LNB BANCORP, INC.
Exhibit Index
Exhibit Number Description
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99.1 Second Quarter 2003 Report of LNB
Bancorp, Inc. to Shareholders
99.2 Press Release of LNB Bancorp, Inc.
reporting financial results for the
first half of 2003
Exhibit 99.1
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 half of 2003. As of June 30,
2003, LNB Bancorp, Inc. achieved growth in earnings, dividends, assets,
loans, securities, deposits, and shareholders' equity.
All 2002 financial statements and related pre-share amounts have been
restated to reflect the adoption of Statement of Financial Accounting
Standard (SFAS) No. 147 Acquisitions of Certain Financial Institutions and
SFAS No. 142 "Goodwill and Other Intangible Assets" as related to
intangibles. Per share amounts have been adjusted to reflect a three-for-two
Stock split on March 14, 2003.
Earnings have increased 2% for the first half of the year, compared to the
same period one year ago. Earnings for the first six months of 2003 reached
$4,515,000, up from $4,429,000 during the first half of 2002. Second
quarter earnings for 2003 reached $2,324,000 compared with $2,281,000 for the
second quarter of 2002.
Earnings for 2003 were higher than a year ago because of higher net interest
income and lower noninterest income, noninterest expenses and provision for
income taxes. Increases in net interest income were supported by commercial
and consumer loans growth coupled with decreases in rates paid on interest
bearing liabilities.
The decrease in noninterest income resulted primarily from decreases in
Investment and Trust Services income and gains on sales of securities offset
in part by increases in fees and service charges and increases of gains on
sales of loans. Decreases in noninterest expenses resulted from decreases in
salaries and employee benefits and marketing expenses offset in part by
increases in occupancy expense, outside services and furniture and equipment
expenses.
Basic and diluted earnings per share for the first half of 2003 reached $.68,
a 2% increase over the $.67 amount reported for the first half of 2002. Cash
dividends declared per share for the first half of 2003 increased 3% or by
$.01 to $.34 per share, up from $.33 per share in 2002.
Asset growth remains solid. Consolidated assets climbed 8% to $753.1
million at June 30, 2003, up $58.5 million from June 30, 2002. Net loans
grew by $27.1 million from one year ago to $520.1 million at June 30, 2003
for a 6% increase. The security portfolio increased to $165.8 million at
June 30, 2003, up $19.0 million or 13% from one year ago.
Total deposits increased 7% to $591.6 million, up $38.2 million from one year
ago. Increases in savings, checkinvest, Market Access, certificates of
deposit and 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 $4.3 million during the twelve months
ended June 30, 2003 for a 7% increase. Total shareholders' equity was
$68.6 million or $10.38 per share at June 30, 2003, compared to $64.2 million
or $9.70 per share at June 30, 2002.
In addition, we are pleased to announce that effective June 30, 2003, LNB
Bancorp, Inc. was added for the first time to the Russell 2000 Index. LNB
Bancorp Inc.'s split adjusted stock price advanced about 20% and 81% for the
six months and three years ended June 30, 2003, respectively. We appreciate
and thank you for your continuing support and look forward to addressing you
after the completion of our third quarter of operations.
/s/Stanley G. Pijor
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Stanley G. Pijor
CHAIRMAN OF THE BOARD
/s/Gary C. Smith
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Gary C. Smith
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Consolidated Balance Sheets (Unaudited)
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June 30, 2003 2002
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ASSETS:
Cash and Due from Banks. . . . . . . . . . .$ 27,377,000 $ 28,053,000
Federal Funds Sold and Short-term Investments 3,081,000 3,463,000
Federal Home Loan Bank and Federal
Reserve Bank Stock, at Cost . . . . . . . . 3,807,000 3,658,000
Securities Held to Maturity, at Cost . . . . 4,061,000 11,915,000
Securities Available for Sale, at Fair Value 157,925,000 131,224,000
Portfolio Loans. . . . . . . . . . . . . . . 519,758,000 490,653,000
Loans Available for Sale . . . . . . . . . . 7,465,000 8,449,000
Reserve for Loan Losses. . . . . . . . . . . (7,105,000) (6,140,000)
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NET LOANS. . . . . . . . . . . . . . . . . . 520,118,000 492,962,000
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Premises, Equipment and Intangible
Assets (net). . . . . . . . . . . . . . . . 13,750,000 14,055,000
Accrued Interest Receivable and
Other Assets. . . . . . . . . . . . . . . . 22,966,000 9,234,000
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TOTAL ASSETS . . . . . . . . . . . . . . . .$753,085,000 $694,564,000
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LIABILITIES AND STOCKHOLDERS' EQUITY:
Noninterest-Bearing Deposits . . . . . . . .$ 99,146,000 $ 84,362,000
Interest-Bearing Deposits. . . . . . . . . . 492,484,000 469,148,000
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TOTAL DEPOSITS . . . . . . . . . . . . . . . 591,630,000 553,511,000
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Securities Sold under Repurchase Agreements
and Other Short-term Borrowings . . . . . . 17,080,000 21,633,000
Federal Home Loan Bank Advances. . . . . . . 69,425,000 48,875,000
Accrued Interest, Taxes, Expenses and
Other Liabilities . . . . . . . . . . . . . 6,359,000 6,268,000
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TOTAL LIABILITIES. . . . . . . . . . . . . . 684,494,000 630,287,000
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Common Stock . . . . . . . . . . . . . . . . 6,755,000 4,417,000
Additional Capital . . . . . . . . . . . . . 26,116,000 26,238,000
Retained Earnings. . . . . . . . . . . . . . 37,933,000 35,390,000
Accumulated Other Comprehensive Income . . . 679,000 1,132,000
Treasury Stock, at Cost. . . . . . . . . . . (2,892,000) (2,900,000)
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TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . 68,591,000 64,277,000
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $753,085,000 $694,564,000
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Consolidated Statements of Income (Unaudited)
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Six Months Ended June 30, 2003 2002
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INTEREST INCOME:
Interest and Fees on Loans. . . . . . . . . . $16,510,000 $17,027,000
Interest and Dividends on Securities. . . . . 2,781,000 3,584,000
Interest on Federal Funds Sold and
Short-term Investments . . . . . . . . . . . 21,000 52,000
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TOTAL INTEREST INCOME . . . . . . . . . . . . 19,312,000 20,663,000
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INTEREST EXPENSE:
Interest on Deposits. . . . . . . . . . . . . 3,934,000 5,176,000
Interest on Federal Home Loan Bank Advances . 829,000 861,000
Interest on Securities Sold under Repurchase Agreements
and Other Short-term Borrowings. . . . . . . 115,000 244,000
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TOTAL INTEREST EXPENSE. . . . . . . . . . . . 4,878,000 6,281,000
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NET INTEREST INCOME . . . . . . . . . . . . . 14,434,000 14,382,000
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Provision for Loan Losses . . . . . . . . . . 1,134,000 1,125,000
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NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES. . . . . . . . . . . . . . . 13,300,000 13,257,000
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NONINTEREST INCOME:
Investment and Trust Services Division Income 854,000 1,043,000
Fees and Service Charges. . . . . . . . . . . 3,596,000 3,505,000
Gains from Sales of Securities. . . . . . . . 450,000 540,000
Gains on Sales of Loans . . . . . . . . . . . 141,000 45,000
Other Operating Income. . . . . . . . . . . . 130,000 172,000
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TOTAL NONINTERST INCOME . . . . . . . . . . . 5,171,000 5,305,000
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NONINTEREST EXPENSES:
Salaries and Employee Benefits. . . . . . . . 5,671,000 5,762,000
Furniture and Equipment Expenses. . . . . . . 1,160,000 1,088,000
Net Occupancy Expense of Premises . . . . . . 789,000 745,000
Card-related Expenses . . . . . . . . . . . . 636,000 648,000
Supplies and Postage. . . . . . . . . . . . . 538,000 533,000
Outside Services. . . . . . . . . . . . . . . 824,000 668,000
Marketing and Public Relations. . . . . . . . 405,000 552,000
Ohio Franchise Tax. . . . . . . . . . . . . . 362,000 228,000
Other Operating Expenses. . . . . . . . . . . 1,450,000 1,760,000
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TOTAL NONINTEREST EXPENSE . . . . . . . . . . 11,835,000 11,984,000
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INCOME BEFORE INCOME TAXES. . . . . . . . . . 6,636,000 6,578,000
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Income Taxes. . . . . . . . . . . . . . . . . 2,121,000 2,149,000
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NET INCOME. . . . . . . . . . . . . . . . . . $ 4,515,000 $ 4,429,000
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PER SHARE DATA:
BASIC EARNINGS PER SHARE* . . . . . . . . . . $.68 $.67
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DILUTED EARNINGS PER SHARE* . . . . . . . . . $.68 $.67
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DIVIDENDS DECLARED PER SHARE* . . . . . . . . $.34 $.33
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(*) All share and per share data has been adjusted to reflect the 3-for-2
stock split in 2003 and the 2 percent stock dividend in 2002.