Exhibit to Form 8 - K
S - K Reference Number (99.1)
First Quarter 2003 Report to Shareholders
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 2003. As of March
31, 2003, LNB Bancorp, Inc. achieved growth in earnings, dividends, assets,
loans, securities, deposits, and shareholders' equity.
We are pleased to announce that earnings increased 2% for the first quarter
of 2003, compared to the same quarter one year ago, increasing to $2,191,000,
up from last year's $2,148,000. The 2002 financial statements and per-share
amounts have been restated to reflect the adoption of Statement of Financial
Accounting Standard No. 142 "Goodwill and Other Intangible Assets". The 2003
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 2003 reached
$.33, a three % increase from the $.32 amount reported for the first quarter
of 2002. Earnings for 2003 were higher than a year ago because of higher net
interest income and lower noninterest income, loan loss provision and income
taxes. Increases in net interest income were fueled by strong commercial
loan growth.
The first quarter cash dividend declared per share in 2003 was $.17 per
share, an increase from the $.16 amount reported for the first quarter of
2002.
Asset growth remains solid. Consolidated assets climbed 9.1% to $722.0
million at March 31, 2003, up $60.4 million from March 31, 2002. Net loans
grew by $21.5 million from one year ago to $504.8 million at March 31, 2003,
for a 4.4% increase. Commercial loan growth accounted for most of total loan
growth during the 12 months ended March 31, 2003. The security portfolio
increased to $155.1 million at March 31, 2003, up $22.9 million or 17.3% from
one year ago. Increases in United States government agencies securities
accounted for most of the increase.
Total deposits climbed almost 11.0% to $578.9 million at March 31, 2003, up
$56.6 million from one year ago. Increases in savings, checkinvest, Market
Access, certificates of deposit and high performance checking accounted for
the deposit increase. Lorain National Bank's deposits are insured by the
Federal Deposit Insurance Corporation (FDIC). Lorain National Bank operates
21 banking centers and 27 ATMs in nine local communities.
Total shareholders' equity increased by $5.0 million during the twelve months
ended March 31, 2003 for a 8.0% increase. Total shareholders' equity was
$67.4 million or $10.21 per share at March 31, 2003, compared to $62.4
million or $9.63 per share at March 31, 2002. The percentage of
shareholders' equity to assets reached 9.3% at March 31, 2003.
On February 25, 2003, LNB Bancorp, Inc.'s Board of Directors approved a
three-for-two (3-for-2) stock split of the Bancorp's common stock. The
number of shares issued as a result of the stock split totaled 2,200,239
shares. The shares issued as a result of the stock split were distributed on
March 14, 2003. Shareholders participating in the Bancorp's dividend
reinvestment plan were issued fractional shares as was necessary.
Shareholders not participating in the dividend reinvestment plan were paid
cash in lieu of fractional shares.
We appreciate and thank you for your continuing support and look forward to
addressing you after the completion of our second quarter of operations.
/s/Stanley G. Pijor
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Stanley G. Pijor
CHAIRMAN OF THE BOARD
/s/Gary C. Smith
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Gary C. Smith
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Consolidated Balance Sheets (Unaudited)
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March 31, 2003 2002
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ASSETS:
Cash and Due from Banks. . . . . . . . . . .$ 25,527,000 $ 20,164,000
Federal Funds Sold and Short-term Investments 3,235,000 3,453,000
Federal Home Loan Bank and Federal
Reserve Bank Stock, at Cost . . . . . . . . 3,772,000 3,619,000
Securities Held to Maturity, at Cost . . . . 5,312,000 13,177,000
Securities Available for Sale, at Fair Value 146,005,000 115,396,000
Portfolio Loans. . . . . . . . . . . . . . . 500,385,000 481,019,000
Loans Available for Sale . . . . . . . . . . 11,094,000 8,558,000
Reserve for Loan Losses. . . . . . . . . . . (6,703,000) (6,269,000)
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NET LOANS. . . . . . . . . . . . . . . . . . 504,776,000 483,308,000
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Premises, Equipment and Intangible
Assets (net). . . . . . . . . . . . . . . . 13,902,000 13,687,000
Accrued Interest Receivable and
Other Assets. . . . . . . . . . . . . . . . 19,519,000 8,838,000
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TOTAL ASSETS . . . . . . . . . . . . . . . .$722,048,000 $661,642,000
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Noninterest-Bearing Deposits . . . . . . . .$ 87,054,000 $ 76,982,000
Interest-Bearing Deposits. . . . . . . . . . 491,801,000 445,340,000
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TOTAL DEPOSITS . . . . . . . . . . . . . . . 578,855,000 522,322,000
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Securities Sold under Repurchase Agreements
and Other Short-term Borrowings . . . . . . 16,839,000 20,763,000
Federal Home Loan Bank Advances. . . . . . . 52,425,000 50,375,000
Accrued Interest, Taxes, Expenses and
Other Liabilities . . . . . . . . . . . . . 6,557,000 5,797,000
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TOTAL LIABILITIES. . . . . . . . . . . . . . 654,676,000 599,257,000
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Common Stock . . . . . . . . . . . . . . . . 6,753,000 4,418,000
Additional Capital . . . . . . . . . . . . . 26,086,000 26,238,000
Retained Earnings. . . . . . . . . . . . . . 36,701,000 34,179,000
Accumulated Other Comprehensive Income . . . 726,000 450,000
Treasury Stock, at Cost. . . . . . . . . . . (2,894,000) (2,900,000)
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TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . 62,372,000 62,385,000
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $722,048,000 $661,642,000
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Consolidated Statements of Income (Unaudited)
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Three Months Ended March 31, 2003 2002
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INTEREST INCOME:
Interest and Fees on Loans. . . . . . . . . . $ 8,202,000 $ 8,372,000
Interest and Dividends on Securities. . . . . 1,472,000 1,798,000
Interest on Federal Funds Sold and
Short-term Investments . . . . . . . . . . . 12,000 19,000
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TOTAL INTEREST INCOME . . . . . . . . . . . . 9,686,000 10,189,000
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INTEREST EXPENSE:
Interest on Deposits. . . . . . . . . . . . . 2,051,000 2,574,000
Interest on Federal Home Loan Bank Advances . 407,000 381,000
Interest on Securities Sold under Repurchase Agreements
and Other Short-term Borrowings. . . . . . . 68,000 151,000
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TOTAL INTEREST EXPENSE. . . . . . . . . . . . 2,526,000 3,106,000
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NET INTEREST INCOME . . . . . . . . . . . . . 7,160,000 7,083,000
Provision for Loan Losses . . . . . . . . . . 564,000 600,000
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES. . . . . . . . . . . . . . . 6,596,000 6,483,000
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NON-INTEREST INCOME:
Investment and Trust Services Division Income 454,000 575,000
Fees and Service Charges. . . . . . . . . . . 1,777,000 1,683,000
Gains From Sales of Loans and Securities. . . 265,000 307,000
Other Operating Income. . . . . . . . . . . . 10,000 73,000
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TOTAL NON-INTERST INCOME. . . . . . . . . . . 2,506,000 2,638,000
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NON-INTEREST EXPENSES:
Salaries and Employee Benefits. . . . . . . . 2,964,000 2,917,000
Net Occupancy Expense of Premises . . . . . . 412,000 381,000
Furniture and Equipment Expenses. . . . . . . 549,000 531,000
Card-related Expenses . . . . . . . . . . . . 292,000 302,000
Supplies and Postage. . . . . . . . . . . . . 282,000 276,000
Ohio Franchise Tax. . . . . . . . . . . . . . 181,000 61,000
Other Operating Expenses. . . . . . . . . . . 1,266,000 1,460,000
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TOTAL NON-INTEREST EXPENSE. . . . . . . . . . 5,946,000 5,928,000
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INCOME BEFORE INCOME TAXES. . . . . . . . . . 3,156,000 3,193,000
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Income Taxes. . . . . . . . . . . . . . . . . 965,000 1,045,000
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NET INCOME. . . . . . . . . . . . . . . . . . $ 2,191,000 $ 2,148,000
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PER SHARE DATA:
BASIC EARNINGS PER SHARE. . . . . . . . . . . $.33 $.32
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DILUTED EARNINGS PER SHARE. . . . . . . . . . $.33 $.32
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DIVIDENDS DECLARED PER SHARE. . . . . . . . . $.17 $.16
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