##### Table of Contents



Form 10-Q SECURITIES AND EXCHANGE COMMISSION  [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  OR [   ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
  Commission file number: 0-13203   Ohio
(State of Incorporation)
    
    34-1406303
(I.R.S. Employer Identification No.)457 Broadway, Lorain, Ohio
(Address of principal executive offices)
    
    44052 - 1769
(Zip Code)
 (440) 244-6000
Registrants telephone number, including area code Not Applicable
(Former: name, address and fiscal year, if changed since last report) Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such
requirements for the past 90 days. YES [X]   NO [ ] Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2) YES [X]   NO [ ] Indicate the number of shares outstanding of each of the issuers classes of
common stock, as of the latest practicable date.  Outstanding at August 5, 2004: 6,641,083 sharesClass of Common Stock: $1.00 par value




---



LNB Bancorp, Inc.
Table of Contents  
 Part I. Financial InformationItem 1. Financial StatementsConsolidated Balance Sheets  June 30, 2004 and December 31, 2003Consolidated Statements of Income  Three and six months ended
June 30, 2004 and 2003Consolidated Statements of Cash Flows  Six months ended June 30,
2004 and 2003Consolidated Statements of Changes in Shareholders Equity  Six
months ended June 30, 2004 and 2003Notes to Consolidated Financial StatementsItem 2. Managements Discussion and Analysis of Financial
Condition and Results of OperationsItem 3. Quantitative and Qualitative Disclosures About Market RiskItem 4. Controls and ProceduresPart II. Other InformationItem 1. Legal ProceedingsItem 2. Changes in Securities and Use of ProceedsItem 3. Defaults Upon Senior SecuritiesItem 4. Submission of Matters to a Vote of Security HoldersItem 5. Other InformationItem 6. Exhibits and Reports on Form 8-KSignaturesCertificationsEX-2 ASSET PURCHASE AGREEMENTEX-31(A) 302 CERTIFICATION FOR CEOEX-31(B) 302 CERTIFICATION FOR CFOEX-32(A) 906 CERTIFICATION FOR CEOEX-32(B) 906 CERTIFICATION FOR CFO




---



##### Table of Contents



LNB Bancorp, Inc. 
 
 June 30,
    
    December 31,(Dollars in thousands)
    
    2004
    
    2003Assets:Cash and due from banks
    
    $
    23,719
    
    
    $
    24,646Federal funds sold and short-term investments
    
    
    6,811
    
    
    
    3,103Securities:Available for sale, at fair value
    
    
    128,017
    
    
    
    143,459Held to maturity, at cost (fair value $20,585 and $4,952 respectively)
    
    
    20,944
    
    
    
    4,789Other investments and equity stock, at cost
    
    
    3,690
    
    
    
    3,879Total securities
    
    
    152,651
    
    
    
    152,127Loans:Portfolio loans
    
    
    544,367
    
    
    
    528,096Loans held for sale
    
    
    4,516
    
    
    
    6,215Total loans
    
    
    548,883
    
    
    
    534,311Reserve for loan losses
    
    
    (7,989
    )
    
    
    (7,730
    )Net loans
    
    
    540,894
    
    
    
    526,581Bank owned life insurance
    
    
    13,023
    
    
    
    12,702Bank premises and equipment, net
    
    
    11,908
    
    
    
    11,009Intangible assets
    
    
    3,188
    
    
    
    3,245Accrued interest receivable
    
    
    2,658
    
    
    
    2,818Other assets
    
    
    4,736
    
    
    
    4,401Foreclosed assets
    
    
    596
    
    
    
    589Total Assets
    
    $
    760,184
    
    
    $
    741,221Liabilities and Shareholders Equity:Deposits:Demand and other noninterest-bearing deposits
    
    $
    91,024
    
    
    $
    86,693Savings, market access and passbook accounts
    
    
    292,554
    
    
    
    277,197Certificates of deposit
    
    
    206,955
    
    
    
    217,454Total deposits
    
    
    590,533
    
    
    
    581,344Securities sold under repurchase agreements
and other short-term borrowings
    
    
    18,915
    
    
    
    15,023Federal Home Loan Bank advances
    
    
    77,301
    
    
    
    71,540Accrued interest payable
    
    
    857
    
    
    
    875Accrued taxes, expenses and other liabilities (Note 6)
    
    
    4,407
    
    
    
    4,304Total liabilities
    
    
    692,013
    
    
    
    673,086Shareholders Equity: (Note 4)Common stock, $1.00 par: Shares authorized 15,000,000, Shares issued
6,766,867 and 6,766,867, respectively; Shares outstanding 6,641,083
and 6,617,618 respectively
    
    
    6,767
    
    
    
    6,767Additional capital
    
    
    26,243
    
    
    
    26,243Retained earnings
    
    
    40,443
    
    
    
    38,714Accumulated other comprehensive income (loss)
    
    
    (2,851
    )
    
    
    (704
    )Treasury stock at cost, 125,784 and 149,249 shares, respectively
    
    
    (2,431
    )
    
    
    (2,885
    )Total Shareholders Equity
    
    
    68,171
    
    
    
    68,135Commitments and contingencies (Note 7)Total Liabilities and Shareholders Equity
    
    $
    760,184
    
    
    $
    741,221
 See accompanying notes to the consolidated financial statements.




---



##### Table of Contents



LNB Bancorp, Inc. 
 
 Three Months Ended
    
    Six Months EndedJune 30,
    
    June 30,
    
    June 30,
    
    June 30,(Dollars in thousands, except per share amounts)
    
    2004
    
    2003
    
    2004
    
    2003Interest Income:Interest and fees on loans
    
    $
    7,913
    
    
    $
    8,308
    
    
    $
    15,706
    
    
    $
    16,510Interest and dividends on securities:U.S. Government agencies and corporations
    
    
    934
    
    
    
    1,080
    
    
    
    1,886
    
    
    
    2,318States and political subdivisions
    
    
    128
    
    
    
    157
    
    
    
    273
    
    
    
    312Other debt and equity securities
    
    
    73
    
    
    
    72
    
    
    
    145
    
    
    
    151Interest on Federal funds sold and other
interest-bearing
    
    
    19
    
    
    
    9
    
    
    
    33
    
    
    
    21Total interest income
    
    
    9,067
    
    
    
    9,626
    
    
    
    18,043
    
    
    
    19,312Interest Expense:Interest on depositsTime certificates of $100,000 and over
    
    
    321
    
    
    
    385
    
    
    
    655
    
    
    
    760Other deposits
    
    
    1,286
    
    
    
    1,498
    
    
    
    2,566
    
    
    
    3,174Interest on securities sold under agreements
to repurchase and other short-term borrowings
    
    
    51
    
    
    
    47
    
    
    
    92
    
    
    
    115Interest on Federal Home Loan Bank advances
    
    
    528
    
    
    
    422
    
    
    
    979
    
    
    
    829Total interest expense
    
    
    2,186
    
    
    
    2,352
    
    
    
    4,292
    
    
    
    4,878Net Interest Income
    
    
    6,881
    
    
    
    7,274
    
    
    
    13,751
    
    
    
    14,434Provision for Loan Losses
    
    
    425
    
    
    
    570
    
    
    
    950
    
    
    
    1,134Net Interest Income after Provision for Loan Losses
    
    
    6,456
    
    
    
    6,704
    
    
    
    12,801
    
    
    
    13,300Non-Interest Income:Service charges on deposits accounts
    
    
    1,031
    
    
    
    1,109
    
    
    
    2,015
    
    
    
    2,055Electronic banking fees
    
    
    643
    
    
    
    627
    
    
    
    1,274
    
    
    
    1,308Investment and Trust Services Income
    
    
    486
    
    
    
    400
    
    
    
    1,072
    
    
    
    854Gain on sale of securities
    
    
    0
    
    
    
    247
    
    
    
    223
    
    
    
    450Income from investment in life insurance
    
    
    161
    
    
    
    193
    
    
    
    320
    
    
    
    377Other service charges, exchanges and fees
    
    
    130
    
    
    
    127
    
    
    
    241
    
    
    
    233Gain on sale of loans
    
    
    46
    
    
    
    79
    
    
    
    83
    
    
    
    141Other noninterest income
    
    
    99
    
    
    
    76
    
    
    
    224
    
    
    
    139Total Non-Interest Income
    
    
    2,596
    
    
    
    2,858
    
    
    
    5,452
    
    
    
    5,557Non-Interest Expenses:Salaries and employee benefits (Notes 5 and 6)
    
    
    2,907
    
    
    
    2,900
    
    
    
    5,945
    
    
    
    6,048Net occupancy expenses
    
    
    409
    
    
    
    377
    
    
    
    783
    
    
    
    789Furniture and equipment expenses
    
    
    659
    
    
    
    611
    
    
    
    1,329
    
    
    
    1,160Card-related expenses
    
    
    393
    
    
    
    344
    
    
    
    725
    
    
    
    636Supplies and postage
    
    
    257
    
    
    
    256
    
    
    
    509
    
    
    
    538Professional services
    
    
    300
    
    
    
    606
    
    
    
    534
    
    
    
    824Marketing and advertising
    
    
    314
    
    
    
    165
    
    
    
    493
    
    
    
    405Ohio franchise tax
    
    
    180
    
    
    
    181
    
    
    
    368
    
    
    
    362Other noninterest expenses
    
    
    859
    
    
    
    642
    
    
    
    1,568
    
    
    
    1,459Non-Interest Expenses
    
    
    6,278
    
    
    
    6,082
    
    
    
    12,254
    
    
    
    12,221Income Before Income Taxes
    
    
    2,774
    
    
    
    3,480
    
    
    
    5,999
    
    
    
    6,636Income Taxes
    
    
    794
    
    
    
    1,156
    
    
    
    1,763
    
    
    
    2,121Net Income
    
    $
    1,980
    
    
    $
    2,324
    
    
    $
    4,236
    
    
    $
    4,515Net Income Available to Common Shareholders:Basic Earnings Per Share (Note 2)
    
    $
    .30
    
    
    $
    .35
    
    
    $
    .64
    
    
    $
    .68Diluted Earnings Per Share (Note 2)
    
    $
    .30
    
    
    $
    .35
    
    
    $
    .64
    
    
    $
    .68
 See accompanying notes to the consolidated financial statements.




---



##### Table of Contents



LNB Bancorp, Inc. 
 
 For the Six Month Periods Ended(Dollars in thousands)
    
    June 30, 2004
    
    June 30, 2003Cash Flows from Operating Activities:Interest received
    
    $
    18,720
    
    
    $
    19,758Other income received
    
    
    4,858
    
    
    
    5,187Interest paid
    
    
    (4,310
    )
    
    
    (4,883
    )Originations of loans held for sale
    
    
    (1,950
    )
    
    
    (10,789
    )Proceeds from sale of loans held for sale
    
    
    2,339
    
    
    
    12,065Gain on sale of securities
    
    
    (223
    )
    
    
    (450
    )Gain on sale of loans held for sale
    
    
    (83
    )
    
    
    (141
    )Cash paid for salaries and employee benefits
    
    
    (6,306
    )
    
    
    (6,472
    )Net occupancy expense of premises paid
    
    
    (783
    )
    
    
    (754
    )Furniture and equipment expenses paid
    
    
    (1,329
    )
    
    
    (531
    )Cash paid for supplies and postage
    
    
    (509
    )
    
    
    (538
    )Cash paid for other operating expenses
    
    
    (3,265
    )
    
    
    (7,289
    )Federal income taxes paid
    
    
    (825
    )
    
    
    (1,900
    )Net Cash Provided by Operating Activities
    
    
    6,334
    
    
    
    3,263Cash Flows from Investing Activities:Proceeds from maturities of securities held to maturity
    
    
    273
    
    
    
    6,587Proceeds from sales and maturities of securities available for sale
    
    
    45,965
    
    
    
    96,975Purchases of securities held to maturity
    
    
    (16,517
    )
    
    
    0Purchases of securities available for sale
    
    
    (33,651
    )
    
    
    (117,138
    )Increase in loans held for sale
    
    
    389
    
    
    
    1,135Net (increase) in loans made to customers
    
    
    (14,950
    )
    
    
    (20,131
    )Purchases of bank premises and equipment
    
    
    (1,783
    )
    
    
    (501
    )Proceeds from sales of bank premises and equipment
    
    
    0
    
    
    
    51Proceeds from liquidation of other foreclosed assets
    
    
    271
    
    
    
    22Purchases of other foreclosed assets
    
    
    (278
    )
    
    
    (589
    )Net Cash Used in Investing Activities
    
    
    (20,281
    )
    
    
    (33,589
    )Cash Flows from Financing Activities:Net increase in demand and other noninterest-
bearing deposits
    
    
    4,331
    
    
    
    18,267Net increase (decrease) in savings, market access and passbook
deposits
    
    
    15,358
    
    
    
    (1,214
    )Net increase (decrease) in certificates of deposit
    
    
    (10,499
    )
    
    
    8,450Net increase (decrease) in securities sold under
repurchase agreements and other short-term borrowings
    
    
    3,892
    
    
    
    (9,786
    )Proceeds from Federal Home Loan Bank Advances
    
    
    103,000
    
    
    
    160,235Repayment of Federal Home Loan Bank Advances
    
    
    (97,239
    )
    
    
    (139,735
    )Cash paid in lieu of fractional shares related to three-for-two
stock split
    
    
    0
    
    
    
    (13
    )Issuance of Common Stock under stock option plans
    
    
    0
    
    
    
    51Proceeds from the exercise of stock options plans
    
    
    333
    
    
    
    0Issuance of Treasury Stock under employee benefit plans
    
    
    0
    
    
    
    8Dividends paid
    
    
    (2,448
    )
    
    
    (2,311
    )Net Cash Provided by Financing Activities
    
    
    16,728
    
    
    
    33,952Net Increase in Cash and Cash Equivalents
    
    
    2,781
    
    
    
    3,626Cash and Cash Equivalents at Beginning of Year
    
    
    27,749
    
    
    
    26,832Cash and Cash Equivalents at End of Quarter
    
    $
    30,530
    
    
    $
    30,458




---



##### Table of Contents



Reconciliation of Net Income to Net Cash Provided by
    
    For the Six Month Periods EndedOperating Activities:
    
    June 30, 2004
    June 30, 2003Net Income
    
    $
    4,236
    
    
    $
    4,515Adjustments to reconcile net income to net cash provided by
operating activities:Originations of loans held for sale
    
    
    (1,950
    )
    
    
    (10,789
    )Proceeds from sale of loans held for sale
    
    
    2,339
    
    
    
    12,065Gain on sale of securities
    
    
    (223
    )
    
    
    (450
    )Gain on sale of loans
    
    
    (83
    )
    
    
    (141
    )Depreciation and amortization
    
    
    876
    
    
    
    788Amortization of intangible assets
    
    
    57
    
    
    
    56Amortization of premiums on investment securities
    
    
    377
    
    
    
    597Amortization of deferred loan fees and costs, net
    
    
    171
    
    
    
    (283
    )Provision for loan losses
    
    
    950
    
    
    
    1,134(Increase) in cash surrender value of BOLI
    
    
    (321
    )
    
    
    (377
    )Decrease in accrued interest receivable
    
    
    160
    
    
    
    118(Increase) in other assets
    
    
    (335
    )
    
    
    (2,851
    )(Decrease) in accrued interest payable
    
    
    (18
    )
    
    
    (5
    )Increase (Decrease) in accrued taxes, expenses and other
liabilities
    
    
    103
    
    
    
    (439
    )Other, net
    
    
    (5
    )
    
    
    (675
    )Net Cash Provided by Operating Activities
    
    $
    6,334
    
    
    $
    3,263
 See accompanying notes to the consolidated financial statements.




---



##### Table of Contents



LNB Bancorp, Inc. 
 
 AccumulatedOther
    
    
    
    
    
    TotalCommon
    
    Additional
    
    Retained
    
    Comprehensive
    
    Treasury
    
    Shareholders'Stock
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Stock
    
    equityBalance at
January 1, 2003
    
    $
    4,501
    
    
    $
    28,319
    
    
    $
    35,639
    
    
    $
    1,054
    
    
    $
    (2,900
    )
    
    $
    66,613Add (deduct)Net income for
period
    
    
    
    
    
    
    
    
    
    
    4,515
    
    
    
    
    
    
    
    
    
    
    
    4,515Net unrealized
losses on
securities
available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (375
    )
    
    
    
    
    
    
    (375
    )Total Comprehensive
Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,140Issuance of common
stock under stock
option plans
    
    
    4
    
    
    
    47
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    51Issuance of
treasury stock
under employee
benefit plans
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8
    
    
    
    8Dividends declared
 Common ($.34 per
share)
    
    
    
    
    
    
    
    
    
    
    (2,208
    )
    
    
    
    
    
    
    
    
    
    
    (2,208
    )Issuance of
2,250,210 shares of
common under 3 for
2 stock split
    
    
    2,250
    
    
    
    (2,250
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    0Payment of cash in
lieu of fractional
shares issued under
three-for-two stock
split
    
    
    
    
    
    
    
    
    
    
    (13
    )
    
    
    
    
    
    
    
    
    
    
    (13
    )Balance at
June 30, 2003
    
    $
    6,755
    
    
    $
    26,116
    
    
    $
    37,933
    
    
    $
    679
    
    
    $
    (2,892
    )
    
    $
    68,591
 AccumulatedOther
    
    
    
    
    
    TotalCommon
    
    Additional
    
    Retained
    
    Comprehensive
    
    
    
    
    
    Shareholders'Stock
    
    Capital
    
    Earnings
    
    Income (Loss)
    
    Treasury Stock
    
    equityBalance at
January 1, 2004
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    38,714
    
    
    $
    (704
    )
    
    $
    (2,885
    )
    
    $
    68,135Add (deduct)Net income for
period
    
    
    
    
    
    
    
    
    
    
    4,236
    
    
    
    
    
    
    
    
    
    
    
    4,236Net unrealized
losses on
securities
available for sale,
net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,147
    )
    
    
    
    
    
    
    (2,147
    )Total Comprehensive
Income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,089Issuance of
Treasury stock
under stock option
agreements
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    
    
    
    
    454
    
    
    
    333Dividends declared
 Common ($.36 per
share)
    
    
    
    
    
    
    
    
    
    
    (2,386
    )
    
    
    
    
    
    
    
    
    
    
    (2,386
    )Balance at
June 30, 2004
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    40,443
    
    
    $
    (2,851
    )
    
    $
    (2,431
    )
    
    $
    68,171
 See accompanying notes to the consolidated financial statements.




---



##### Table of Contents



LNB Bancorp, Inc. 
  1. Basis of Presentation These consolidated financial statements include the accounts of LNB Bancorp,
Inc. (the Parent Company) and its wholly-owned subsidiaries, Lorain National
Bank (the Bank) and Charleston Insurance Agency, Inc. Charleston Title
Agency, LLC, a 49%-owned subsidiary, is accounted for under the equity method.
The term the Corporation refers to LNB Bancorp, Inc. and its wholly-owned
subsidiaries, The Lorain National Bank and Charleston Insurance Agency, Inc.,
and a 49% interest in Charleston Title Agency, LLC. All significant
inter-company balances and transactions have been eliminated in consolidation.
Also included is the Banks wholly-owned subsidiary, North Coast Community
Development Corporation (NCCDC). All dollar amounts in this report are
reported in thousands of dollars, except per share amounts. Management believes that these unaudited consolidated interim financial
statements reflect all adjustments of a normal recurring nature and disclosures
that are necessary for a fair presentation of the results for the interim
periods presented. Some previously reported results have been reclassified to
conform to current reporting practices. The results of operations for the
interim periods are not necessarily indicative of the results of operations to
be expected for the full year. The LNB Bancorps 2003 Annual Report to
Shareholders (Form 10-K) should be read in conjunction with these statements. 2. Earnings Per Share Data Earnings per share data for the three and six month periods ended June 30, 2004
and 2003 are calculated as follows. For the Three Months Ended June 30, 2004Income (Numerator)
    
    Shares
    
    Per Share(Dollars in Thousands)
    
    (Denominator)
    
    AmountNet Income
    
    $
    1,980Basic EPS  Income
available to common
shareholders
    
    $
    1,980
    
    
    
    6,625,312
    
    
    $
    .30Effect of Dilutive
Securities 
Incentive Stock
Options
    
    
    -0-
    
    
    
    341Diluted EPS 
Income available to
common shareholders
and assumed
conversions
    
    $
    1,980
    
    
    
    6,625,653
    
    
    $
    .30
 For the Three Months Ended June 30, 2003Income (Numerator)
    
    Shares
    
    Per Share(Dollars in Thousands)
    
    (Denominator)
    
    AmountNet Income
    
    $
    2,324Basic EPS  Income
available to common
shareholders
    
    $
    2,324
    
    
    
    6,603,920
    
    
    $
    .35Effect of Dilutive
Securities 
Incentive Stock
Options
    
    
    -0-
    
    
    
    20,343Diluted EPS 
Income available to
common shareholders
and assumed
conversions
    
    $
    2,324
    
    
    
    6,624,263
    
    
    $
    .35




---



##### Table of Contents



For the Six Months Ended June 30, 2004Income (Numerator)
    
    Shares
    
    Per Share(Dollars in Thousands)
    
    (Denominator)
    
    AmountNet Income
    
    $
    4,236Basic EPS  Income
available to common
shareholders
    
    $
    4,236
    
    
    
    6,621,491
    
    
    $
    .64Effect of Dilutive
Securities 
Incentive Stock
Options
    
    
    -0-
    
    
    
    797Diluted EPS 
Income available to
common shareholders
and assumed
conversions
    
    $
    4,236
    
    
    
    6,622,288
    
    
    $
    .64
 For the Six Months Ended June 30, 2003Income (Numerator)
    
    Shares
    
    Per Share(Dollars in Thousands)
    
    (Denominator)
    
    AmountNet Income
    
    $
    4,515Basic EPS  Income
available to common
shareholders
    
    $
    4,515
    
    
    
    6,602,924
    
    
    $
    .68Effect of Dilutive
Securities 
Incentive Stock
Options
    
    
    -0-
    
    
    
    18,008Diluted EPS 
Income available to
common shareholders
and assumed
conversions
    
    $
    4,515
    
    
    
    6,620,932
    
    
    $
    .68
 3. Critical Accounting Policies and New Accounting and Regulatory
Pronouncements Critical Accounting Policies The Corporation maintains critical accounting policies for the allowance for
loan losses, classification and evaluation of securities valuation and a
deferred tax asset valuation reserve. Refer to notes 1,5,7 and 12 of the Notes
to Consolidated Financial Statements for additional information incorporated by
reference to the 2003 Annual Report to Shareholders on Form 10-K. Impacts of Accounting and Regulatory Pronouncements Corporate management is not aware of any proposed regulations or current
recommendations by the Financial Accounting Standards Board or by regulatory
authorities, which, if they were implemented, would have a material effect on
the financial position, results of operations or liquidity of the Corporation.
However, the potential impact of certain accounting and regulatory
pronouncements warrant further discussion.




---



##### Table of Contents



Financial Accounting Standards Board: The Financial Accounting Standards Board (FASB) has issued: SFAS No. 132(Revised 2003), Employers Disclosures about Pensions and Other
Postretirement Benefits In December 2003, the FASB issued SFAS No. 132 (Revised 2003), Employers
Disclosures about Pensions and Other Postretirement Benefits. This Statement
expands upon the existing disclosure requirements as prescribed under the
original SFAS No. 132 by requiring more details about pension plan assets,
benefit obligations, cash flows, benefit costs and related information. SFAS
No. 132® also requires companies to disclose various elements of pension and
postretirement benefit costs in interim-period financial statements beginning
after December 15, 2003. This Statement is effective for financial statements
with fiscal years ending after December 15, 2003. The Corporation adopted the
additional year-end disclosure requirements under SFAS No. 132® during the
fourth quarter of 2003 and the interim-period financial statement disclosure
requirements starting in the first quarter of 2004. Its adoption did not have a
material impact on our financial position, results of operation, or liquidity.
SFAS No. 132® disclosures are included in Note 5. FASB Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest
Entities. and FASB Interpretation No. 46R (FIN
No. 46(R)), Consolidation of
Variable Interest Entities an interpretation of ARB 51 (revised December
2003) In January 2003, the FASB issued Interpretation No. 46 (FIN No. 46),
Consolidation of Variable Interest Entities. This Interpretation clarifies
the application of ARB No. 51, Consolidated Financial Statements, for certain
entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated support from
other parties. This Interpretation requires variable interest entities (VIEs)
to be consolidated by the primary beneficiary which represents the enterprise
that will absorb the majority of the VIEs expected losses if they occur,
receive a majority of the VIEs residual returns if they occur, or both.
Qualifying Special Purpose Entities (QSPE) are exempt from the consolidation
requirements of FIN No. 46. This Interpretation was effective for VIEs created
after January 31, 2003 and for VIEs in which an enterprise obtains an interest
after that date. In December 2003, the FASB issued Interpretation No. (46R)
(FIN No. 46(R)), Consolidation of Variable Interest Entities  an
interpretation of ARB 51 (revised December 2003), which replaces FIN No. 46.
FIN No. 46(R) was primarily issued to clarify the required accounting for
interests in VIEs. Additionally, this Interpretation exempts certain entities
from its requirements and provides for special effective dates for enterprises
that have fully or partially applied FIN No. 46 (R) as of December 24, 2003.
Application of FIN No. 46(R) is required in financial statements of public
enterprises that have interests in structures that are commonly referred to as
special-purpose entities, or SPEs, for periods ending after December 15, 2003.
Application by public enterprises, other than small business issuers, for all
other types of VIEs (i.e., non-SPEs) is required in financial statements for
periods ending after March 15, 2004. The Corporation had no variable interest
entities and therefore, the interpretation of FIN No. 46(R) had no impact on
the financial position, results of operations or liquidity.




---



##### Table of Contents



Other Statements of Financial Accounting Standards All other applicable Statements of Financial Accounting Standards that have
been issued and have effective dates impacting 2004 and prior years financial
statements were adopted by the Corporation. Corporate management believes there
are no Statements of Financial Accounting Standards, which have been issued and
have implementation dates in the future that will materially impact the
financial statements of future years. Significant actions by the Federal
government and its agencies,
affecting the financial institutions industry in general, are currently having
and will continue to have an impact on the Corporation. A discussion of these
actions follows: SEC Staff Accounting Bulletin: No. 105, Application of Accounting Principles
to Loan Commitments In March 2004, the SEC issued Staff Accounting Bulletin No. 105 Application of
Accounting Principles to Loan Commitments. This Staff Accounting Bulletin
summarizes the views of the SEC staff regarding the application of generally
accepted accounting principles to loan commitments accounted for as derivative
instruments, a loan committed at a specified rate, but funded later.
Presently, the Corporation does not make loan commitments that will be funded
at a later date, and therefore, the SEC Staff Accounting Bulletin had no impact
on the Corporations financial position, results of operations or liquidity. FASB Exposure Draft Proposed Statement of Financial Accounting Standard  Fair
Value Measurement On June 23, 2004, The Financial Accounting Standards Board released an exposure
draft Proposed Statement of Financial Accounting Standard  Fair Value
Measurement. This proposed standard related to the application of methods for
measuring the fair value of assets and liabilities and related expanded
disclosure requirements. This proposal, in final form, is expected to become
effective for fiscal years ending after June 15, 2005. When adopted, this
proposed standard is not expected to have a material impact the financial
position, results of operations or liquidity of the Corporation. Sarbanes-Oxley Act of 2002 On July 30, 2002, President Bush signed into law the Sarbanes-Oxley Act of
2002, which contains important new requirements for public companies in the
area of financial disclosure and corporate governance. Although portions of the
act are still being fully implemented, we do not anticipate any significant
changes in the operations of and reporting by the Corporation as a result of
the act. In accordance with the requirements of the Sarbanes-Oxley Act, written
certifications for this quarterly report on Form 10-Q by the chief executive
officer and the chief financial officer of the Corporation are filed in this
report under Exhibit index (31(a)), (31(b)), (32(a)), and (32(b)). See
Controls and Procedures for the Corporations evaluation of disclosure
controls and procedures.




---



##### Table of Contents



4. Common Stock On February 25, 2003, the Board of Directors of LNB Bancorp, Inc. declared a
three-for-two split of common stock. Shareholders received one additional
common share for every two shares owned on the stock-split record date of March
10, 2003. Shareholders participating in the Bancorps dividend reinvestment
plan, LNBB Direct (the Plan), were issued fractional shares. Shareholders not
participating in the Plan were issued cash in lieu of fractional shares. For
additional information see Form 8-K filed on February 25, 2003. Prior year
share and per share data were restated to reflect this stock-split. On February 17, 2004, the Board of Directors of LNB Bancorp, Inc. declared a
first quarter cash dividend of $.18 per share payable April 1, 2004, to
shareholders of record
on March 15, 2004. This represents a 5.9 percent increase from last years
first quarter cash dividend of $.17 per share. On May 18, 2004, the Board of Directors of LNB Bancorp, Inc. declared a second
quarter cash dividend of $.18 per share payable in July 1, 2004, to
shareholders of record on June 14, 2004. This represents a 5.9 increase from
last years second quarter cash dividend of $.17 per share. 5. Stock-Based Compensation The FASB issued SFAS No. 148, Accounting for Stock-Based Compensation -
Transition and Disclosure. SFAS No. 148 provides guidance on how to transition
from the intrinsic value method of accounting for stock-based employee
compensation under APB No. 25 to SFAS No. 123s fair value method for
accounting, if a company so elects. In accordance with the transitional
guidance of SFAS No. 148, the fair value method of accounting for stock options
should be applied prospectively to awards granted subsequent to January 1,
2003. As permitted, options granted prior to January 1, 2003, will continue to
be accounted for under APB Opinion 25, and the pro forma impact of accounting
for these options at fair value will continue to be disclosed in the notes to
the consolidated financial statements. The Corporation did not issue any stock
options during the first six months of 2004 or during 2003. All stock options
issued were 100% vested at June 30, 2004 and 2003, and therefore had
compensation cost for the Corporations stock-based compensation plans been
determined consistent with SFAS No. 123, net income and net income per share
would not have been impacted.




---



##### Table of Contents



6. Retirement Pension Plan The Banks non-contributory defined benefit pension plan (the Plan) covers
substantially all of its employees. Effective December 31, 2002, the benefits
under the Plan were frozen and no additional benefits will be accrued under the
Plan after December 31, 2002. The 2003 loss recognized due to settlement in the
amount of $10 results from significant lump sum distributions paid in 2003, but
not actuarially projected for 2003. The net periodic pension cost charged to salaries and benefits expense in the
income statements amounted to $19 and $38 for the second quarter and six month
periods ended June 30, 2004. This compares to $29 and $58 for the same periods
in 2003. For the Three Month
    
    For the Six MonthPeriods Ended
    
    Periods EndedComponents of Net Periodic Pension Cost(Dollars in thousands)
    
    June 30, 2004
    
    June 30, 2003
    
    June 30, 2004
    
    June 30, 2003Service cost
    
    $
    113
    
    
    $
    120
    
    
    $
    226
    
    
    $
    239Interest cost
    
    
    (94
    )
    
    
    (96
    )
    
    
    (188
    )
    
    
    (191
    )Loss recognized due to settlement
    
    
    0
    
    
    
    5
    
    
    
    0
    
    
    
    10Net Periodic Pension Cost
    
    $
    19
    
    
    $
    29
    
    
    $
    38
    
    
    $
    58
 Employer Contributions The Corporation previously disclosed in its 2003 Annual Report to Shareholders
on Form 10-K, that it expected to contribute $500 to the Lorain National Bank
Retirement Pension Plan in 2004. Accordingly, a $500 cash contribution was made
to the Plan in March 2004. 7. Contingent Liabilities, Guarantees, Commitments and Related Party
Transactions Litigation In the ordinary course of business the Corporation is subject to legal actions
that involve claims of monetary relief. Based on information presently known,
management does not believe there are any legal actions or proceedings to which
the Corporation or any of its subsidiaries are a party, will have a material
impact on the financial position, results of operations or liquidity of the
Corporation. Commitments Commitments to extend credit are agreements to lend to a customer as long as
there are no violations of any conditions in the contract. Substantially all
these commitments are variable rate. Most of the Banks activities are in its
defined market area. There is no exposure to high leveraged transactions or
foreign credits. Since many of these commitments expire without being drawn
upon, the total commitment amounts do not necessarily represent future
cash-flow requirements. 8. Acquisition On July 2, 2004, LNB Bancorp, Inc. issued a press release on Form 8-K regarding
the signing of a definitive agreement to acquire Mortgage One Services, Inc.,
an Ohio corporation with headquarters in Lorain, Ohio. This transaction is
expected to close in August 2004. The new entity will be incorporated as LNB
Mortgage LLC and conduct business under the trademark name Mortgage One Banc.
LNB Mortgage LLC will operate as a wholly-owned subsidiary of Lorain National
Bank. This transaction will be accounted for as a purchase of assets and
assumption of certain liabilities of Mortgage One Services, Inc. The assets are
predominately the furniture and fixtures of Mortgage One Services, Inc. and
intangibles. LNB Mortgage LLC will also assume the remaining term of a lease on
the one location of Mortgage One Services, Inc. For more information on this
transaction see The Asset Purchase Agreement between Lorain National Bank and
Mortgage One Banc that is included in this Form 10-Q filing as Exhibit 2. As
part of this transaction, Lorain National Bank will enter into an Employment
Contract with the President of Mortgage One Banc, to continue in his current
role after this transaction closes.




---



##### Table of Contents



Part I 
 Item 2  Managements Discussion and Analysis of Financial Condition and
Results of Operations
 The following is managements discussion and analysis of certain significant
factors that affected the Corporations financial condition and results of
operations during the periods included in the Consolidated Financial Statements
which are part of this filing. Certain statements contained herein are not based on historical facts and are
forward-looking statements. 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 of 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 Corporation
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. Introduction LNB Bancorp, Inc. is the financial holding company for Lorain National Bank.
The Corporation is headquartered in Lorain, Ohio and operates 19 offices in
three counties in northern Ohio. As disclosed in the Corporations 2003 Annual
Report on Form 10-K, two new offices were scheduled to open during 2004. The
first new office, located in Avon, Ohio opened for business in March 2004. The second new office, located in Avon Lake,
Ohio opened in May 2004. The most material current trend continues to be the
trends in revenue growth. As disclosed in the Results of Operations section of
this report, expense control efforts have been successful this year, but the
efficiency ratio has risen due to depressed revenue. The primary source of the
Corporations revenue is net interest income. The economy and competitive
pressures have clearly impacted this component of revenue. The local economy
has continued to depress the Companys asset growth and more specifically loan
growth. The local area conditions have also impacted the deposit market which
has grown more slowly in 2004 than historically. Competitive pressures have
also impacted asset and deposit growth. With the economy weak, a fewer number
of loans and deposits are being generated, and these are being subjected to
extreme competitive pressure.




---



##### Table of Contents



Results of Operations (Dollars in Thousands) Net income for the second quarter of 2004 was $1,980, a decrease of $344
from $2,324 reported in the same period in 2003. Basic and diluted earnings per
common share for the second quarter of 2004 were $.30, as compared to $.35 for
the same period in 2003. Net income for the first six months of 2004 was
$4,236, a decrease of $279 from $4,515 reported in the same period in 2003.
Basic and diluted earnings per common share for the first six months of 2004
were $.64, as compared to $.68 for the same period in 2003. Return on average assets (ROAA) and return on average equity (ROAE) were 1.05%
and 11.60%, respectively, for the second quarter of 2004, as compared to 1.27%
and 13.68% for the same period in 2003. ROAA and ROAE were 1.13% and 12.39%,
respectively, for the six month period ended June 30, 2004, as compared to
1.26% and 13.45% for the same period in 2003. Table 1 containing selected operating data follows: Three Months Ended
    
    Six Months EndedTable 1 Operating Data
    
    June 30,
    
    June 30,
    
    June 30,
    
    June 30,(Dollars in thousands, except per share data)
    
    2004
    
    2003
    
    2004
    
    2003Net interest income
    
    $
    6,881
    
    
    $
    7,274
    
    
    $
    13,751
    
    
    $
    14,434Provision for loan loss
    
    
    425
    
    
    
    570
    
    
    
    950
    
    
    
    1,134Noninterest Income
    
    
    2,596
    
    
    
    2,858
    
    
    
    5,452
    
    
    
    5,557Noninterest Expense
    
    
    6,278
    
    
    
    6,082
    
    
    
    12,254
    
    
    
    12,221Net Income
    
    $
    1,980
    
    
    $
    2,324
    
    
    $
    4,236
    
    
    $
    4,515Basic earnings per share
    
    $
    .30
    
    
    $
    .35
    
    
    $
    .64
    
    
    $
    .68Diluted earnings per share
    
    $
    .30
    
    
    $
    .35
    
    
    $
    .64
    
    
    $
    .68Cash dividends per Common share
    
    $
    .18
    
    
    $
    .17
    
    
    $
    .36
    
    
    $
    .34Dividend Payout Ratio
    
    
    60.0
    %
    
    
    48.6
    %
    
    
    56.3
    %
    
    
    50.0
    %ROAA
    
    
    1.05
    %
    
    
    1.27
    %
    
    
    1.13
    %
    
    
    1.26
    %ROAE
    
    
    11.60
    %
    
    
    13.68
    %
    
    
    12.39
    %
    
    
    13.45
    %Net interest margin
    
    
    3.94
    %
    
    
    4.52
    %
    
    
    3.97
    %
    
    
    4.36
    %Efficiency ratio
    
    
    65.68
    %
    
    
    57.90
    %
    
    
    63.32
    %
    
    
    60.71
    %




---



##### Table of Contents



Net Interest Income Net interest income is the difference between the interest and dividend income
earned on our loans and investments and interest expense on our deposits and
borrowings. Net interest income is affected by a number of factors including
the level, pricing and maturity of interest earning assets and interest bearing
liabilities, interest rate fluctuations and asset quality in general, as well
as general economic conditions and regulatory policies. Net interest income is
the most significant component of the Corporations earnings. Net interest income for the second quarter of 2004 was $6,881, a decrease of
$393 or 5.4% from $7,274 in the second quarter of 2003. The structure of the
balance sheet and competitive market pressures contributed to this result. The
balance sheet is structured to benefit from rising rates. The average yield on
earnings assets declined 74 basis points in the three month period ended June
30, 2004 as compared to the same period in 2003. This is primarily the result
of a 126 basis point decline, and a 57 basis point decline, in the yields on
securities and loans respectively during the quarter, as compared to the second
quarter of 2003. The prolonged declining rate environment has impacted the
yields on securities by accelerating cashflow in an unattractive reinvestment
environment. The decline in the average loan yield is a function of the prime
rate nature of the portfolio and competitive pressure. The Corporations net interest income has also been impacted by the slow
recovery of the local economy. Average earning assets were $710.4 million
during the second quarter of 2004, an increase of $32.4 million or 4.8% from
the second quarter last year. Modest commercial and home equity loan growth was
supplemented by consumer loans purchased from another financial institution.
Offsetting some of this growth was continued runoff in the mortgage loan
portfolio. Average deposits were $585.4 million for the second quarter of 2004,
down $1.4 million or .2% from the same quarter last year. Time deposits
averaged $209.5 million for the quarter ended June 30, 2004, a decline of $6.5
million from the same period in 2003. A portion of this decline was offset by
growth in savings deposits. With deposits declining slightly, asset growth was
funded with substantially higher levels of average borrowings. Total borrowings
increased by 37.1% to average $99.4 million for the second quarter of 2004, as
compared to the same quarter last year. The majority of this increase was in
term Federal Home Loan Bank borrowings which grew of 43.8%. The migration from
core funding to borrowings has a tangible cost, as the average rate on interest
bearing deposits was 1.31% as compared to the average rate on borrowings of
2.34% in the second quarter of 2004. Table 2 presents the components of the Corporations net interest income for
the three month periods ended June 30, 2004 and 2003. Rates are computed on a
tax equivalent basis and non-accrual loans are included in the average
balances.




---



##### Table of Contents



(Dollars in thousands)
    
    Three Months Ended June 30, 2004
    
    Three Months Ended June 30, 2003Interest
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    Income/
    
    
    
    
    
    Average
    
    Income/Table 2  Components of net interest income
    
    Balance
    
    Expense
    
    Rate
    
    Balance
    
    Expense
    
    RateAssets:Earning assets:Fed funds sold and interest bearing
deposits with banks
    
    $
    7,219
    
    
    $
    19
    
    
    
    1.06
    %
    
    $
    3,235
    
    
    $
    7
    
    
    
    .87
    %Securities
    
    
    158,958
    
    
    
    1,216
    
    
    
    3.07
    
    
    
    156,019
    
    
    
    1,685
    
    
    
    4.33Gross loans
    
    
    544,233
    
    
    
    7,913
    
    
    
    5.85
    
    
    
    518,730
    
    
    
    8,308
    
    
    
    6.42Total earning assets
    
    
    710,410
    
    
    $
    9,148
    
    
    
    5.18
    %
    
    
    677,984
    
    
    $
    10,000
    
    
    
    5.92
    %Noninterest assets
    
    
    48,031
    
    
    
    
    
    
    
    
    
    
    
    54,203Total assets
    
    $
    758,441
    
    
    
    
    
    
    
    
    
    
    $
    732,187Liabilities and Shareholders EquityInterest bearing liabilities:Transaction deposits
    
    $
    176,215
    
    
    $
    301
    
    
    
    .69
    %
    
    $
    176,509
    
    
    $
    344
    
    
    
    .78
    %Savings deposits
    
    
    108,314
    
    
    
    85
    
    
    
    .31
    
    
    
    104,970
    
    
    
    95
    
    
    
    .36Time deposits
    
    
    209,470
    
    
    
    1,222
    
    
    
    2.35
    
    
    
    215,952
    
    
    
    1,444
    
    
    
    2.68Total interest bearing deposits
    
    
    493,999
    
    
    
    1,608
    
    
    
    1.31
    
    
    
    497,431
    
    
    
    1,883
    
    
    
    1.52Short-term borrowings
    
    
    19,983
    
    
    
    41
    
    
    
    .83
    
    
    
    17,336
    
    
    
    38
    
    
    
    .88FHLB advances
    
    
    79,373
    
    
    
    537
    
    
    
    2.72
    
    
    
    55,210
    
    
    
    431
    
    
    
    3.13Total interest bearing liabilities
    
    
    593,355
    
    
    $
    2,186
    
    
    
    1.48
    %
    
    $
    569,977
    
    
    $
    2,352
    
    
    
    1.66
    %Noninterest bearing liabilities
    
    
    96,425
    
    
    
    
    
    
    
    
    
    
    
    93,816Shareholders equity
    
    
    68,661
    
    
    
    
    
    
    
    
    
    
    
    68,394Total liabilities and equity
    
    $
    758,441
    
    
    
    
    
    
    
    
    
    
    $
    732,187Net interest income (tax equivalent)
    
    
    
    
    
    $
    6,962
    
    
    
    
    
    
    
    
    
    
    $
    7,648Net interest spread (tax equivalent)
    
    
    
    
    
    
    
    
    
    
    3.70
    %
    
    
    
    
    
    
    
    
    
    
    4.26
    %Net interest margin (tax equivalent)
    
    
    
    
    
    
    
    
    
    
    3.94
    %
    
    
    
    
    
    
    
    
    
    
    4.52
    %




---



##### Table of Contents



The Corporations net interest margin for the six months ended June 30, 2004
was $13,751, a decrease of $683, or 4.73% from the first half of 2003. The
impact of the prolonged interest rate environment can be seen in the overall
yield on earning assets of 5.20%, which is a decline of 72 basis points for the
first six months of 2004 as compared to the same period in 2003. Earning asset
yields continue to be impacted by competitive market pressures and the
prepayment of assets resulting in shorter durations and considerable cashflow.
The low interest rate environment, in addition to compressing asset yields has
also impacted the cost of funding. This can be seen in the average rate on
interest bearing liabilities, which was 1.47% for the first six months of 2004
compared to 1.74% for the first six months of 2003. Although this is a 27 basis
point decrease from the rate paid on interest bearing deposits and purchased
funds in the first six months of 2003, it represents less than half the yield
decline that was experienced by the earnings assets being funded by these
sources. This demonstrates the impact of the practical rate floors that have
been reached on the savings and transaction accounts. In recent weeks, market
rates on deposit accounts have begun to rise in anticipation of what is
expected to be a series of Federal Reserve Bank rate increases. This has had
the effect of reducing the demand for term investment such as certificates of
deposit, and increasing the demand for more liquid transaction accounts. The impact of the slow economic recovery in the local market can be seen in the
change in earnings assets. For the six month period ended June 30, 2004,
average earning assets were $703.7 million as compared to $674.0 million of the
same period in 2003. This is an increase of 4.4%, or about half the historical
annual growth rate experienced by the Corporation. The Corporation believes
that the improving economy and the associated asset growth, combined with
increasing interest rates and slower prepayment rates, will begin to improve
net interest income in future periods. Table 3 presents the components of the Corporations net interest income for
the six month periods ended June 30, 2004 and 2003. Rates are computed on a tax
equivalent basis and non-accrual loans are included in the average balances.




---



##### Table of Contents



(Dollars in thousands)
    
    Six Months Ended June 30, 2004
    
    Six Months Ended June 30, 2003Interest
    
    
    
    
    
    
    
    
    
    InterestAverage
    
    Income/
    
    
    
    
    
    Average
    
    Income/Table 3  Components of net interest income
    
    Balance
    
    Expense
    
    Rate
    
    Balance
    
    Expense
    
    RateAssets:Earning assets:Fed funds sold and interest bearing
deposits with banks
    
    $
    5,944
    
    
    $
    33
    
    
    
    1.12
    %
    
    $
    3,231
    
    
    $
    21
    
    
    
    1.31
    %Securities
    
    
    157,858
    
    
    
    2,453
    
    
    
    3.07
    
    
    
    156,763
    
    
    
    2,921
    
    
    
    4.33Gross loans
    
    
    539,881
    
    
    
    15,706
    
    
    
    5.85
    
    
    
    514,028
    
    
    
    16,510
    
    
    
    6.48Total earning assets
    
    
    703,683
    
    
    $
    18,192
    
    
    
    5.20
    %
    
    
    674,022
    
    
    $
    19,452
    
    
    
    5.92
    %Noninterest earning assets
    
    
    48,950
    
    
    
    
    
    
    
    
    
    
    
    50,717Total assets
    
    $
    752,633
    
    
    
    
    
    
    
    
    
    
    $
    724,739Liabilities and Shareholders EquityInterest bearing liabilities:Transaction deposits
    
    $
    172,907
    
    
    $
    526
    
    
    
    .61
    %
    
    $
    178,007
    
    
    $
    780
    
    
    
    .88
    %Savings deposits
    
    
    106,172
    
    
    
    162
    
    
    
    .31
    
    
    
    100,654
    
    
    
    208
    
    
    
    .42Time deposits
    
    
    212,980
    
    
    
    2,533
    
    
    
    2.39
    
    
    
    214,198
    
    
    
    2,946
    
    
    
    2.77Total interest bearing deposits
    
    
    492,059
    
    
    
    3,221
    
    
    
    1.32
    
    
    
    492,859
    
    
    
    3,934
    
    
    
    1.61Short-term borrowings
    
    
    18,971
    
    
    
    83
    
    
    
    .88
    
    
    
    17,296
    
    
    
    106
    
    
    
    1.24FHLB advances
    
    
    77,563
    
    
    
    988
    
    
    
    2.56
    
    
    
    55,240
    
    
    
    838
    
    
    
    3.06Total interest bearing liabilities
    
    
    588,593
    
    
    $
    4,292
    
    
    
    1.47
    %
    
    
    565,395
    
    
    $
    4,878
    
    
    
    1.74
    %Noninterest bearing liabilities
    
    
    95,299
    
    
    
    
    
    
    
    
    
    
    
    91,647Shareholders equity
    
    
    68,741
    
    
    
    
    
    
    
    
    
    
    
    67,697Total liabilities and equity
    
    $
    752,633
    
    
    
    
    
    
    
    
    
    
    $
    724,739Net interest income (tax equivalent)
    
    
    
    
    
    $
    13,900
    
    
    
    
    
    
    
    
    
    
    $
    14,574Net interest spread (tax equivalent)
    
    
    
    
    
    
    
    
    
    
    3.73
    %
    
    
    
    
    
    
    
    
    
    
    4.18
    %Net interest margin (tax equivalent)
    
    
    
    
    
    
    
    
    
    
    3.97
    %
    
    
    
    
    
    
    
    
    
    
    4.36
    %




---



##### Table of Contents



Provision for loan losses The provision for loan losses represents the charge to income necessary to
adjust the reserve for loan losses to an amount that represents managements
assessment of the estimated probable credit losses inherent in the
Corporations loan portfolio which have been incurred at the balance sheet
date. The provision for loan losses decreased $145 or 25.4% to $425 in the
second quarter of 2004 compared to $570 in the second quarter of 2003. The
provision for loan losses for the six month period ended June 30, 2004 was
$950, as compared to $1,134 for the same period in 2003. This represents a $184
reduction or 16.2%. The lower provision for loans losses is due to two factors.
First, actual net charge-offs for the first six months of 2004 were nearly
unchanged from the same period in 2003, and the forecast for charge-offs over
the next 12 months indicates improving economic conditions. Net charge-offs were $255
and $691 for the three and six month periods ended June 30, 2004. This compares
to $168 and $682 for the same periods ended June 30, 2003. On an annualized
basis, these totals represent .19% and .26% of average loans during the three
and six month periods ended June 30, 2004, as compared to .13% and .27% for the
same periods in 2003. The second factor is the perceived and actual trends in
the level of potential problem loans, other foreclosed assets and nonaccrual
loans. Management does not expect that the level of nonaccrual loans will
significantly decline in the next six months, but trends indicate improvements in the levels of potential
problem loans and foreclosed assets. Table 4 presents a summary of The
Corporations loan loss experience for the three and six months ended June 30,
2004 and 2003. For the Three Months
    
    For the Six MonthsEnded
    
    EndedTable 4 - Reserve for loan losses
    
    June 30,
    
    June 30,
    
    June 30,
    
    June 30,(Dollars in thousands)
    
    2004
    
    2003
    
    2004
    
    2003Balance at beginning of period
    
    $
    7,819
    
    
    $
    6,703
    
    
    $
    7,730
    
    
    $
    6,653Charge-offs:Commercial
    
    
    50
    
    
    
    77
    
    
    
    423
    
    
    
    373Real estate
    
    
    2
    
    
    
    0
    
    
    
    12
    
    
    
    0Consumer
    
    
    234
    
    
    
    170
    
    
    
    365
    
    
    
    473Total charge-offs
    
    
    286
    
    
    
    247
    
    
    
    800
    
    
    
    846Recoveries:Commercial
    
    
    0
    
    
    
    20
    
    
    
    28
    
    
    
    28Real estate
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Consumer
    
    
    31
    
    
    
    59
    
    
    
    81
    
    
    
    136Total recoveries
    
    
    31
    
    
    
    79
    
    
    
    109
    
    
    
    164Net charge-offs
    
    
    255
    
    
    
    168
    
    
    
    691
    
    
    
    682Provision for loan losses
    
    
    425
    
    
    
    570
    
    
    
    950
    
    
    
    1,134Reserve for loan losses
    
    $
    7,989
    
    
    $
    7,105
    
    
    $
    7,989
    
    
    $
    7,105
 For more information see sections titled Non-performing Assets and Reserve
for Loan Losses.




---



##### Table of Contents



Noninterest Income The change in noninterest income reflects local economic factors, one-time
income items, and efforts to expand fee-based product offerings. Noninterest
income for the second quarter of 2004 was $2,596, a decrease of $262 or 9.2%
from $2,858 for the same quarter of 2003. This decline was primarily the result
of weakness in service charges on deposits accounts which were down $78 or
7.0%, a decline of $32 in income from investments in life insurance, and a
decline in the gains on sale of securities of $247. The weakness in service
charges on deposit accounts reflects general economic trends. The single
largest component of service charges on deposit accounts is overdraft fees.
These fees are generated based on customer transaction activity. Management
attributes the weakness in these fees to the impact of the weak local economy
on transaction volume. The reduction in income on investments in life insurance
reflects long-term interest rates and the impact this has on the earnings rate
of these long-term investments. Gain on the sale of securities is a non-core
income source. The gains taken in the second quarter of 2003 reflected
management efforts to reposition the securities portfolio for rising interest
rates. Partially offsetting these trends were a 21.5% increase in Investment
and Trust Division income, modest improvement in electronic banking fees and
other service charges, and fees earned on the placement of loans with third
party lenders. For the first six months of 2004, noninterest income was $5,452,
a decline of $105 or 1.9% from $5,557 for the same period in 2003. The factors
impacting the second quarter comparison with the same quarter last year also
explain the changes between the first six months of 2004 and the same period in
2003. Noninterest Expense Noninterest expense for the second quarter of 2004 was $6,278, an increase of
$196 or 3.2%, from $6,082 reported for the same quarter of 2003. This was due
primarily to increases in net occupancy costs, furniture and equipment
expenses, marketing and advertising, and other noninterest expenses. The
increases in net occupancy and furniture and equipment expenses are related to
ongoing technology upgrade projects and the new branches opened during the
first six months of 2004. The increase in other noninterest expense is
attributable to higher telephone expenses. The telephone expenses for the
current period are at normal levels. The telephone expense in the second
quarter of 2003 reflected a one-time refund from the service provider for
over-billing. Marketing expense increased for the three month and six month
periods ended June 30, 2004 as compared to the same periods in 2003 due to
higher advertising expenses and the marketing costs associated with the opening
of two new branches. The advertising expense increase was primarily due to more
newspaper advertising. Offsetting a portion of these increases were reductions
in outside services. This was primarily related to lower expenses for
compliance and legal work. The compliance variance is somewhat related to the
timing and billing of such work during the year. The legal fees are down due to
the SEC settlement reported on Form 8-K on May 19, 2004, and
generally better institutional control over how legal services are incurred.
The efficiency ratio was 65.68% for the second quarter of 2004, up from 57.90%
for the same quarter last year. With noninterest expense increasing only
fractionally, the efficiency ratio is being driven higher by the declining
revenue of the Corporation. Noninterest expense for the six month period ended
June 30, 2004 was $12,254, an increase of $33 or .3%, from $12,221 reported for
the same period of 2003. The same trends in the expense components highlighted
in the quarter over quarter comparison are present in the six month comparison. Income Taxes The provision for income taxes for the second quarter and first six months of
2004 were $794 and $1,763 respectively. This represents reductions from $1,156
and $2,121 for the same periods in 2003. These reductions are attributable to
lower pretax income and the impact of North Coast Community Development
Corporation (NCCDC) activities that have begun to generate tax credits in 2004. NCCDC is a subsidiary of Lorain
National Bank. It was formed in late 2002 as a Community Development
Corporation (CDC) in order to make investments in low income census tracts and
to apply for the related Federal tax credits made available to such CDCs.
NCCDC was awarded tax credits in late 2003 for investments up to $9 million. In 2004, despite the weak local economy, NCCDC was capitalized for $4.5
million, and at June 30, 2004 had approved 4 customers that qualified for
investment and thereby have generated tax credits in 2004. The impact of these
credits reduced the Corporations effective tax rate to 28.6% for the three
month period ended June 30, 2004 as compared to 33.2% for the same period in
2003. The effective tax rate for the six month period ended June 30, 2004 was
29.4% a decrease from 32.0% for the same period in 2003.




---



##### Table of Contents



Financial Condition (Dollars in thousands) At June 30, 2004, total assets were $760,184, an increase of $18,963 from
December 31, 2003. This increase was primarily attributable to increases in
loans of $14,572, premises, equipment and intangibles of $899, and short-term
investments of $3,708. This net growth in assets was funded by growth in other
borrowings, including Federal Home Loan Bank advances, of $9.7 million or
11.2%. Total deposits increased 1.6% or $9.2 million, to $590,533 at June 30,
2004 when compared to December 31, 2003. This increase in deposits was
primarily due to growth in transaction accounts partially offset by lower time
deposit balances. Shareholders equity totaled $68,171 at June 30, 2004,
increasing $36 from December 31, 2003. Net retained earnings (net income less
cash dividends) for the six months ended June 30, 2004 totaled $1,850.
Accumulated other comprehensive income (loss) was $(2,851), which represents a
change from December 31, 2003 of $2,147. This was due to a decrease in the
market value of securities available for sale. The net effect of the issuance
of Treasury stock under stock option plans was $333. Components of the Loan Portfolio Loans are generally reported at the principal amount outstanding, net of
unearned income. Loans held for sale are valued on an aggregate basis at the
lower of carrying amount or fair value. Interest income is recognized on an
accrual basis. Loan origination fees, certain direct costs, and unearned
discounts are deferred and amortized into interest income as an adjustment to
the yield over the term of the loan. Loan commitment fees are generally
deferred and amortized into fee income on a straight-line basis over the
commitment period. Other credit related fees, including letter and line of
credit fees are recognized as fee income when earned. Table 5 presents the components of total loans at June 30, 2004, December 31,
2003 and June 30, 2003. Table 5 Loan Portfolio
    
    June 30,
    
    December 31,
    
    June 30,(Dollars in thousands)
    
    2004
    
    2003
    
    2003Commercial
    
    $
    320,937
    
    
    $
    297,468
    
    
    $
    287,601Mortgage
    
    
    100,420
    
    
    
    113,649
    
    
    
    115,976Installment
    
    
    61,997
    
    
    
    59,217
    
    
    
    58,056Home Equity
    
    
    61,013
    
    
    
    57,762
    
    
    
    53,752Loans held for sale
    
    
    4,516
    
    
    
    6,215
    
    
    
    11,838Total loans
    
    $
    548,883
    
    
    $
    534,311
    
    
    $
    527,223




---



##### Table of Contents



Nonperforming Assets The level of nonperforming assets at June 30, 2004 remains at approximately the
same level as December 31, 2003, and management believes nonperforming assets
are well collateralized. Table 6 presents the level of nonperforming assets and
respective ratios at the end of the last five calendar quarters. Commercial loans secured by real estate are designated as non-performing when
either principal or interest payments are 90 days or more past due, terms are
renegotiated below market level, or when an individual analysis of a borrowers
credit worthiness indicates a credit should be placed on nonperforming status. Consumer loan are subject to mandatory charge-off at a specific delinquency
date and except for residential real estate loans, are not classified as
nonperforming prior to being charge-off. Closed-end consumer loans, which
include installment and student loans are generally charged-off in full no
later than 120 days past due. Table 6  Nonperforming Assets
    
    June 30,
    
    March 31,
    
    December 31,
    
    September 30,
    
    June 30,(Dollars in thousands)
    
    2004
    
    2004
    
    2003
    
    2003
    
    2003Nonperforming Assets:Non-accrual loans
    
    $
    5,452
    
    
    $
    5,234
    
    
    $
    5,154
    
    
    $
    3,481
    
    
    $
    2,609Restructured loans
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0
    
    
    
    0Other foreclosed assets
    
    
    596
    
    
    
    662
    
    
    
    589
    
    
    
    589
    
    
    
    589Total Nonperforming Assets
    
    $
    6,048
    
    
    $
    5,896
    
    
    $
    5,743
    
    
    $
    4,070
    
    
    $
    3,198Reserve for loan losses to total
nonperforming assets
    
    
    132.1
    %
    
    
    160.0
    %
    
    
    150.0
    %
    
    
    187.8
    %
    
    
    222.1
    %Nonperforming assets to total loans
    
    
    1.10
    %
    
    
    1.08
    %
    
    
    1.06
    %
    
    
    .75
    %
    
    
    .61
    %Nonperforming loans to total loans
    
    
    .99
    %
    
    
    .96
    %
    
    
    .95
    %
    
    
    .64
    %
    
    
    .49
    %Accruing loans past due 90 days
    
    $
    281
    
    
    $
    0
    
    
    $
    46
    
    
    $
    25
    
    
    $
    14




---



##### Table of Contents



Performing loans where some concerns exist as to the ability of the borrower to
comply with present loan repayment terms, excluding nonperforming loans,
approximated $22,836, $23,242 and $21,747 at June 30, 2004, March 31, 2004 and
December 31, 2003, respectively, and are being closely monitored by management
and the Board of Directors. The amounts include results from a loan-by-loan
evaluation of loans classified as special mention, substandard and
doubtful, but are not included in the nonperforming loan category. The
classification of these loans, however, does not imply that management expects
losses on each of these loans, but believes that a higher level of scrutiny is
prudent under the circumstances. These loans require close monitoring despite
the fact that they are currently performing. Such classifications relate to
specific concerns relating to each individual borrower and do not relate to any
concentrated risk elements common to all loans in this group. Non-accrual loans increased slightly to $5,452, from $5,234 at March 31, 2004
and $5,154 at December 31, 2003. Nearly all non-accrual loans are secured by
real estate or commercial real estate. As of June 30, 2004, the Corporation did
not have any loan concentrations which exceeded 10% of total loans. The Corporation maintains a reserve for loan losses at a level adequate to
absorb managements estimate of probable losses inherent in the loan portfolio.
The reserve is comprised of a general reserve, a specific reserve for
identified problem loans and an unallocated reserve. The general reserve is
determined by applying estimated loss factors to the credit exposures from
outstanding loans. For construction, commercial and commercial real estate
loans, loss factors are applied based on internal risk grades of these loans.
For residential real estate, installment and other loans, loss factors are
applied on a portfolio basis. Loss factors are based on the Corporations
historical loss experience, and are reviewed for revision on a quarterly basis,
along with other factors affecting the collectibility of the loan portfolio.
Specific reserves are established for all classified loans, where management
has determined that, due to identified significant conditions, the probability
that a loss has been incurred exceeds the general reserve loss factor
determination for those loans. The unallocated reserve recognizes the
estimation of risk associated with the allocated general and specific reserves
and incorporates managements evaluation of existing conditions that are not
included in the allocated reserve determinations. These conditions are reviewed
quarterly by management and include general economic conditions, credit quality
trends, and internal loan review and regulatory examination findings.




---



##### Table of Contents



Sources of Funds Management considers its interest sensitivity profile when deciding on the
sources of funds to use to fund assets. See Item 3. Quantitative and
Qualitative Disclosures About Market Risk of this form 10-Q regarding further
information on our interest rate risk profile Liquidity Management of liquidity is of growing importance to the banking industry. The
liquidity of a financial institution reflects its ability to meet loan
requests, to accommodate possible outflows in deposits and to take advantage of
interest rate market opportunities. The ability of a financial institution to
meet its current financial obligations is a function of balance sheet
structure, the ability to liquidate assets, and the availability of alternative
sources of funds. In addition to maintaining a stable core deposit base, the Corporations
banking subsidiary maintains adequate liquidity primarily through the use of
investment securities and unused borrowing capacity. At June 30, 2004,
securities and other short-term investments with maturities of one year or less
totaled $45,683. In addition, the mortgage-backed securities provide an
estimated cash flow of $24,384 over a twelve-month time horizon. The Bank is a
member of the Federal Home Loan Bank of Cincinnati (FHLB). The FHLB provides a
reliable source of funds to support asset growth in excess of deposit growth.
As of June 30, 2004, the Bank had total credit availability with the FHLB of
$127,336, of which $77,301 was outstanding. The Bank also maintains borrowing
capacity at the Federal Reserve Bank of Cleveland. At June 30, 2004, there were
no borrowings on this borrowing base of $46,941. The Bank also maintains
Federal funds lines of credit with correspondents totaling $24,850. There were
$5,500 outstanding balances on these lines as of June 30, 2004. Since the Corporation is a financial holding company and does not conduct
operations, its only sources of operating liquidity are borrowings from outside
sources and dividends paid to it by the Bank. For the Bank, regulatory approval
is required in order to pay dividends in excess of the subsidiarys earnings
retained for the current year plus retained net profits for the prior two
years. As a result of these restrictions, dividends that could be paid to the
Corporation by its bank subsidiary, without prior regulatory approval, were
limited to $9,842 at June 30, 2004. Asset/Liability Management Closely related to liquidity management is the management of interest-earning
assets and interest-bearing liabilities. LNB Bancorp manages its rate
sensitivity position to avoid wide swings in net interest margins and to
minimize risk due to changes in interest rates. At June 30, 2004, The
Corporations gap position, the difference between the dollar value of interest
rate sensitive assets and interest rate sensitive liabilities, was positive for
three, six and twelve month periods. Earnings-at-risk simulation indicates that
the Corporation will experience net interest income improvement as rates rise.
See also Item. 3, Quantitative and Qualitative Disclosures About Market Risk.




---



##### Table of Contents



Regulatory Capital The Corporation continues to maintain a strong capital position. Total
shareholders equity was $68,171, at June 30, 2004, a slight increase of $36,
or .05% from December 31, 2003. This increase resulted primarily from $4,236 of
net income generated for the six months ended June 30, 2004 less cash dividends
payable to shareholders of $2,386. The change in intermediate term interest
rates experienced in the first six months of 2004 has caused a decrease in the
fair value of available for sale securities which resulted in a decrease in
shareholders equity within accumulated other comprehensive income of $2,147
for the six months ended June 30, 2004. As of June 30, 2004, the Corporation
held 125,784 shares of common stock as treasury stock at a cost of $2,431. This
change in treasury stock during the first six months of 2004 is attributable to
shares issued pursuant to employee benefit plans and stock option plans. The Corporation and the Bank continue to monitor growth to stay within the
constraints established by the regulatory authorities. Under Federal banking
regulations, at June 30, 2004 and December 31, 2003, the Corporation and Bank
maintained capital ratios consistent with guidelines to be deemed
well-capitalized. These capital positions for the Corporation are presented in
Table 7. June 30,
    
    December 31,
    
    Minimum Well-Table 7  Capital Ratios
    
    2004
    
    2003
    
    capitalized RatioLeverage Ratio
    
    
    7.97
    %
    
    
    8.92
    %
    
    
    5.00
    %Tier I Risk based Ratio
    
    
    9.71
    %
    
    
    11.32
    %
    
    
    8.00
    %Total Capital Ratio
    
    
    11.61
    %
    
    
    12.57
    %
    
    
    10.00
    %
 The Corporation regularly evaluates acquisition opportunities and conducts due
diligence activities in connection with possible acquisitions in markets near
or within the Corporations current geographic market. As a result,
acquisition discussions and, in some cases negotiations, take place and future
acquisitions could occur. Corporate management believes that the Corporations
current capital resources are sufficient to support any foreseeable acquisition
activity.




---



##### Table of Contents



Item 3. Quantitative and Qualitative Disclosures About Market Risk Market risk is the risk that a financial institutions earnings and capital, or
its ability to meet its business objectives, will be adversely affected by
movements in market rates or prices such as interest rates, foreign exchange
rates, equity prices, credit spreads and/or commodity prices. Within the
Corporation, the dominant market risk exposure is changes in interest rates.
The negative effects of this exposure are felt through the net interest margin,
mortgage banking revenues and the market value of various assets and
liabilities. The Corporation manages market risk through its Asset/Liability Committee
(ALCO) at the consolidated level. This committee monitors interest rate risk
through sensitivity analysis, whereby it measures potential changes in future
earnings that may result from one or more hypothetical changes in interest
rates. This analysis is performed by estimating the expected cash flows of the
Corporations financial instruments using interest rates in effect at June 30,
2004. For the net interest income estimates, the hypothetical rates are applied
to the financial instruments based on the assumed cash flows. The Corporation
applied these interest rate shocks to its financial instruments in 300, 200 and
100 basis point increasing rate scenarios. Scenarios testing 300, 200 and 100
basis points decreases in rates were not measured due to the low probability of
such declines. Table 8 presents the potential ratio of the Corporations interest rate
sensitive assets (i.e. assets that will mature or reprice within a specific
time period) divided by its interest rate sensitive liabilities (i.e.
liabilities that will mature or reprice within a specific time period),
commonly referred to as the interest rate sensitivity gap or gap, for the
current period and the cumulative position at three, six and twelve month time
periods. Table 8  Interest Rate Sensitivity (Cumulative) (Dollars in thousands)
    
    Current
    
    3 months
    
    6 months
    
    12 monthsRate Sensitive Assets (RSA)
    
    $
    382,192
    
    
    $
    402,606
    
    
    $
    419,535
    
    
    $
    437,729Rate Sensitive Liabilities (RSL)
    
    
    351,973
    
    
    
    341,983
    
    
    
    345,364
    
    
    
    359,219Net GAP Position (RSA/RSL)
    
    
    30,219
    
    
    
    60,623
    
    
    
    74,171
    
    
    
    78,510Cumulative GAP
    
    
    109
    %
    
    
    114
    %
    
    
    116
    %
    
    
    119
    %
 Table 9 presents an analysis of the potential sensitivity of the Corporations
net interest income to sudden and sustained 300, 200 and 100 basis point
changes in market rates. The net interest income presented in each interest
rate scenario represents the potential net interest income result for the next
twelve months. Table 9  Earnings at Risk +100 basis
    
    +200 basis
    
    +300 basis(Dollars in thousands)
    
    Base Case
    
    points
    
    points
    
    pointsNet Interest Income
    
    $
    26,802
    
    
    
    +$596
    
    
    
    +$1,115
    
    
    
    +$1,633
 ALCO is aggressively managing the Corporations risk to net interest income in
response to an expected rising interest rate environment. The preceding
analysis is based on numerous assumptions, including relative levels of market
interest rates, loan prepayments and reactions of depositors to changes in
interest rates, and should not be relied upon as being indicative of actual
results. Further, the analysis does not
necessarily contemplate all actions the Corporation may undertake in response
to changes in interest rates.




---



##### Table of Contents



Item 4. Controls and Procedures The Corporation carried out an evaluation under the supervision and with the
participation of the Corporations management, including the Corporations
President and Chief Executive Officer and Executive Vice President and Chief
Financial Officer, of the effectiveness of the design and operation of the
Corporations disclosure controls and procedures as of June 30, 2004, pursuant
to SEC rule 13a-15. Based upon that evaluation, the President and Chief
Executive Officer and Chief Financial Officer
concluded that as of June 30, 2004, the Corporations disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Corporation (including its consolidated subsidiaries) required
to be included in the Corporations periodic SEC filings. There was no significant change made in the Corporations internal control over
financial reporting that occurred during the Corporations second quarter ended
June 30, 2004, that was materially affecting, or is reasonably likely to
materially affect, the Corporations internal control over financial reporting.




---



##### Table of Contents



PART II. OTHER INFORMATION 
 Item 1. Legal Proceedings Not Applicable 
 Item 2. Changes in Securities and Use of Proceeds Issuer Purchases of Equity Securities (d) Maximum Number(a) Total
    
    (b)
    
    (c) Total Number of
    
    (or Approximate DollarNumber of
    
    Average
    
    Shares (or Units)
    
    Value) of Shares (orShares (or
    
    Price Paid
    
    Purchased as Part of
    
    Units) that May Yet BeUnits)
    
    per Share
    
    Publicly Announced
    
    Purchased Under thePeriod
    
    Purchased
    
    (or Unit)
    
    Plans or Programs
    
    Plans or ProgramsJanuary 1, 2004 -
January 31, 2004
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/AFebruary 1, 2004 -
February 29, 2004
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/AMarch 31, 2004 -
March 31, 2004
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/AApril 1, 2004-
April 30, 2004
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/AMay 1, 2004  May
31, 2004
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/AJune 1, 2004- June
30, 2004
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/ATotal
    
    
    0
    
    
    N/A
    
    
    0
    
    
    N/A
 LNB Bancorp, Inc does not have any common stock repurchase plans, either
publicly announced or non-publicly announced. 
 Item 3. Defaults Upon Senior Securities Not applicable. 
 Item 4. Submission of Matters to a Vote of Security Holders a) LNB Bancorp Inc.s 2004 Annual Meeting of Shareholders was held on April 20,
2004. 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 four (4) 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. The following presents Directors, elected for terms expiring in 2007, at the
2004 Annual Meeting.




---



##### Table of Contents



TermClass III Directors
    
    ExpiresDaniel P. Batista
    
    
    2007David M. Koethe
    
    
    2007Stanley G. Pijor
    
    
    2007Eugene M. Sofranko
    
    
    2007
 The following table presents Directors who continue for terms expiring in 2005
and 2006. TermDirector
    
    ExpiresTerry D. Goode
    
    
    2005James R. Herrick
    
    
    2005Benjamin G. Norton
    
    
    2005John W. Schaeffer
    
    
    2005Robert M. Campana
    
    
    2006Lee C. Howley, Jr.
    
    
    2006James F. Kidd
    
    
    2006Jeffrey F. Riddell
    
    
    2006
 c) Other matters voted upon  (1)
    
    Election of four (4) Class III Directors to serve a three-year term
until the Annual Meeting of Shareholders on April 17, 2007 were as
follows: Percent of AffirmativeClass III Directors
    
    For
    
    Against
    
    VoteDaniel P. Batista
    
    
    5,466,469
    
    
    
    148,753
    
    
    
    83David M. Koethe
    
    
    5,536,597
    
    
    
    78,625
    
    
    
    84Stanley G. Pijor
    
    
    5,251,138
    
    
    
    364,084
    
    
    
    79Eugene M. Sofranko
    
    
    5,525,309
    
    
    
    89,913
    
    
    
    83
 The total number of shares of LNB Bancorp, Inc. Common Stock, $1.00 par value,
outstanding as of March 1, 2004, the record date of the Annual Meeting was
6,617,726. Total shares voted were 5,615,222 or 84.9% of the outstanding
shares. 
 Item 5. Other Information Not applicable.




---



##### Table of Contents



Item 6. Exhibits and Reports on Form 8-K (a) Exhibits pursuant to item 601 (a) of regulation S-K is part of this
report. Please see the section after the report on Form 8-K for detailed
information. (b) Reports on Form 8-K April 20, 2004  LNB Bancorp, Inc. published and released its 1st Quarter 2004
Report to Shareholders and issued a press release announcing 1st Quarter 2004
Earnings dated April 20, 2004. April 20, 2004  LNB Bancorp, Inc. published and issued a press release
announcing Lorain National Bank to Acquire Mortgage One Banc to Expand Market
Presence in Consumer Mortgage Lending. May 19, 2004  LNB Bancorp, Inc. filed an 8-K report regarding a settlement of
a civil action against the Company, which was filed by the Securities and
Exchange Commission in the United States District Court for the Northern
District of Ohio. May 20, 2004  LNB Bancorp, Inc. issued a press release dated May 19, 2004,
announcing the issuance of cash dividend of $.18 per share for the second
quarter of 2004. This common stock dividend is payable in July 1, 2004 to
shareholders of record on June 14, 2004. July 6, 2004  LNB Bancorp, Inc. issued a press release announcing the signing
of a definitive agreement to acquire Mortgage One Banc dated July 2, 2004. July 22, 2004  LNB Bancorp, Inc. published and released its 2nd Quarter 2004
Report to Shareholders and issued a press release announcing 2nd Quarter 2004
Earnings dated July 21, 2004. 
 SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has caused this report to be signed on its behalf by the undersigned
thereunto duly authorized. LNB BANCORP, INC.
(Registrant)Date: August 9, 2004
    /s/ Terry M. WhiteTerry M. WhiteChief Financial Officer




---



##### Table of Contents



LNB Bancorp, Inc.
Exhibit Index
Pursuant to Item 601 (a) of Regulation S-K S-KReference
    
    
    
    PageNumber
    
    Exhibit
    
    Number(2)
    
    Asset Purchase Agreement dated July 1, 2004, between
and among LNB Mortgage LLC, an Ohio limited
liability company, The Lorain National Bank, a
national bank, and Mortgage One Services, Inc., an
Ohio corporation as previously disclosed on Form 8-K
dated July 6, 2004.(3.1)
    
    LNB Bancorp, Inc. Second Amended Articles of
Incorporation. Previously filed under Item 6,
Exhibit (3)(i) to Quarterly Report on Form 10-Q
(Commission File No. 0-13202) for the quarter ended
September 30, 2000, filed November 14, 2000 and
incorporated herein by reference.
    
    N/A(3.2)
    
    LNB Bancorp, Inc. Amended Code of Regulations.
Previously filed under Item 7, Exhibit 3 to Form 8-K
(Commission File No. 0-13203) filed January 4, 2001
and incorporated herein by reference.
    
    N/A(4)
    
    Instruments Defining the Rights of Security Holders.
(See Exhibits 3.1 and 3.2)
    
    N/A(31(a))
    
    Chief Executive Officer Sarbanes-Oxley Act 302
Certification dated August 9, 2004 for LNB Bancorp,
Inc.s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004.(31(b))
    
    Chief Financial Officer Sarbanes-Oxley Act 302
Certification dated August 9, 2004 for LNB Bancorp,
Inc.s Quarterly Report on Form 10-Q for the quarter
ended June 30, 2004.(32(a))
    
    Certification pursuant to 18 U.S.C. section 1350, as
enacted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.(32(b))
    
    Certification pursuant to 18 U.S.C. section 1350, as
enacted pursuant to section 906 of the
Sarbanes-Oxley Act of 2002.