EXHIBIT 99
MESSAGE TO SHAREHOLDERS
It's a pleasure, once again, to report on the progress of LNB Bancorp, Inc.,
and its subsidiary companies after the end of the third quarter of 2003. All
pre 2003 financial statements and related per-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 1% for the first nine months of 2003, compared to the
same period one year ago. Earnings for the first nine months of 2003 reached
a record high of $6,870,000, up from $6,805,000 during the same period in
2002. Earnings for 2003 were higher than a year ago because of higher
noninterest income, offset in part by a slightly lower net interest income, a
higher loan loss provision and noninterest expenses.
Decreases in yields on investments and loans more than offset increases in
the volume of earning assets - resulting in a slight decrease in 2003
interest income. The downward repricing of interest-bearing liabilities more
than offset increases in volume and contributed to a decrease in interest
expense. The increase in noninterest income results primarily from increases
in fees and service charges and increases in gains on sales of loans and
gains on sale of the credit card portfolio offset in part by decreases in
Investment and Trust Services Division income and decreases in gains on sales
of securities.
Increases in noninterest expenses resulted from increases in salaries and
employee benefits, furniture and equipment expense, and outside services
offset in part by decreases in marketing expenses. The softening of the
economy and its related impact on credit plus the increase in the loan
growth resulted in the recording of higher levels of loan loss provision for
the first nine months of 2003, compared with the same period in 2002.
Basic and diluted earnings per share for the first nine months of 2003
reached $1.04, a 1% increase over the $1.03 amount reported for the same
period in 2002. Cash dividends declared per share for the first nine months
of 2003 increased 2% compared to the first nine months of 2002.
Asset growth remains solid. Consolidated assets increased 6% to $757.2
million, as of September 30, 2003 up $45.9 million from September 30, 2002.
Loans increased 8 percent to $540.2 million, up $38.8 million from one year
ago. Commercial loans surpassed the $300 million mark for the first time in
the history of LNB Bancorp, Inc. reaching $304.2 million at September 30,
2003.
Total deposits increased 1 percent to $571.2 million, up $3.6 million from
one year ago. Lorain National Bank operates 20 banking centers and 23 ATMs in
nine local communities.
Other borrowings increased $40.7 million to $112.6 million at September 30,
2003, or 57 percent from $72.0 million at September 30, 2002. The increase in
other borrowings was attributable to increases in Federal Home Loan Bank
advances of $40.1 million plus increases in repurchase agreements and Federal
funds purchased totaling $.6 million. Total shareholders' equity increased by
$2.8 million during the twelve months ended September 30, 2003 for a 4%
increase.
We appreciate and thank you for your continuing support and look forward to
addressing you after the completion of another successful year of operations.
Sincerely,
/s/ Stanley G. Pijor
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Stanley G. Pijor
CHAIRMAN OF THE BOARD
/s/ Gary C. Smith
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Gary C. Smith
PRESIDENT AND
CHIEF EXECUTIVE OFFICER
Consolidated Balance Sheets (Unaudited)
--------------------------
September 30, 2003 2002
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ASSETS:
Cash and Due from Banks. . . . . . . . . . .$ 28,860,000 $ 24,230,000
Federal Funds Sold and Short-term Investments 3,081,000 3,480,000
Federal Home Loan Bank and Federal
Reserve Bank Stock, at Cost . . . . . . . . 3,843,000 3,699,000
Securities Held to Maturity, at Cost . . . . 2,981,000 11,842,000
Securities Available for Sale, at Fair Value 151,697,000 139,669,000
Portfolio Loans. . . . . . . . . . . . . . . 533,687,000 493,017,000
Loans Available for Sale . . . . . . . . . . 6,497,000 8,432,000
Reserve for Loan Losses. . . . . . . . . . . (7,642,000) (6,557,000)
---------------------------
NET LOANS. . . . . . . . . . . . . . . . . . 532,542,000 494,892,000
---------------------------
Premises, Equipment and Intangible
Assets (net). . . . . . . . . . . . . . . . 13,860,000 14,143,000
Accrued Interest Receivable and
Other Assets. . . . . . . . . . . . . . . . 20,352,000 19,497,000
---------------------------
TOTAL ASSETS . . . . . . . . . . . . . . . .$757,216,000 $711,452,000
---------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY:
Noninterest-Bearing Deposits . . . . . . . .$ 87,115,000 $ 87,174,000
Interest-Bearing Deposits. . . . . . . . . . 484,049,000 480,424,000
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TOTAL DEPOSITS . . . . . . . . . . . . . . . 571,164,000 567,598,000
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Securities Sold under Repurchase Agreements
and Other Short-term Borrowings . . . . . . 26,187,000 25,579,000
Federal Home Loan Bank Advances. . . . . . . 86,425,000 46,375,000
Accrued Interest, Taxes, Expenses and
Other Liabilities . . . . . . . . . . . . . 4,864,000 6,077,000
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TOTAL LIABILITIES. . . . . . . . . . . . . . 688,640,000 645,629,000
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Common Stock . . . . . . . . . . . . . . . . 6,756,000 4,501,000
Additional Capital . . . . . . . . . . . . . 26,120,000 28,315,000
Retained Earnings. . . . . . . . . . . . . . 39,128,000 34,483,000
Accumulated Other Comprehensive Income . . . (541,000) 1,424,000
Treasury Stock, at Cost. . . . . . . . . . . (2,887,000) (2,900,000)
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TOTAL SHAREHOLDERS' EQUITY . . . . . . . . . 68,576,000 65,823,000
---------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $757,216,000 $711,452,000
---------------------------
Note: The 2002 financial statements and per-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."
Consolidated Statements of Income (Unaudited)
------------------------
Nine Months Ended September 30, 2003 2002
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INTEREST INCOME:
Interest and Fees on Loans. . . . . . . . . . $24,774,000 $25,672,000
Interest and Dividends on Securities. . . . . 3,906,000 5,331,000
Interest on Federal Funds Sold and
Short-term Investments . . . . . . . . . . . 32,000 75,000
-------------------------
TOTAL INTEREST INCOME . . . . . . . . . . . . 28,712,000 31,078,000
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INTEREST EXPENSE:
Interest on Deposits. . . . . . . . . . . . . 5,623,000 7,677,000
Interest on Federal Home Loan Bank Advances . 1,284,000 1,312,000
Interest on Securities Sold under Repurchase
Agreements and Other Short-term Borrowings. 157,000 364,000
-------------------------
TOTAL INTEREST EXPENSE. . . . . . . . . . . . 7,064,000 9,353,000
-------------------------
NET INTEREST INCOME . . . . . . . . . . . . . 21,648,000 21,725,000
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Provision for Loan Losses . . . . . . . . . . 2,125,000 1,725,000
-------------------------
NET INTEREST INCOME AFTER PROVISION
FOR LOAN LOSSES. . . . . . . . . . . . . . . 19,523,000 20,000,000
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NONINTEREST INCOME:
Investment and Trust Services Division Income 1,305,000 1,485,000
Fees and Service Charges. . . . . . . . . . . 5,504,000 5,484,000
Gains from Sales of Securities. . . . . . . . 449,000 600,000
Gains on Sales of Loans . . . . . . . . . . . 195,000 56,000
Gains on Sale of Credit Card Portfolio. . . . 820,000 -0-
Other Operating Income. . . . . . . . . . . . 241,000 248,000
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TOTAL NONINTERST INCOME . . . . . . . . . . . 8,514,000 7,873,000
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NONINTEREST EXPENSES:
Salaries and Employee Benefits. . . . . . . . 8,886,000 8,470,000
Furniture and Equipment Expenses. . . . . . . 1,807,000 1,628,000
Net Occupancy Expense of Premises . . . . . . 1,160,000 1,113,000
Card-related Expenses . . . . . . . . . . . . 980,000 992,000
Supplies and Postage. . . . . . . . . . . . . 783,000 769,000
Outside Services. . . . . . . . . . . . . . . 1,073,000 917,000
Marketing and Public Relations. . . . . . . . 584,000 828,000
Ohio Franchise Tax. . . . . . . . . . . . . . 542,000 385,000
Other Operating Expenses. . . . . . . . . . . 2,246,000 2,761,000
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TOTAL NONINTEREST EXPENSE . . . . . . . . . . 18,061,000 17,863,000
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INCOME BEFORE INCOME TAXES. . . . . . . . . . 9,976,000 10,010,000
-------------------------
Income Taxes. . . . . . . . . . . . . . . . . 3,106,000 3,205,000
-------------------------
NET INCOME. . . . . . . . . . . . . . . . . . $ 6,870,000 $ 6,805,000
-------------------------
PER SHARE DATA:
BASIC EARNINGS PER SHARE* . . . . . . . . . . $1.04 $1.03
-------------------------
DILUTED EARNINGS PER SHARE* . . . . . . . . . $1.04 $1.03
-------------------------
DIVIDENDS DECLARED PER SHARE* . . . . . . . . $ .51 $ .50
-------------------------
(*) 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.
LORAIN NATIONAL BANK TO EXPAND ATM NETWORK IN GRAFTON
Lorain National Bank is announcing a series of upcoming projects designed to
improve customer service and increase the efficiency of its branch
operations, according to Gary C. Smith, president and chief executive officer
of LNB Bancorp, Inc. and its banking subsidiary, Lorain National Bank.
In addition to plans to construct new banking offices in Avon and Avon Lake
next year; Lorain National will expand its automated teller machine network
with a new ATM in the Grafton Station convenience center in the village of
Grafton during the fourth quarter of this year.
The drive-up facility will include an ATM and a night depository to better
serve commercial customers in the Grafton area.
"We're pleased to announce that Lorain National Bank is committed to growth
and development right here in our neighborhood; while at the same time
increasing operating efficiency and shareholder value," Smith said.
"Our new banking office construction and facilities improvements in Lorain
County will allow us to provide even higher quality service to our customers
while increasing efficiencies bank wide," Smith added. "We are excited about
our opportunities to expand our banking business in our primary market."
PROPOSED LNB PROJECTS INCLUDE:
Installation of an ATM and night depository at 537 Main Street, Grafton,
adjacent to the new Grafton Station complex.
ESTIMATED COMPLETION DATE: FOURTH QUARTER 2003.
Expansion of business offices at LNB's Ely Square office at 124 Middle
Avenue in Elyria is currently underway. The new office facilities will
provide a greater presence for the bank's expanding business banking and
investment and trust divisions. The facility will also be the headquarters
of the bank's Community Reinvestment department.
ESTIMATED COMPLETION DATE: FOURTH QUARTER 2003.
Construction of a new banking office at the Lake Pointe development at 2100
Center Road (Route 83), near Detroit Road in Avon. The full-service office,
complete with drive-in banking and drive-up ATM, will be constructed in the
2100 Center development just west of the new Avon Commons shopping complex.
ESTIMATED OPENING DATE: FIRST QUARTER 2004.
Construction of a new banking office at 32960 Walker Road, in the Avon Lake
Towne Center shopping complex. Upon completion, banking operations will be
relocated to the new office from LNB's existing Avon Lake office at the
corner of Miller and Walker roads. The full-service office, complete
with drive-in banking and drive-up ATM, will provide a more centrally-located
banking office for its Avon Lake customers.
ESTIMATED OPENING DATE: MARCH 2004.
Lorain National Bank is a local independent bank operating 20 retail branch
offices and 23 ATMs in the nine communities of Lorain, Elyria, Amherst, Avon
Lake, LaGrange, Oberlin, Olmsted Township, Vermilion and Westlake.
THIS RELEASE CONTAINS STATEMENTS THAT ARE CONSIDERED "FORWARD-LOOKING
STATEMENTS" AS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995. THE PLANS AND PROJECTIONS DESCRIBED HEREIN ARE BASED ON CURRENT
EXPECTATIONS, AND A NUMBER OF IMPORTANT FACTORS COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY. SUCH FACTORS INCLUDE, BUT ARE NOT LIMITED TO, FLUCTUATIONS
IN INTEREST RATES, INFLATION, GOVERNMENT REGULATIONS, MANAGEMENT'S STRATEGIC
DIRECTION FOR LORAIN NATIONAL BANK, AND THE ECONOMIC CONDITIONS AND
COMPETITION IN THE GEOGRAPHIC AND BUSINESS AREAS IN WHICH THE BANK OPERATES.