corporation, limited liability company or other entity
(governmental or otherwise) who or which provides, renders or performs a
Competitive Activity (as defined herein) within the Service Area (as defined
herein), even if the Competitor has no office or other facilities located
within the Service Area; and (ii) any parent, subsidiary or other person or
entity affiliated with, or related by ownership to, any of the foregoing
designated in Subitem (i) of this Section 8.1(C).
(D) "Confidential Information" means all of the following
(whether written or verbal) pertaining to Employer: (i) trade secrets (as
defined by Ohio law); Client or Customer lists, records and other information
regarding Employer's Clients or Customers (whether or not evidenced in
writing); Client or Customer fee or price schedules and fee or price
policies; financial books, plans, records, ledgers and information; business
development plans; sales and marketing plans; research and development plans;
employment and personnel manuals, records, data and policies; business
manuals, methods and operations; business forms, correspondence, memoranda
and other records; computer records and related data; and any other
confidential or proprietary data and information of Employer or its Clients
or Customers which Employee encounters during the Employment Term (as defined
in Section 8.1(E)); and (ii) all products, technology, ideas, inventions,
discoveries, developments, devices, processes, business notes, forms and
documents, business products, computer programs, and other creations (and
improvements of any of the foregoing), whether patentable or copyrightable,
which Employee has acquired, developed, conceived or made (whether directly
or indirectly, whether solicited or unsolicited, or whether during normal
work hours or during off-time) during the Employment Term or during the
Restricted Period and which relate to any business activity of Employer or
are derived from the Confidential Information designated in Subsection (i) of
this Section 8.1(D).
32
(E) "Client" or "Customer" means a person, sole
proprietorship, partnership, association, organization, corporation, limited
liability company, or other entity (governmental or otherwise), wherever
located: (i) to or for which Employer sells any products or renders or
performs services either during the 180-day period immediately preceding
commencement of the Restricted Period or during the Restricted Period, or
(ii) which Employer solicits or (as demonstrated by plans, strategies or
other tangible preparation) intends to solicit to purchase products or
services from Employer either during the 180-day period immediately preceding
commencement of the Restricted Period or during the Restricted Period.
(F) "Employment Term" means the period of time starting on
the date Employee's employment with Employer commences and terminating at the
close of business on the date Employee's employment with Employer terminates.
(G) "Restricted Period" means a time-period, as chosen by
Employer (in its sole discretion) by written notice to Employee within thirty
(30) days after termination of the Employment Term, equal to either one (1)
year or two (2) years commencing on the date the Employment Term is
terminated by either Party (for any reason, with or without cause); provided,
however, that such period shall be extended to include any period of time
during which Employee engages in any activity constituting a breach of this
Agreement and any period of time during which litigation transpires wherein
Employee is held to have breached this Agreement.
(H) "Service Area" means: (i) Lorain County, Ohio and
all counties immediately contiguous to Lorain County, constituting those
geographic areas in which Employer presently conducts substantial business
activities; and (ii) those counties located in the State of Ohio in which
Employer conducts or transacts substantial business activities on the date
the Employment Term terminates; and (iii) those counties in the State of Ohio
in which, on the date the Employment Term terminates, Employer intends to
conduct or transact substantial business activities as demonstrated by plans,
strategies or other tangible preparation for such business activities.
(I) "Employer" means, for purposes of this Section 8, LNB
Bancorp, Inc. and The Lorain National Bank (a national bank association), all
direct and indirect parent and subsidiary entities thereof, and all entities
related to LNB Bancorp, Inc., to The Lorain National Bank or to such parent
and subsidiary entities by common ownership.
8.2 Expressly in consideration for Employer's promises made in
this Agreement and to induce Employer to sign this Agreement, Employee
promises and agrees that:
(A) Confidentiality. The Confidential Information is and, at
all times, shall remain the exclusive property of Employer, and Employee:
(i) shall hold the Confidential Information in strictest confidence and in a
position of trust for Employer and its Clients and Customers, and (ii) except
33
as may be necessary to perform Employee's employment duties with Employer but
only in compliance with Employer's confidentiality policies and all
applicable laws, shall not (directly or indirectly) use for any purpose,
copy, duplicate, disclose, convey to any third-party or convert any
Confidential Information, either during the Employment Term or at any time
following termination of the Employment Term (by any Party, for any reason,
with or without cause), and (iii) upon the request of Employer at any time
during or after the Employment Term, shall immediately deliver to Employer
all the Confidential Information in Employee's possession and shall neither
convey to any third-party nor retain any copies or duplicates thereof; and
(B) Competitive Acts. During the Employment Term and during
the Restricted Period, Employee (or any entity owned or controlled by
Employee) shall not directly or indirectly, without the prior written
approval of the President and Chief Executive Officer of Employer (or any
person expressly designated by the President and Chief Executive Officer),
perform a Competitive Act; and
(C) Clients and Custiners. During the Restricted Period,
Employee (or any entity owned or controlled by Employee) shall not directly
or indirectly: (i) solicit from or perform for any Client or Customer a
Competitive Activity, wherever such Client or Customer is located, or (ii)
influence (or attempt to influence) any Client or Customer to transfer such
Client's or Customer's patronage or business from Employer, or (iii)
otherwise interfere with any business relationship of Employer with any
Client or Customer; and
(D) Employees. During the Restricted Period, Employee (or
any entity owned or controlled by Employee) shall not directly or indirectly:
(i) employ, engage, contract for the services of, or solicit or otherwise
induce the services of any person who, during the one hundred eighty (180)-
day period immediately preceding commencement of the Restricted Period or
during the Restricted Period, is or was an employee of Employer, or (ii)
otherwise interfere with (or attempt to interfere with) any employment
relationship of Employer with any employee.
(E) Other Employment. During the Employment Term, Employee
shall not perform services (whether or not for compensation) as an employee,
independent contractor, consultant, representative or agent of any person,
sole proprietorship, partnership, limited liability company, corporation,
association (other than Employer), organization, or other entity
(governmental or otherwise) without the prior, written consent of the
President and Chief Executive Officer of Employer (or any person expressly
designated by the President).
(F) Costs of Enforcement. Employee shall pay all reasonable
legal fees, court costs, expert fees, investigation costs, and other expenses
incurred by Employer in any litigation under which Employee is adjudicated to
have violated this Section 8.
34
8.3 Employee understands and agrees that:
(A) during the Employment Term, Employee will materially
assist Employer in the generation, development or enhancement of certain
Confidential Information, Clients and Customers and certain other business
assets and activities for Employer; and
(B) Employee's promises in this Section 8: (i) were
negotiated at arm's-length and with ample time for Employee to seek the
advice of legal counsel, (ii) are required for the fair and reasonable
protection of Employer and the Confidential Information, and (iii) do not
constitute an unreasonable hardship to Employee in working for Employer or in
subsequently earning a livelihood in Employee's field of expertise outside
the Service Area; and
(C) if Employee breaches (or threatens to breach) any or all
of the promises in this Section 8: the privacy and thereby the value of the
Confidential Information will be significantly jeopardized; Employer will be
subject to the immediate risk of material, immeasurable, and irreparable
damage and harm; the remedies at law for Employee's breach shall be
inadequate; and Employer shall therefore be entitled to injunctive relief
against Employee in addition to any and all other legal or equitable
remedies; and
(D) if Employee had not agreed to the restrictive promises in
this Agreement, Employer would not have signed this Agreement.
8.4 Employee's promises, duties and obligations made in this
Section 8 shall apply to Employee irrespective of whether a Change in Control
(as defined in Section 11.1) occurs and shall survive the voluntary or
involuntary cessation or termination of the Employment Term by either Party
(for any reason, with or without cause). If any of the restrictions
contained in this Section 8 are ever judicially held to exceed the geographic
or time limitations permitted by law, then such restrictions shall be deemed
to be reformed to comply with the maximum geographic and time limitations
permitted by law. The existence of any claim or cause of action by Employee
against Employer (whether or not derived from or based upon Employee's
employment with Employer) shall not constitute a defense to Employer's
enforcement of any covenant, duty or obligation of Employee in this Section
8.
9. Indemnification.
9.1 Employer hereby indemnifies and saves Employee harmless from
and against all claims, liabilities, judgments, decrees, fines, penalties,
fees, amounts paid in settlement or any other costs, losses, expenses
(including, but not limited to, attorneys' fees and court costs) directly or
indirectly arising or resulting from or in connection or association with any
threatened or pending action, suit or proceeding (whether civil, criminal,
35
administrative, investigatory or otherwise) and any appeals related thereto
under which Employee is a party or participant because of Employee's good
faith actions or omissions arising from the performance of Employee's duties
and obligations under this Agreement, except for such claims (including court
proceedings) brought by the respective Parties against each other.
9.2 As a condition precedent to the indemnification and other
obligations of Employer under this Section 9, Employee must:
(A) Notify Employer of any actual or potential claim under
this Section 9; and
(B) Authorize and permit Employer, in its sole discretion, to
choose any legal counsel to defend or otherwise handle the claim and all
proceedings and matters relating thereto; and
(C) Permit Employer to assume total, complete and exclusive
control of the claim and all proceedings and matters relating thereto; and
(D) Cooperate in all reasonable respects with Employer in
handling the claims and all proceedings and matters related thereto.
10. Miscellaneous.
10.1 This Agreement constitutes the entire agreement among the
Parties with respect to the subject matter hereof and supersedes any and all
other prior or contemporaneous agreements or contracts (either oral or
written) between the Parties with respect to the subject matter hereof.
10.2 The invalidity or unenforceability of any particular provision
of this Agreement shall not affect its other provisions and this Agreement
shall be construed in all respects as if such invalid or unenforceable
provision had been omitted.
10.3 Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of Employer, its successors
and assigns and upon Employee, Employee's administrators, executors,
legatees, heirs and assigns. At any time, Employer may assign this Agreement
and Employer's rights, duties, obligations and benefits thereunder to any
Subsidiary as defined in Section 11.1(I) of this Agreement.
10.4 This Agreement shall be construed and enforced under and in
accordance with the laws of the State of Ohio; for all litigation arising
hereunder, the State Courts of Lorain County, Ohio shall have exclusive
venue; and each Party (separately and collectively) hereby submits to the
personal jurisdiction of the State Courts of Lorain County, Ohio for all
litigation arising under this Agreement.
10.5 All promises, representations, warranties and covenants of the
36
Parties shall survive termination of the Agreement Term, unless otherwise
expressly provided herein.
11. Change in Control.
11.1 For purposes solely of this Section 11, the following terms
shall have the respective meanings set forth below:
(A) "Bonus Amount" means the highest annual incentive bonus
earned by Employee from Employer (or its Subsidiaries) during the last three
(3) completed fiscal years of Employer immediately preceding Employee's Date
of Termination (annualized in the event Employee was not employed by Employer
or its Subsidiaries for the whole of any such fiscal year).
(B) "Cause" means any one or more of the following: (i) the
willful and continued failure of Employee to perform substantially Employee's
duties with Employer (other than any such failure resulting from Employee's
Disability as defined in Section 11.1(E) of this Agreement or any such
failure subsequent to Employee's being delivered a Notice of Termination
without Cause by Employer or after Employee's delivering a Notice of
Termination for Good Reason to Employer) after a written demand for
substantial performance is delivered to Employee by Employer's Board of
Directors which specifically identifies the manner in which the Board of
Directors believes that Employee has not substantially performed Employee's
duties and provides Employee with three (3) days to correct such failure, or
(ii) the willful engaging by Employee in illegal conduct or gross misconduct
which is injurious to Employer or any Subsidiary, or (iii) the conviction of
Employee of, or a plea by Employee of nolo contendere to, a felony, or (iv)
Employee's breach of or failure to perform any of the non-competition and
non-disclosure covenants contained in Section 8 of this Agreement or
contained in any other document signed by Employee and by Employer. For
purpose of this paragraph (B), no act or failure to act by Employee shall be
considered "willful" unless done or omitted to be done by Employee in bad
faith and without reasonable belief that Employee's action or omission was in
the best interests of Employer. Any act or failure to act based upon
authority given pursuant to a resolution duly adopted by Employer's Board of
Directors, based upon the advice of counsel for Employer, or based upon the
instructions of Employer's Chief Executive Officer or another senior officer
of Employer shall be conclusively presumed to be done, or omitted to be done,
by Employee in good faith and in the best interests of Employer.
(C) "Change in Control" means the occurrence of any one of
the following events:
(i) if individuals who, on the date of this Agreement, constitute the Board
of Directors (the "Incumbent Directors") of LNB Bancorp, Inc. (herein called
"Company") cease for any reason to constitute at least a majority of
Company's Board of Directors; provided, however, that: (A) any person
becoming a director subsequent to the date of this Agreement, whose election
37
or nomination for election was approved by a vote of at least two-thirds
(2/3) of the Incumbent Directors then on Company's Board of Directors (either
by a specific vote or by approval of the proxy statement of Company in which
such person is named as a nominee for director, without written objection by
such Incumbent Directors to such nomination), shall be deemed to be an
Incumbent Director, and (B) no individual elected or nominated as a director
of Company initially as a result of an actual or threatened election contest
with respect to directors or any other actual or threatened solicitation of
proxies by or on behalf of any person other than Company's Board of Directors
shall be deemed to be an Incumbent Director;
(ii) if any "person" (as such term is defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used
in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act),
directly or indirectly, of securities of Company representing twenty percent
(20%) or more of the combined voting power of Company's then-outstanding
securities eligible to vote for the election of Company's Board of Directors
(the "Company Voting Securities"); provided, however, that the events
described in this clause (ii) shall not be deemed to be a Change in Control
by virtue of any of the following acquisitions: (A) by Company or any
Subsidiary, (B) by any employee benefit plan sponsored or maintained by
Employer or any Subsidiary or by any employee stock benefit trust created by
Employer or any Subsidiary, (C) by any underwriter temporarily holding
securities pursuant to an offering of such securities, (D) pursuant to a Non-
Qualifying Transaction (as defined in clause (iii) of this paragraph (C),
below), (E) pursuant to any acquisition by Employee or any group of persons
including Employee (or any entity controlled by Employee or by any group of
persons including Employee), or (F) a transaction (other than one described
in clause (iii) of this paragraph (C), below) in which Company Voting
Securities are acquired from Company, if a majority of the Incumbent
Directors approves a resolution providing expressly that the acquisition
pursuant to this subparagraph (F) does not constitute a Change in Control
under this clause (ii);
(iii) upon the consummation of a merger, consolidation, share exchange or
similar form of corporate transaction involving Company or any of its
Subsidiaries that requires the approval of Company's shareholders, whether
for such transaction or the issuance of securities in the transaction (a
"Business Combination"), unless immediately following such Business
Combination: (A) more than fifty percent (50%) of the total voting power of
either (x) the corporation resulting from the consummation of such Business
Combination (the "Surviving Corporation") or, if applicable, (y) the ultimate
parent corporation that directly or indirectly has beneficial ownership of
one hundred percent (100%) of the voting securities eligible to elect
directors of the Surviving Corporation (the "Parent Corporation") is
represented by Company Voting Securities that were outstanding immediately
prior to such Business Combination (or, if applicable, represented by shares
into which such Company Voting Securities were converted pursuant to such
38
Business Combination), and such voting power among the holders thereof is in
substantially the same proportion as the voting power of such Company Voting
Securities among the holders thereof immediately prior to the Business
Combination, (B) no person (other than any employee benefit plan sponsored or
maintained by the Surviving Corporation or the Parent Corporation or any
employee stock benefit trust created by the Surviving Corporation or the
Parent Corporation) is or becomes the beneficial owner, directly or
indirectly, of twenty percent (20%) or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation), and (C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent Corporation,
the Surviving Corporation) were Incumbent Directors at the time of the Board
of Director's approval of the execution of the initial agreement providing
for such Business Combination (any Business Combination which satisfies all
of the criteria specified in (A), (B) and (C) of this Section 11.1(C)(iii)
shall be deemed to be a "Non-Qualifying Transaction"); or
(iv) if the shareholders of Company approve a plan of complete liquidation or
dissolution of Company or a sale of all or substantially all of Company's
assets but only if, pursuant to such liquidation or sale, the assets of
Company are transferred to an entity not owned (directly or indirectly) by
Company's shareholders.
Notwithstanding the foregoing, a Change in Control shall not be deemed
to occur solely because any person acquires beneficial ownership of more than
twenty percent (20%) of Company Voting Securities as a result of the
acquisition of Company Voting Securities by Company which reduces the number
of Company Voting Securities outstanding; provided, however, that if (after
such acquisition by Company) such person becomes the beneficial owner of
additional Company Voting Securities that increases the percentage of
outstanding Company Voting Securities beneficially owned by such person, a
Change in Control shall then occur. Notwithstanding anything in this
Agreement to the contrary, if (1) Employee's employment is terminated prior
to a Change in Control for reasons that would have constituted a Qualifying
Termination if they had occurred following a Change in Control, (2) Employee
reasonably demonstrates that such termination was at the request of a third
party who had indicated an intention or taken steps reasonably calculated to
effect a Change in Control, and (3) a Change in Control involving such third
party (or a party competing with such third party to effectuate a Change in
Control) does occur, then (for purposes of this Agreement) the date
immediately prior to the date of such termination of employment (or event
constituting Good Reason) shall be treated as a Change in Control.
(D) "Date of Termination" means (1) the effective date on
which Employee's employment by Employer terminates as specified in a prior
written notice by Employer or Employee (as the case may be) to the other,
or (2) if Employee's employment by Employer terminates by reason of death,
the date of death of Employee, or (3) if the Employee incurs a Disability, the
39
date of such Disability as determined by a physician chosen by Employer. For
purposes of determining the timing of payments and benefits to Employee under
Section 11.2, the date of the actual Change in Control shall be treated as
Employee's Date of Termination.
(E) "Disability" means Employee's inability to perform
Employee's then-existing duties with Employer on a full-time basis for at
least one hundred eighty (180) consecutive days as a result of Employee's
incapacity due to physical or mental illness.
(F) "Good Reason" means, without Employee's express written
consent, the occurrence of any of the following events after a Change in
Control:
(i) (a) any change in the duties or responsibilities (including reporting
responsibilities) of Employee that is inconsistent in any material and
adverse respect with Employee's positions, duties, responsibilities or status
with Employer immediately prior to such Change in Control (including any
material and adverse diminution of such duties or responsibilities), or (b) a
material and adverse change in Employee's titles or offices with Employer
(including, if applicable, membership on Employer's Board of Directors) from
those existing immediately prior to such Change in Control;
(ii) (a) a reduction by Employer in Employee's Basic Salary as in effect
immediately prior to such Change in Control (or as such Basic Salary may be
increased from time to time thereafter), or (b) the failure by Employer to
pay Employee an annual bonus in respect of the year in which such Change in
Control occurs or any subsequent year in an amount greater than or equal to
the annual bonus earned for the year ended prior to the year in which such
Change in Control occurs;
(iii) any requirement of Employer that Employee: (a) be based anywhere
more than fifty (50) miles from the office where Employee is located at the
time of the Change in Control, or (b) travel on Employer business to an
extent substantially greater than the travel obligations of Employee
immediately prior to such Change in Control;
(iv) the failure of Employer to: (a) continue in effect any material
employee benefit plan, compensation plan, welfare benefit plan or other
material fringe benefit plan in which Employee is participating immediately
prior to such Change in Control or the taking of any action by Employer which
would materially and adversely affect Employee's participation in or reduce
Employee's benefits under any such plan, unless Employee is permitted to
participate in other plans providing Employee with substantially equivalent
benefits in the aggregate, or (b) provide Employee with paid vacation in
accordance with the most favorable vacation policies of Employer as in effect
for Employee immediately prior to such Change in Control, including the
crediting of all service for which Employee had been credited under such
vacation policies prior to the Change in Control; or
40
(v) the failure of Employer to obtain the assumption (and, if applicable,
guarantee) agreement from any successor (and Parent Corporation) as
contemplated in Section 11.4(B).
Notwithstanding any contrary provision in this Agreement: (1) an
isolated, insubstantial and inadvertent action taken in good faith and which
is remedied by Employer within ten (10) days after receipt of notice thereof
given by Employee shall not constitute Good Reason; and (2) Employee's right
to terminate employment for Good Reason shall not be affected by Employee's
incapacities due to mental or physical illness; and (3) Employee's continued
employment shall not constitute a consent to, or a waiver of rights with
respect to, any event or condition constituting Good Reason (provided,
however, that Employee must provide notice of termination of employment
within thirty (30) days following Employee's knowledge of an event
constituting Good Reason or such event shall not constitute Good Reason under
this Agreement).
(G) "Qualifying Termination" means a termination of
Employee's employment with Employer after a Change in Control (i) by Employer
other than for Cause, or (ii) by Employee for Good Reason. Termination of
Employee's employment on account of death, Disability or Retirement shall not
constitute a Qualifying Termination.
(H) "Retirement " means the termination of Employee's
employment with Employer: (i) on or after the first of the month coincident
with or next following Employee's attainment of age sixty-five (65), or (ii)
on such later date as may be provided in a written agreement between Employer
and Employee.
(I) "Subsidiary" means any corporation or other entity in
which Company: (i) has a direct or indirect ownership interest of fifty
percent (50%) or more of the total combined voting power of the then-
outstanding securities or interests of such corporation or other entity
entitled to vote generally in the election of directors, or (ii) has the
right to receive fifty percent (50%) or more of the distribution of profits
or fifty percent (50%) of the assets upon liquidation or dissolution of such
corporation or other entity.
(J) "Termination Period" means the period of time beginning
with a Change in Control and ending two (2) years following such Change in
Control.
(K) "Highest Base Salary" means Employee's highest annual
base salary (excluding any bonuses) paid to Employee by Employer during
Employer's last three (3) fiscal years completed immediately prior to the
Date of Termination.
(L) "Company" means LNB Bancorp, Inc. and its successors.
41
11.2 Notwithstanding any contrary provision in Section 7 or in any
other Section of this Agreement, if (during the Termination Period)
Employee's employment with Employer terminates pursuant to a Qualifying
Termination:
(A) Employer shall pay to Employee, within twenty (20) days
following the Date of Termination, a lump sum cash amount equal to the sum of
(i) two hundred percent (200%) of Employee's Highest Base Salary, as defined
in Section 11.1(K), through the Date of Termination, plus (ii) any base
salary and bonuses which have been earned through the Date of Termination and
are payable, to the extent not theretofore paid or deferred, plus (iii) a pro
rata portion of Employee's annual bonus for the fiscal year in which
Employee's Date of Termination occurs in an amount at least equal to (1)
Employee's Bonus Amount multiplied by (2) a fraction, the numerator of which
is the number of days in the fiscal year in which the Date of Termination
occurs through the Date of Termination and the denominator of which is three
hundred sixty-five (365), and reduced by (3) any amounts paid to Employee by
Employer as an executive bonus (pursuant to approval of the Board of
Directors) for the fiscal year in which Employee's Date of Termination
occurs, plus (iv) any accrued and unpaid vacation pay.
(B) Employer shall continue to provide, for a period of
twenty-four (24) months following the Date of Termination, Employee (and
Employee's dependents, if applicable) with the same level of medical, dental,
accident, disability and life insurance benefits and continuing education
payments (necessary for Employee to maintain any professional licensure
requirements related to Employee's employment duties with Employer) upon
substantially the same terms and conditions (including contributions required
by Employee for such benefits) as existed immediately prior to Employee's
Date of Termination (or, if more favorable to Employee, as such benefits and
terms and conditions existed immediately prior to the Change in Control);
provided, however, that if Employee is not eligible or qualified to continue
to participate in Employer's plans providing such benefits, Employer shall
otherwise provide such benefits on the same after-tax basis as if continued
participation had been permitted. Notwithstanding the foregoing, in the
event Employee becomes re-employed with another employer and becomes eligible
to receive welfare benefits from such employer, the welfare benefits
described herein shall be secondary to such benefits during the period of
such eligibility but only if (and to the extent that) Employer reimburses
Employee for any increased cost and provides any additional benefits
necessary to give Employee the benefits provided in this Section 11.2(B).
Employee's accrued benefits as of the Date of Termination under Employer's
employee benefit plans shall be payable in accordance with the terms of such
plans.
(C) Notwithstanding any contrary provision in this Section
11.2, Employer's payments to Employee under this Section 11.2 shall be
reduced to the extent that such payments (together with all other payments by
Employer to Employee under all other written or verbal agreements between
42
Employer and Employee) constitute an "excess parachute payment" under Section
280G of the Internal Revenue Code (as may be periodically amended).
11.3 Employer shall withhold from all payments due to Employee (or
Employee's beneficiaries or estate) hereunder all taxes which, by applicable
federal, state, local or other law, Employer is required to withhold
therefrom.
11.4 (A) This Section 11 shall not be terminated by any Business
Combination. In the event of any Business Combination, the provisions of
this Section 11 shall be binding upon the Surviving Corporation and such
Surviving Corporation shall be treated as Employer hereunder.
(B) Employer agrees that, in connection with any Business
Combination, Employer will cause any successor entity to Employer
unconditionally to assume (and, for any Parent Corporation in such Business
Combination, to guarantee), by written instrument delivered to Employee (or
Employee's beneficiaries or estate), all of the obligations of Employer under
this Section 11. Failure of Employer to obtain such assumption or guarantee
prior to the effectiveness of any such Business Combination that constitutes
a Change in Control shall be a breach of this Agreement and shall constitute
Good Reason hereunder and, further, shall entitle Employee to compensation
and other benefits from Employer in the same amount and on the same terms as
Employee would be entitled hereunder as if Employee's employment were
terminated following a Change in Control by reason of a Qualifying
Termination. For purposes of implementing this Section 11.4(B), the date on
which any such Business Combination becomes effective shall be deemed the
date Good Reason occurs and shall be the Date of Termination, if so requested
by Employee.
(C) This Section 11 shall inure to the benefit of and be
enforceable by Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Employee dies while any amounts would have been payable to Employee under
this Section 11 if Employee had continued to live, all such amounts (unless
otherwise provided herein) shall be paid in accordance with the terms of this
Section 11 to such person or persons appointed in writing by Employee to
receive such amounts or, if no person is so appointed, to Employee's estate.
11.5 In the event of a tender or exchange offer, proxy contest, or
the execution of any agreement which, if consummated, would constitute a
Change in Control, Employee agrees (as a condition to receiving any payments
and benefits under Section 11.2 of this Agreement) not to leave voluntarily
the employ of the Employer (other than as a result of Disability, Retirement
or an event which would constitute Good Reason if a Change in Control had
occurred) until the Change in Control occurs or, if earlier, such tender or
exchange offer, proxy contest or agreement is terminated or abandoned.
43
IN WITNESS WHEREOF, the Parties have set their hands as of the day and
year first above written.
In the Presence of:
/s/Ann E. Koler /s/Terry M. White
______________________ __________________________
(Signature of First Witness) Terry M. White
"Employee"
/s/Denise M. Harmych
______________________
(Signature of Second Witness)
LNB BANCORP, INC.
/s/Ann E. Koler By:/s/Gary C. Smith
______________________ __________________________
(Signature of First Witness) Gary C. Smith, President
/s/Denise M. Harmych
______________________
(Signature of Second Witness)
THE LORAIN NATIONAL BANK
/s/Ann E. Koler By:/s/Gary C. Smith
_______________________ __________________________
(Signature of First Witness) Gary C. Smith, President
/s/Denise M. Harmych
_______________________
(Signature of Second Witness) "Employer"
44
LNB Bancorp, Inc.
Exhibit to Form 10 - Q
(For the three months ended March 31, 2002)
S - K Reference Number (13)
First Quarter Report to Shareholders of
LNB Bancorp, Inc. - March 31, 2002
EDGAR Version
Description:
Three sided pamphlet
Outside cover: white with photo of two seagulls
ANNUITIES / MUTUAL FUNDS
TRUST / ESTATE PLANNING TITLE AGENCY
BANKING INVESTMENT MANAGEMENT INSURANCE AGENCY
(Logo) LNB
Bancorp, Inc.
and subsidiaries
First Quarter Report
March 31, 2002
Inside contains: Message to Shareholders
Unaudited EDGAR version Consolidated Balance Sheets for period ending
March 31, 2002 and March 31, 2001, respectively,
Unaudited EDGAR version Consolidated Statements of Income for the Three
Months ended March 31, 2002 and March 31, 2001, respectively,
White, Campagna join LNB: Friedman's, Weber's roles expand
LNB's new high-performance checking program off to a fast start
LNB Bancorp, Inc. Subsidiary Locations
Banking Centers, ATMs, LNB Investment and Trust Services and LNB Investment
Center
45
Inside of front cover:
Message to Shareholders
It's a pleasure, once again, to report on the progress of LNB Bancorp, Inc.,
and its subsidiary companies after the first quarter of 2002. As of March
31, 2002, LNB Bancorp, Inc. achieved growth in earnings, dividends, assets,
loans, deposits and shareholders' equity. We are pleased to announce that
earnings increased 5% for the first quarter of 2002, compared to the same
quarter one year ago, climbing to $2,105,000, up from last year's $2,006,000.
The 2002 first quarter's earnings were the highest for any first quarter in
the history of LNB Bancorp, Inc.
Basic and diluted earnings per share for the first quarter of 2002 reached
$.49, a 4% increase from the $.47 amount reported for the first quarter of
2001. Per share amounts have been adjusted for the 2001 stock dividend.
Earnings for 2002 were higher than a year ago because of higher net interest
income and noninterest income, offset in part by higher loan loss provision
and operating expenses. Increases in net interest income were fueled by
strong commercial and consumer loan growth. The first quarter cash dividends
declared per share in 2002 was $.25 per share, the same amount as the first
quarter of 2001.
Asset growth remains solid. Consolidated assets climbed 6% to $661.6 million
at March 31, 2002, up $36.2 million from March 31, 2001. Net loans grew by
$37.0 million from one year ago to $483.3 million at March 31, 2002, for an
8% increase. Total deposits rose almost 3% to $522.3 million at March 31,
2002, up $13.9 million from one year ago. Increases in savings, checkinvest,
Market Access, and money market deposits accounted for the deposit increase.
Lorain National Bank's deposits are insured by the Federal Deposit Insurance
Corporation (FDIC). Lorain National Bank operates 20 banking centers and 27
ATMs in nine local communities.
Total shareholders' equity increased by $4.1 million during the twelve months
ended March 31, 2002 for a 7% increase. Total shareholders' equity was
$62.3 million or $14.47 per share at March 31, 2002, compared to $58.2
million or $13.56 per share at March 31, 2001. The percentage of
shareholders' equity to assets reached 9% at March 31, 2002. The annualized
return on average shareholders' equity and annualized return on average
assets were 13.56% and 1.29%, respectively, for the first quarter of 2002.
Gary C. Smith, LNB Bancorp's President and Chief Executive Office, stated:
"The effectiveness with which we managed around a weak economy was
illustrated by the results of a survey supplied by the investment firm of
Howe Barnes Investments Inc., in March. Of the 27 banks in the survey, which
compared publicly traded Ohio-based banks with total assets under $1 billion,
LNB Bancorp ranked second in four categories for the 12 months ended December
31, 2001: return on average assets (ROAA), return on average equity (ROAE),
noninterest income to average assets and net interest margin.
46
"Of the surveyed banks holding the number-one positions in these performance
measures," he explained, "no single bank achieved top ranking in more than a
single category, making LNB Bancorp's overall position in the survey most
enviable." "We are very proud of our relative performance and feel it
reflects the hard work and dedication of all of our employees. Moreover, we
are pursuing initiatives aimed at increasing the investment community's
awareness of the many strengths in our business and operations, creating
additional value for all of our stakeholders," Smith concluded.
We appreciate and thank you for your continuing support and look forward to
addressing you after the completion of our second quarter of operations.
/s/ Stanley G. Pijor /s/ Gary C. Smith
--------------------- ------------------
Stanley G. Pijor Gary C. Smith
Chairman of the Board President and Chief
Executive Officer
NET INCOME millions of dollars
(A Net Income graph follows in printed version with income on the y-axis
and years 1998 through 2002 on the x-axis. The graph is a vertical bar
graph. The co-ordinates, by year, which are presented in the table below
are plotted on the previously described grid.)
DIVIDENDS PER SHARE dollars*
(A Dividends Per Share graph follows in printed version with dividends on
the y-axis and years 1998 through 2002 on the x-axis. The graph is a
vertical bar graph. The co-ordinates, by year, which are presented in the
table below are plotted on the previously described grid.)
BASIC EARNINGS PER SHARE dollars*
(A Basic Earnings Per Share graph follows in printed version with earnings
per share on the y-axis and years 1998 through 2002 on the x-axis. The
graph is a vertical bar graph. The co-ordinates, by year, which are
presented in the table below are plotted on the previously described
grid.)
Basic Earnings
Net Income Dividends Per Share Per Share
Year millions of dollars dollars* dollars*
2002 $2,105 $0.25 $0.49
2001 $2,006 $0.25 $0.47
2000 $1,980 $0.23 $0.47
1999 $1,833 $0.21 $0.42
1998 $1,678 $0.19 $0.40
*Adjusted for stock dividends and splits
47
Consolidated Balance Sheets (Unaudited)
--------------------------
March 31, 2002 2001
- ----------------------------------------------------------------------
ASSETS:
Cash and Due from Banks. . . . . . . . . . .$ 20,164,000 $ 22,130,000
Federal Funds Sold and Short-term Investments 3,453,000 3,117,000
Federal Home Loan Bank and Federal
Reserve Bank Stock, at Cost . . . . . . . . 3,619,000 3,203,000
Securities Held to Maturity, at Cost . . . . 13,177,000 43,777,000
Securities Available for Sale, at Fair Value 115,396,000 83,332,000
Portfolio Loans. . . . . . . . . . . . . . . 481,019,000 442,515,000
Loans Available for Sale . . . . . . . . . . 8,558,000 8,815,000
Reserve for Loan Losses. . . . . . . . . . . (6,269,000) (5,045,000)
---------------------------
NET LOANS. . . . . . . . . . . . . . . . . . 483,308,000 446,285,000
---------------------------
Premises, Equipment and Intangible
Assets (net). . . . . . . . . . . . . . . . 13,621,000 14,794,000
Accrued Interest Receivable and
Other Assets. . . . . . . . . . . . . . . . 8,838,000 8,721,000
---------------------------
TOTAL ASSETS . . . . . . . . . . . . . . . .$661,576,000 $625,359,000
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Noninterest-Bearing Deposits . . . . . . . .$ 76,982,000 $ 79,849,000
Interest-Bearing Deposits. . . . . . . . . . 445,340,000 428,540,000
---------------------------
TOTAL DEPOSITS . . . . . . . . . . . . . . . 522,322,000 508,389,000
---------------------------
Securities Sold under Repurchase Agreements
and Other Short-term Borrowings . . . . . . 20,763,000 27,617,000
Federal Home Loan Bank Advances. . . . . . . 50,375,000 24,345,000
Accrued Interest, Taxes, Expenses and
Other Liabilities . . . . . . . . . . . . . 5,774,000 6,764,000
---------------------------
TOTAL LIABILITIES. . . . . . . . . . . . . . 599,234,000 567,115,000
---------------------------
Common Stock . . . . . . . . . . . . . . . . 4,418,000 4,313,000
Additional Capital . . . . . . . . . . . . . 26,238,000 24,336,000
Retained Earnings. . . . . . . . . . . . . . 34,136,000 31,543,000
Accumulated Other Comprehensive Income . . . 450,000 952,000
Treasury Stock, at Cost. . . . . . . . . . . (2,900,000) (2,900,000)
---------------------------
TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . 62,342,000 58,244,000
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $661,576,000 $625,359,000
---------------------------
48
TOTAL ASSETS millions of dollars
(A Total Assets graph follows in printed version with assets on the y-axis
and years 1998 through 2002 on the x-axis. The graph is a vertical bar
graph. The co-ordinates, by year, which are presented in the table below
are plotted on the previously described grid.)
TOTAL SHAREHOLDERS' EQUITY millions of dollars
(A Total Shareholders' Equity graph follows in printed version with
shareholder's equity on the y-axis and years 1998 through 2002 on the
x-axis. The graph is a vertical bar graph. The co-ordinates, by year,
which are presented in the table below are plotted on the previously
described grid.)
TOTAL DEPOSITS millions of dollars
(A Total Deposits graph follows in printed version with deposits on the y-
axis and years 1998 through 2002 on the x-axis. The graph is a vertical bar
graph. The co-ordinates, by year, which are presented in the table below are
plotted on the previously described grid.)
Total Shareholders'
Total Assets Equity Total Deposits
Year millions of dollars millions of dollars millions of dollars
2002 $661.6 $62.3 $522.3
2001 $625.4 $58.2 $508.4
2000 $600.3 $51.9 $489.5
1999 $560.6 $49.2 $452.8
1998 $490.0 $45.8 $412.6
49
Consolidated Statements of Income (Unaudited)
------------------------
Three Months Ended March 31, 2002 2001
- ----------------------------------------------------------------------
INTEREST INCOME:
Interest and Fees on Loans. . . . . . . . . . $ 8,372,000 $ 9,836,000
Interest and Dividends on Securities. . . . . 1,798,000 1,847,000
Interest on Federal Funds Sold and
Short-term Investments . . . . . . . . . . . 19,000 41,000
-------------------------
TOTAL INTEREST INCOME . . . . . . . . . . . . 10,189,000 11 724,000
-------------------------
INTEREST EXPENSE:
Interest on Deposits. . . . . . . . . . . . . 2,574,000 4,179,000
Interest on Federal Home Loan Bank Advances . 381,000 328,000
Interest on Securities Sold under Repurchase Agreements
and Other Short-term Borrowings. . . . . . . 151,000 396,000
-------------------------
TOTAL INTEREST EXPENSE. . . . . . . . . . . . 3,106,000 4,903,000
-------------------------
NET INTEREST INCOME . . . . . . . . . . . . . 7,083,000 6,821,000
Provision for Loan Losses . . . . . . . . . . 600,000 450,000
-------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES. . . . . . . . . . . . . . . 6,483,000 6,371,000
-------------------------
NON-INTEREST INCOME:
Investment and Trust Services Division Income 575,000 558,000
Fees and Service Charges. . . . . . . . . . . 1,683,000 1,443,000
Gains From Sales of Loans and Securities. . . 307,000 29,000
Other Operating Income. . . . . . . . . . . . 73,000 13,000
-------------------------
TOTAL NON-INTERST INCOME. . . . . . . . . . . 2,638,000 2,043,000
-------------------------
NON-INTEREST EXPENSES:
Salaries and Employee Benefits. . . . . . . . 2,917,000 2,600,000
Net Occupancy Expense of Premises . . . . . . 381,000 386,000
Furniture and Equipment Expenses. . . . . . . 531,000 519,000
Card-related Expenses . . . . . . . . . . . . 302,000 282,000
Supplies and Postage. . . . . . . . . . . . . 276,000 275,000
Ohio Franchise Tax. . . . . . . . . . . . . . 61,000 162,000
Other Operating Expenses. . . . . . . . . . . 1,526,000 1,175,000
-------------------------
TOTAL NON-INTEREST EXPENSE. . . . . . . . . . 5,994,000 5,399,000
-------------------------
INCOME BEFORE INCOME TAXES. . . . . . . . . . 3,127,000 3,015,000
-------------------------
Income Taxes. . . . . . . . . . . . . . . . . 1,022,000 1,009,000
-------------------------
50
NET INCOME. . . . . . . . . . . . . . . . . . $ 2,105,000 $ 2,006,000
-------------------------
PER SHARE DATA:
BASIC EARNINGS PER SHARE. . . . . . . . . . . $.49 $.47
-------------------------
DILUTED EARNINGS PER SHARE. . . . . . . . . . $.49 $.47
-------------------------
DIVIDENDS DECLARED PER SHARE. . . . . . . . . $.25 $.25
-------------------------
(Logo) LNB
Bancorp, Inc.
And subsidiaries
Logos for LNBB NASDAQ LISTED, FDIC Insured, Federal Home Loan Bank System,
and Equal Housing Lender
51
Inside of back cover
White, Campagna join LNB; Friedman's, Weber's roles expand
Gary C. Smith, president and chief executive officer, announced the hiring of
two new Lorain National Bank officers and the expansion of responsibilities
of two current LNB officers.
Terry M. White has joined LNB as Executive Vice President and Chief
Investment Officer. Paul Campagna has joined the bank's commercial lending
division as Vice President, Senior Lending Officer. Gregory D. Friedman,
CPA, LNB executive vice president & chief financial officer, will serve as
Corporate Secretary and James H. Weber, LNB senior vice president and senior
marketing officer, will serve as head of Investor Relations.
"We welcome Terry and Paul to our organization," Smith said. "They fit very
well into out organization and will have an immediate, positive impact on our
operations. I am also pleased to announce the expansion of Greg's and Jim's
duties in the bank. I appreciate their willingness to step forward and
expand their leadership roles."
Color photo in middle of page of Terry M. White
Since July of 2000, White served as senior manager in the financial
management division of Austin & Associates, Inc. in Toledo, where his
responsibilities included advising financial institutions in asset/liability
management, product and customer profitability, organizational profitability
and technology and merger integration.
Color photo at top right side of page of Paul Campagna
Campagna most recently served as Senior Vice President and Credit Officer for
ShoreBank in Cleveland for four years. He was directly responsible for the
overall asset quality of that organization. Prior to joining ShoreBank,
Campagna was employed by the former PremierBank & Trust Company for 16 years.
Color photo at middle of page of Gregory D. Friedman
Friedman has served as chief financial officer since 1989, having joined LNB
as an assistant vice president in 1985. He was promoted to executive vice
president in 1999. Prior to joining LNB, he served as senior manager at KPMG
LLP (formerly Peat, Marwick, Mitchell & Co.), where he specialized in
financial institution and insurance audits.
Color photo at middle of page of James H. Weber
Weber joined LNB"s management program in 1968. During his career at LNB, he
has been promoted through the ranks as marketing assistant, public relations
officer, vice president of marketing and senior vice president, senior
52
marketing officer. In addition to marketing and investor relations, Weber
oversees the bank's purchasing and maintenance departments and directs all
new physical plant and facilities planning.
LNB"s new high-performance checking program off to a fast start
Lorain National Bank's new high-performance checking program, featuring
totally free checking, has been given a warm reception throughout LNB's
service area.
The program, which offers customers a choice of seven new checking accounts,
was kicked off in January. All new checking customers receive a free gift
for opening the checking account best suited to their lifestyle, ranging from
totally free checking to plans that pay attractive rates of interest.
Every six weeks a different gift is offered. LNB's first quarter gifts,
Pyrex Portable cookware and Wilson sport duffel bag, were very favorably
received. More than 1,500 new checking accounts were opened during the first
quarter.
The new high performance-checking program is a permanent addition to the
bank's product menu and its key components - free gifts and totally free
checking, are now a fixture in the bank's core account marketing plan.
Color photo of free gift coupons on bottom left side of page
Core deposit generation has exceeded our initial projections from the high
performance checking initiative, where LNB focus is on building relationships
with these new customers, providing companion products to fill their
financial needs.
Our existing customers have been given many new choices, yet we respect their
wishes to maintain present checking accounts that have served them
adequately.
53
Back Cover:
White background with black and blue lettering
LNB Bancorp, Inc. Subsidiary Locations
LORAIN NATIONAL BANK CHARLESTON INSURANCE CHARLESTON TITLE
457 Broadway AGENCY, INC. AGENCY, LLC
Lorain, Ohio 44052 457 Broadway 424 Middle Avenue
(440) 244-6000 Lorain, Ohio 44052 Elyria, Ohio 44035
(800) 860-1007 (440) 244-7158 (440) 244-5212
(800) 845-2152 (440) 284-5165
Banking Centers, ATMs, LNB Investment and Trust Services and Investment
Center
Four column format
LORAIN NATIONAL BANK
LORAIN BANKING CENTERS AMHERST BANKING CENTER
**Main **Amherst
457 Broadway 1175 Cleveland Avenue
Lorain, Ohio 44052 Amherst, Ohio 44001
(440) 244-7185 (440) 988-4423
**Sixth Street Drive-In AVON LAKE
200 Sixth Street BANKING CENTER
Lorain, Ohio 44052 **Avon Lake
(440) 244-7242 240 Miller Road
Avon Lake,
**Kansas Avenue Ohio 44012
1604 Kansas Avenue (440) 933-2186
Lorain, Ohio 44052
(440) 288-9151 ELYRIA BANKING CENTERS
**Ely Square
**Oberlin Avenue 124 Middle Avenue
3660 Oberlin Avenue Elyria, Ohio 44035
Lorain, Ohio 44053 (440) 323-4621
(440) 282-9196
**Cleveland Street
**Pearl Avenue 801 Cleveland Street
2850 Pearl Avenue Elyria, Ohio 44035
Lorain, Ohio 44055 (440) 365-8397
(440) 277-1103
**Lake Avenue
**West Park Drive 42935 North Ridge Road
2130 West Park Drive Elyria Township,
Lorain, Ohio 44053 Ohio 44035
(440) 989-3131 (440) 233-7196
54
**Midway Mall WESTLAKE BANKING CENTERS
6395 Midway Mall Blvd. **Crossings of Westlake
Elyria, Ohio 44035 30210 Detroit Road
(440) 324-6530 Westlake, Ohio 44145
(440) 892-9696
**Elyria United
Methodist Village Westlake Village
807 West Avenue 28550 Westlake
Elyria, Ohio 44035 Village Drive
(440) 323-6488 Westlake, Ohio 44145
(440) 808-0229
VILLAGE OF LAGRANGE
BANKING CENTER ATMS
**Village of LaGrange **Captain Larry's Marathon
546 North Center Street 1317 State Route 60
Village of LaGrange, Vermilion, Ohio 44089
Ohio 44050
(440) 355-6734 **City Center Building
300 Broadway
OBERLIN BANKING CENTERS Lorain, Ohio 44052
**Kendal at Oberlin*
600 Kendal Drive **Cooper-Foster Park Road
Oberlin, Ohio 44074 1920 Cooper-Foster
(440) 774-5400 Park Road
Lorain, Ohio 44053
**Oberlin
40 East College Street **Dad's Sunoco
Oberlin, Ohio 44074 7580 Leavitt Road
(440) 775-1361 State Route 584053
Amherst, Ohio 44001
OLMSTED TOWNSHIP
BANKING CENTERS **Gateway Plaza
**Olmsted Township 3451 Colorado Avenue
27095 Bagley Road Lorain, Ohio 44052
Olmsted Township,
Ohio 44138 **Lakeland Medical Center
(440) 235-4600 3700 Kolbe Road
Lorain, Ohio 44053
The Renaissance
26376 John Road **Lorain County
Olmsted Township, Community College
Ohio 44138 1005 North Abbe Road
(440) 427-0041 Elyria, Ohio 44035
VERMILION BANKING CENTER **Lowe's Home
**Vermilion Improvement Warehouse
4455 East Liberty Avenue 620 Midway Boulevard
Vermilion, Ohio 44089 Elyria, Ohio 44035
(440) 967-3124
55
**Mobile ATM LNB INVESTMENT AND
2130 West Park Drive TRUST SERVICES
Lorain, Ohio 44053 457 Broadway
Lorain, Ohio 44052
OTHER OFFICES (440) 244-7226
Executive LNB INVESTMENT CENTER
457 Broadway LNB Investment Center
Lorain, Ohio 44052 457 Broadway
(440) 244-7123 Lorain, Ohio 44052
(440) 244-7158
Branch Administration (800) 845-2152
457 Broadway
Lorain, Ohio 44052 ALL OTHER OFFICES NOT LISTED
(440) 244-7253 Toll Free (800) 860-1007
Lorain (440) 244-6000
Commercial, Consumer
and Mortgage Loans TELEBANKER
457 Broadway Telebanker (440) 245-4562
Lorain, Ohio 44052 Telebanker (800) 610-9033
(440) 244-7220
(440) 244-7272 INTERNET: WWW.4LNB.COM
(440) 244-7216 (440) 989-3348
**ATM service available wherever you see
this symbol
* Restricted to residents, their visitors
and employees