##### 



Form 10-Q
 SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON, D.C. 20549
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended September 30, 2005
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from            to
 Commission file number: 0-13203
 LNB Bancorp, Inc.
  Ohio
State or other jurisdiction
(of Incorporation or organization)
    
    34-1406303 

(I.R.S.
Employer Identification No.)
 457 Broadway, Lorain, Ohio
(Address of principal executive offices)
    
    44052 - 1769
(Zip Code)
 
 
 þ o
 þ o
  o þ




---



##### 



Part I Financial InformationItem 1. Financial Statements.Consolidated Balance Sheets September 30, 2005 (unaudited) and December 31, 2004Consolidated Statements of Income (unaudited) for the three and nine months ended September 30, 2005 and September 30, 2004Consolidated Statements of Changes in Shareholders Equity (unaudited) for the nine months ended September 30, 2005 and September 30, 2004Consolidated
Statements of Cash Flows (unaudited) for the nine months ended September 30, 2005 and September 30, 2004Notes to the Consolidated Financial Statements (unaudited)Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.Item 3. Quantitative and Qualitative Disclosures about Market Risk.Item 4. Controls and Procedures.Part II Other InformationItem 2. Unregistered Sales of Equity Securities and Use of Proceeds.Item 5. Other Information.Item 6. Exhibits.Signatures
 2




---



##### 



Consolidated Balance Sheets
 (Dollars in thousands except share and per share amounts)
    
    September 30, 2005
    
    December 31, 2004(unaudited)AssetsCash and cash equivalents:Cash and due from banks
    
    $
    27,442
    
    
    $
    23,123Short-term investments
    
    
    
    
    
    
    3,695Total cash and cash equivalents
    
    
    27,442
    
    
    
    26,818Investment Securities:Available for sale, at fair value
    
    
    152,435
    
    
    
    145,588Federal Home Loan Bank and Federal Reserve stock, at cost
    
    
    4,187
    
    
    
    4,033Total securities
    
    
    156,622
    
    
    
    149,621Loans:Loans held for sale
    
    
    3,656
    
    
    
    3,067Portfolio loans
    
    
    594,493
    
    
    
    572,157Allowance for loan losses
    
    
    (7,890
    )
    
    
    (7,386
    )Net loans
    
    
    590,259
    
    
    
    567,838Bank premises and equipment, net
    
    
    10,996
    
    
    
    11,493Other real estate owned
    
    
    399
    
    
    
    420Intangible assets
    
    
    3,361
    
    
    
    3,801Other assets
    
    
    23,358
    
    
    
    21,658Total Assets
    
    $
    812,437
    
    
    $
    781,649LiabilitiesDeposits:Noninterest-bearing
    
    $
    96,537
    
    
    $
    96,280Interest-bearing
    
    
    559,203
    
    
    
    509,263Total deposits
    
    
    655,740
    
    
    
    605,543Short-term borrowings
    
    
    20,277
    
    
    
    31,619Federal Home Loan Bank advances
    
    
    61,099
    
    
    
    69,296Accrued interest, taxes and other liabilities
    
    
    5,843
    
    
    
    4,617Total Liabilities
    
    
    742,959
    
    
    
    711,075Shareholders EquityCommon stock, par value $1 per share, authorized 15,000,000 shares,
issued 6,771,867 shares at September 30, 2005 and 6,766,867 shares
at December 31, 2004.
    
    
    6,772
    
    
    
    6,767Additional paid-in capital
    
    
    26,334
    
    
    
    26,243Retained earnings
    
    
    42,295
    
    
    
    41,291Accumulated other comprehensive loss
    
    
    (2,269
    )
    
    
    (1,297
    )Treasury stock at cost, 195,694 shares at September 30, 2005 and
125,686 shares at December 31, 2004
    
    
    (3,654
    )
    
    
    (2,430
    )Total Shareholders Equity
    
    
    69,478
    
    
    
    70,574Total Liabilities and Shareholders Equity
    
    $
    812,437
    
    
    $
    781,649
 See Notes to Consolidated Financial Statements
 3




---



##### 



Consolidated Statements of Income
 For the Three Months Ended
    
    For the Nine Months EndedSeptember 30,
    
    September 30,(Dollars in thousands except share and per share amounts)
    
    2005
    
    2004
    
    2005
    
    2004(unaudited)
    
    (unaudited)Interest IncomeInterest and fees on loans
    
    $
    9,712
    
    
    $
    8,196
    
    
    $
    27,847
    
    
    $
    23,848Interest and dividends on investment securities:Taxable
    
    
    1,239
    
    
    
    1,022
    
    
    
    3,413
    
    
    
    3,053Tax Exempt
    
    
    107
    
    
    
    102
    
    
    
    333
    
    
    
    375Interest on cash equivalents
    
    
    37
    
    
    
    23
    
    
    
    109
    
    
    
    56Total interest income
    
    
    11,095
    
    
    
    9,343
    
    
    
    31,702
    
    
    
    27,332Interest ExpenseDeposits
    
    
    3,021
    
    
    
    1,712
    
    
    
    7,561
    
    
    
    4,933Short-term borrowings
    
    
    201
    
    
    
    62
    
    
    
    395
    
    
    
    154Federal Home Loan Bank advances
    
    
    403
    
    
    
    536
    
    
    
    1,387
    
    
    
    1,515Total interest expense
    
    
    3,625
    
    
    
    2,310
    
    
    
    9,343
    
    
    
    6,602Net Interest Income
    
    
    7,470
    
    
    
    7,033
    
    
    
    22,359
    
    
    
    20,730Provision for Loan Losses
    
    
    300
    
    
    
    399
    
    
    
    1,098
    
    
    
    1,349Net interest income after provision for loan losses
    
    
    7,170
    
    
    
    6,634
    
    
    
    21,261
    
    
    
    19,381Noninterest IncomeDeposit service charges
    
    
    1,152
    
    
    
    1,131
    
    
    
    3,112
    
    
    
    3,146Trust and investment management services
    
    
    555
    
    
    
    539
    
    
    
    1,627
    
    
    
    1,611Mortgage banking revenue
    
    
    242
    
    
    
    108
    
    
    
    967
    
    
    
    108Income from investment in life insurance
    
    
    117
    
    
    
    157
    
    
    
    426
    
    
    
    477Securities gains, net
    
    
    
    
    
    
    158
    
    
    
    174
    
    
    
    381Gains on sales of loans
    
    
    
    
    
    
    17
    
    
    
    132
    
    
    
    100Gains (losses) on sales of other assets, net
    
    
    (31
    )
    
    
    285
    
    
    
    (32
    )
    
    
    285Other noninterest income
    
    
    573
    
    
    
    716
    
    
    
    1,768
    
    
    
    2,494Total noninterest income
    
    
    2,608
    
    
    
    3,111
    
    
    
    8,174
    
    
    
    8,602Noninterest ExpenseSalaries and employee benefits
    
    
    3,414
    
    
    
    3,223
    
    
    
    11,653
    
    
    
    9,168Net occupancy
    
    
    402
    
    
    
    407
    
    
    
    1,368
    
    
    
    1,190Furniture and equipment
    
    
    746
    
    
    
    717
    
    
    
    2,281
    
    
    
    2,046Electronic banking expenses
    
    
    136
    
    
    
    350
    
    
    
    400
    
    
    
    1,075Supplies, postage, and delivery
    
    
    290
    
    
    
    421
    
    
    
    934
    
    
    
    930Outside services
    
    
    394
    
    
    
    306
    
    
    
    1,224
    
    
    
    840Marketing and public relations
    
    
    258
    
    
    
    264
    
    
    
    863
    
    
    
    757Ohio franchise tax
    
    
    179
    
    
    
    181
    
    
    
    561
    
    
    
    549Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    Other noninterest expense
    
    
    945
    
    
    
    891
    
    
    
    3,312
    
    
    
    2,443Total noninterest expense
    
    
    6,764
    
    
    
    6,760
    
    
    
    22,907
    
    
    
    18,998Income before income tax expense
    
    
    3,014
    
    
    
    2,985
    
    
    
    6,528
    
    
    
    8,985Income tax expense
    
    
    857
    
    
    
    911
    
    
    
    1,948
    
    
    
    2,675Net Income
    
    $
    2,157
    
    
    $
    2,074
    
    
    $
    4,580
    
    
    $
    6,310Net Income Per Common ShareBasic
    
    $
    0.33
    
    
    $
    0.31
    
    
    $
    0.69
    
    
    $
    0.95Diluted
    
    
    0.33
    
    
    
    0.31
    
    
    
    0.69
    
    
    
    0.95Dividends declared
    
    
    0.18
    
    
    
    0.18
    
    
    
    0.54
    
    
    
    0.54Average Common Shares OutstandingBasic
    
    
    6,625,086
    
    
    
    6,641,095
    
    
    
    6,635,752
    
    
    
    6,628,097Diluted
    
    
    6,625,168
    
    
    
    6,641,709
    
    
    
    6,635,780
    
    
    
    6,629,103
 See Notes to Consolidated Financial Statements
 4




---



##### 



Consolidated Statements of Shareholders Equity (Unaudited)
 Additional
    
    
    
    
    
    Accumulated Other(Dollars in thousands
    
    Common
    
    Paid-in
    
    Retained
    
    Comprehensive
    
    Treasuryexcept per share amounts)
    
    Stock
    
    Capital
    
    Earnings
    
    Loss
    
    Stock
    
    TotalBalance, January 1, 2004
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    38,714
    
    
    $
    (704
    )
    
    $
    (2,885
    )
    
    $
    68,135Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    6,310
    
    
    
    
    
    
    
    
    
    
    
    6,310Other comprehensive
income, net of tax:Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Change in unrealized
gains and losses
on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (588
    )
    
    
    
    
    
    
    (588
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    5,722Common dividends declared,
$.54 per share
    
    
    
    
    
    
    
    
    
    
    (3,582
    )
    
    
    
    
    
    
    
    
    
    
    (3,582
    )Issuance of Treasury stock
under
stock option agreements
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    
    
    
    
    455
    
    
    
    334Balance, September 30, 2004
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    41,321
    
    
    $
    (1,292
    )
    
    $
    (2,430
    )
    
    $
    70,609Balance, January 1, 2005
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    41,291
    
    
    $
    (1,297
    )
    
    $
    (2,430
    )
    
    $
    70,574Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    4,580
    
    
    
    
    
    
    
    
    
    
    
    4,580Other comprehensive
loss, net of tax:Change in unrealized
gains and losses
on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (972
    )
    
    
    
    
    
    
    (972
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,608Common stock repurchased
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,224
    )
    
    
    (1,224
    )Issuance of common stock
under employment agreement
    
    
    5
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96Common dividends declared,
$.54 per share
    
    
    
    
    
    
    
    
    
    
    (3,576
    )
    
    
    
    
    
    
    
    
    
    
    (3,576
    )Balance, September 30, 2005
    
    $
    6,772
    
    
    $
    26,334
    
    
    $
    42,295
    
    
    $
    (2,269
    )
    
    $
    (3,654
    )
    
    $
    69,478
 See Notes to Consolidated Financial Statements
 5




---



##### 



Consolidated Statements of Cash Flows
 For the Nine MonthsEnded September 30,(Dollars in thousands)
    
    2005
    
    2004(unaudited)Cash flows from operating activities:Net income
    
    $
    4,580
    
    
    $
    6,310Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Provision for loan losses
    
    
    1,098
    
    
    
    1,349Depreciation and amortization
    
    
    1,372
    
    
    
    1,326Securities gains, net
    
    
    (174
    )
    
    
    (381
    )Amortization of premiums and discounts, net
    
    
    528
    
    
    
    686Amortization of intangible assets
    
    
    129
    
    
    
    85Impairment of goodwill, net
    
    
    311
    
    
    
    Deferred loan fee amortization
    
    
    237
    
    
    
    128Deferred income taxes
    
    
    (501
    )
    
    
    (713
    )Gain on sale of other assets, net
    
    
    (100
    )
    
    
    (385
    )Changes in:Accrued interest receivable and other assets
    
    
    (1,199
    )
    
    
    (955
    )Accrued interest, taxes, and other liabilities
    
    
    1,226
    
    
    
    (94
    )Net cash provided by operating activities
    
    
    7,507
    
    
    
    7,356Cash flows from investing activities:Purchases of available for sale securities
    
    
    (30,920
    )
    
    
    (49,570
    )Purchases of Federal Home Loan Bank Stock
    
    
    (154
    )
    
    
    (114
    )Proceeds from principal payments and maturities of available for
sale securities
    
    
    18,171
    
    
    
    40,768Proceeds from sale of available for sale securities
    
    
    4,576
    
    
    
    17,147Net increase in portfolio loans
    
    
    (24,301
    )
    
    
    (34,423
    )Additions to bank premises and equipment
    
    
    (953
    )
    
    
    (2,234
    )Proceeds from the sale of bank premises and equipment
    
    
    55
    
    
    
    444Proceeds from sales of other real estate
    
    
    689
    
    
    
    1,392Cash paid for acquisition of Mortgage One
    
    
    
    
    
    
    (311
    )Net cash used in investing activities
    
    
    (32,837
    )
    
    
    (26,901
    )Cash flows from financing activities:Net increase in deposits
    
    
    50,197
    
    
    
    21,047Net increase (decrease) in short-term borrowings
    
    
    (11,342
    )
    
    
    387Proceeds from Federal Home Loan Bank advances
    
    
    108,000
    
    
    
    104,500Repayment of Federal Home Loan Bank advances
    
    
    (116,197
    )
    
    
    (98,741
    )Issuance of Common stock
    
    
    96
    
    
    
    Common stock repurchased
    
    
    (1,224
    )
    
    
    Proceeds from exercise of employee stock options
    
    
    
    
    
    
    334Dividends paid
    
    
    (3,576
    )
    
    
    (3,582
    )Net cash provided by financing activities
    
    
    25,954
    
    
    
    23,945Net increase in cash and cash equivalents
    
    
    624
    
    
    
    4,400Cash and cash equivalents, January 1
    
    
    26,818
    
    
    
    27,749Cash and cash equivalents, September 30
    
    $
    27,442
    
    
    $
    32,149Supplemental disclosure of cash flow information:Cash paid during the period for:Interest paid
    
    $
    9,546
    
    
    $
    6,602Income taxes paid
    
    
    1,764
    
    
    
    2,305Supplemental disclosures of noncash investing and financing activities:Transfer of loans to other real estate owned
    
    
    668
    
    
    
    920
 See Notes to Consolidated Financial Statements
 6




---



##### 



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
 1. Summary of Significant Accounting Policies
 Consolidation
  Use of Estimates
  Segment Information
  Statements of Cash Flows
  7




---



##### 



Securities
 trading held to maturity available for sale
 Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock
  Loans
     Allowance for Loan Losses
  8




---



##### 



Bank Premises and Equipment
  Goodwill and Core Deposit Intangibles
  Income Taxes
  Comprehensive Income
  9




---



##### 



Stock-Based Compensation
  Reclassifications
  2. New Accounting Pronouncements
 SFAS No. 123(revised) Share Based Payments
  AICPA Statement of Position (SOP) 03-3, Accounting for Certain Loans or Debt Securities Acquired
in a Transfer
  EITF No 03-01 The Meaning of Other-Than-Temporary Impairment and Its Application to Certain
Investments
  10




---



##### 



SFAS No. 154 Accounting Changes and Error Corrections
 Accounting Changes, Reporting Accounting Changes in Interim Financial Statements,
 3. Earnings Per Share
 For the Three Months
    
    For the Nine Months EndedEnded September 30,
    
    September 30,(Dollars in thousands except share and per share amounts)
    
    2005
    
    2004
    
    2005
    
    2004Net income available to common shareholders
    
    $
    2,157
    
    
    $
    2,074
    
    
    $
    4,580
    
    
    $
    6,310Weighted average common shares outstanding
    
    
    6,625,086
    
    
    
    6,641,095
    
    
    
    6,635,752
    
    
    
    6,628,097Dilutive effect of stock options
    
    
    82
    
    
    
    614
    
    
    
    28
    
    
    
    1,006Diluted weighted average common shares outstanding
    
    
    6,625,168
    
    
    
    6,641,709
    
    
    
    6,635,780
    
    
    
    6,629,103Basic earnings per common share
    
    $
    0.33
    
    
    $
    0.31
    
    
    $
    0.69
    
    
    $
    0.95Diluted earnings per common share
    
    $
    0.33
    
    
    $
    0.31
    
    
    $
    0.69
    
    
    $
    0.95
  11




---



##### 



4. Securities
  September 30, 2005Amortized
    
    Unrealized
    
    Unrealized
    
    Fair(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueSecurities available for sale:U.S. Government agencies and corporations
    
    $
    144,011
    
    
    $
    18
    
    
    $
    (3,133
    )
    
    $
    140,896State and political subdivisions
    
    
    11,173
    
    
    
    265
    
    
    
    (19
    )
    
    
    11,419Equity securities
    
    
    45
    
    
    
    75
    
    
    
    
    
    
    
    120Federal Home Loan Bank and Federal Reserve Bank stock
    
    
    4,187
    
    
    
    
    
    
    
    
    
    
    
    4,187Total securities
    
    $
    159,416
    
    
    $
    358
    
    
    $
    (3,152
    )
    
    $
    156,622
 December 31, 2004Amortized
    
    Unrealized
    
    Unrealized
    
    Fair(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueSecurities available for sale:U.S. Government agencies and corporations
    
    $
    131,789
    
    
    $
    168
    
    
    $
    (2,080
    )
    
    $
    129,877State and political subdivisions
    
    
    11,148
    
    
    
    349
    
    
    
    (8
    )
    
    
    11,489Equity securities
    
    
    3,938
    
    
    
    284
    
    
    
    
    
    
    
    4,222Federal Home Loan Bank and Federal Reserve Bank stock
    
    
    4,033
    
    
    
    
    
    
    
    
    
    
    
    4,033Total securities
    
    $
    150,908
    
    
    $
    801
    
    
    $
    (2,088
    )
    
    $
    149,621
  Less than 12 months
    
    12 months or longer
    
    TotalFair
    
    Unrealized
    
    Fair
    
    Unrealized
    
    Fair
    
    Unrealized(Dollars in thousands)
    
    Value
    
    Losses
    
    Value
    
    Losses
    
    Value
    
    LossesU.S. Government
agencies and
corporations
    
    $
    39,275
    
    
    $
    (452
    )
    
    $
    98,167
    
    
    $
    (2,681
    )
    
    $
    137,442
    
    
    $
    (3,133
    )State and political
subdivisions
    
    
    2,307
    
    
    
    (5
    )
    
    
    653
    
    
    
    (14
    )
    
    
    2,960
    
    
    
    (19
    )Total
    
    $
    41,582
    
    
    $
    (457
    )
    
    $
    98,820
    
    
    $
    (2,695
    )
    
    $
    140,402
    
    
    $
    (3,152
    )
 5. Loans
  (Dollars in thousands)
    
    September 30, 2005
    
    December 31, 2004Commercial
    
    $
    369,695
    
    
    $
    339,439Real Estate Mortgage
    
    
    82,424
    
    
    
    112,787Installment
    
    
    37,413
    
    
    
    33,682Purchased Installment
    
    
    42,078
    
    
    
    27,173Home Equity Lines
    
    
    66,539
    
    
    
    62,143Total loans
    
    
    598,149
    
    
    
    575,224Allowance for loan losses
    
    
    (7,890
    )
    
    
    (7,386
    )Net loans
    
    $
    590,259
    
    
    $
    567,838
  12




---



##### 



6. Retirement Pension Plan
   For the Three Months
    
    For the Nine MonthsEnded September 30
    
    Ended September 30(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Interest cost on projected benefit obligation
    
    
    112
    
    
    
    112
    
    
    
    338
    
    
    
    338Expected return on plan assets
    
    
    (88
    )
    
    
    (94
    )
    
    
    (264
    )
    
    
    (282
    )Amortization of unrecognized prior service liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognized actuarial (gain) or loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    24
    
    
    $
    18
    
    
    $
    74
    
    
    $
    56Loss recognized due to curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss recognized due to settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total pension cost
    
    $
    24
    
    
    $
    18
    
    
    $
    74
    
    
    $
    56Weighted-Average Assumptions
    
    
    2005
    
    
    
    2004
    
    
    
    2005
    
    
    
    2004Discount rate
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    5.75
    %
    
    
    5.75
    %Expected long-term return on plan assets
    
    
    7.50
    %
    
    
    5.00
    %
    
    
    7.50
    %
    
    
    5.00
    %Rate of compensation increase
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
    
    
    0.00
    %
 7. Stock Option Plans
  Year Issued
    
    Number of Options
    
    Strike Price
    
    Vested2000
    
    
    11,939
    
    
    $
    18.85
    
    
    
    11,9392005
    
    
    30,000
    
    
    
    19.17
    
    
    
    02005
    
    
    2,500
    
    
    
    16.50
    
    
    
    0Totals
    
    
    44,439
    
    
    $
    19.03
    
    
    
    11,939
  13




---



##### 



For the Three Months
    
    For the Nine MonthsEnded September 30,
    
    Ended Septemebr 30,(Dollars in thousands, except per share amounts)
    
    2005
    
    2004
    
    2005
    
    2004Net Income, as reported
    
    $
    2,157
    
    
    $
    2,074
    
    
    $
    4,580
    
    
    $
    6,310Add: Stock-based compensation, net of tax, as reported
    
    
    
    
    
    
    
    
    
    
    62
    
    
    
    Deduct: Stock-based compensation, net of tax, that would
have been reported if the fair value based method had
been applied to all awards
    
    
    (18
    )
    
    
    (19
    )
    
    
    (106
    )
    
    
    (19
    )Pro forma net income available to common shareholders
    
    $
    2,139
    
    
    $
    2,055
    
    
    $
    4,536
    
    
    $
    6,291Pro forma net income per share:Basic  as reported
    
    $
    0.33
    
    
    $
    0.31
    
    
    $
    0.69
    
    
    $
    0.95Basic  pro forma
    
    
    0.32
    
    
    
    0.31
    
    
    
    0.68
    
    
    
    0.95Diluted  as reported
    
    
    0.33
    
    
    
    0.31
    
    
    
    0.69
    
    
    
    0.95Diluted  pro forma
    
    
    0.32
    
    
    
    0.31
    
    
    
    0.68
    
    
    
    0.95
 8. Interest-Bearing Deposits
  September 30,
    
    December 31,(Dollars in thousands)
    
    2005
    
    2004Interest-bearing demand
    
    $
    79,683
    
    
    $
    82,672Savings
    
    
    98,945
    
    
    
    104,309Money market
    
    
    89,487
    
    
    
    93,188Time:Retail certificates of deposit
    
    
    187,864
    
    
    
    167,192Brokered certificates of deposits
    
    
    57,944
    
    
    
    22,824Public fund certificates of deposit
    
    
    45,280
    
    
    
    39,078Total time deposits
    
    
    291,088
    
    
    
    229,094Total Interest-bearing deposits
    
    $
    559,203
    
    
    $
    509,263
  9. Short-Term Borrowings
  September 30,
    
    December 31,(Dollars in thousands)
    
    2005
    
    2004Securities sold under agreements to repurchase
    
    $
    13,277
    
    
    $
    11,619Federal funds purchased
    
    
    7,000
    
    
    
    20,000Total Short-term borrowings
    
    $
    20,277
    
    
    $
    31,619
 14




---



##### 



10. Federal Home Loan Bank Advances
  September 30,
    
    December 31,(Dollars in thousands)
    
    2005
    
    2004FHLB advance - 4.61%, repaid in 2005
    
    $
    
    
    
    $
    2,230FHLB advance - 4.40%, repaid in 2005
    
    
    
    
    
    
    1,500FHLB advance - 4.36%, repaid in 2005
    
    
    
    
    
    
    2,100FHLB advance - 4.44%, repaid in 2005
    
    
    
    
    
    
    1,000FHLB advance - 2.06%, repaid in 2005
    
    
    
    
    
    
    16,000FHLB advance - 2.21%, repaid in 2005
    
    
    
    
    
    
    360FHLB advance - 2.87%, repaid in 2005
    
    
    
    
    
    
    5,000FHLB advance - 3.75%, due October 20, 2005
    
    
    15,000
    
    
    
    FHLB advance - 3.94%, due October 20, 2005
    
    
    5,000
    
    
    
    FHLB advance - 4.92%, due April 28, 2006
    
    
    1,000
    
    
    
    1,000FHLB advance - 2.70%, due June 19, 2006
    
    
    10,000
    
    
    
    10,000FHLB advance - 2.95%, due January 30, 2007
    
    
    10,000
    
    
    
    10,000FHLB advance - 3.55%, due November 21, 2007
    
    
    5,000
    
    
    
    5,000FHLB advance - 3.33%, due February 8, 2008
    
    
    5,000
    
    
    
    5,000FHLB advance - 3.36%, due March 27, 2009
    
    
    10,000
    
    
    
    10,000FHLB advance - 3.55%, due January 1, 2014
    
    
    99
    
    
    
    106Total FHLB advances
    
    $
    61,099
    
    
    $
    69,296
 11. Commitments, Credit Risk, and Contingencies
     15




---



##### 



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 FINANCIAL REVIEW
    Critical Accounting Policy and Estimates
  16




---



##### 



Allowance
for loan losses
       17




---



##### 



Pension accounting
      Goodwill Impairment
  Income Taxes
  18




---



##### 



Introduction
     Results of Operations
 Net Interest Income
  Three Months Ended September 30, 2005 as compared to the Three Months Ended September 30, 2004
   19




---



##### 



Average Balances
   Nine Months Ended September 30, 2005 as compared to the Nine Months Ended September 30, 2004
  20




---



##### 



Average Balances
    21




---



##### 



Tax Equivalent Adjustments to Yields and Margins
   22




---



##### 



Table 1: Condensed Consolidated Average Balance Sheets  Interest, Rate, and Rate/ Volume
differentials are stated on a Fully-Tax Equivalent (FTE) Basis.
 For the Three Months Ended September 30,2005
    
    2004Average
    
    
    
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateAssets:Securities-taxable
    
    $
    145,451
    
    
    $
    1,238
    
    
    
    3.38
    %
    
    $
    147,269
    
    
    $
    1,039
    
    
    
    2.81
    %Securities-tax exempt
    
    
    11,521
    
    
    
    156
    
    
    
    5.37
    %
    
    
    9,351
    
    
    
    148
    
    
    
    6.30
    %Federal funds sold and
short-term investments
    
    
    4,598
    
    
    
    38
    
    
    
    3.28
    %
    
    
    902
    
    
    
    6
    
    
    
    2.65
    %Commercial loans
    
    
    361,000
    
    
    
    6,235
    
    
    
    6.85
    %
    
    
    326,000
    
    
    
    4,782
    
    
    
    5.84
    %Real estate mortgage loans
    
    
    84,359
    
    
    
    1,309
    
    
    
    6.16
    %
    
    
    103,442
    
    
    
    1,689
    
    
    
    6.50
    %Installment loans
    
    
    37,167
    
    
    
    621
    
    
    
    6.63
    %
    
    
    44,763
    
    
    
    870
    
    
    
    7.73
    %Purchased installment loans
    
    
    41,128
    
    
    
    479
    
    
    
    4.62
    %
    
    
    20,670
    
    
    
    185
    
    
    
    3.56
    %Home equity lines
    
    
    66,030
    
    
    
    1,068
    
    
    
    6.42
    %
    
    
    61,151
    
    
    
    671
    
    
    
    4.37
    %Total Earning Assets
    
    $
    751,254
    
    
    $
    11,144
    
    
    
    5.89
    %
    
    $
    713,548
    
    
    $
    9,390
    
    
    
    5.24
    %Allowance for loan loss
    
    
    (7,928
    )
    
    
    
    
    
    
    
    
    
    
    (8,128
    )Cash and due from banks
    
    
    24,287
    
    
    
    
    
    
    
    
    
    
    
    24,797Bank owned life insurance
    
    
    13,721
    
    
    
    
    
    
    
    
    
    
    
    12,953Other assets
    
    
    23,463
    
    
    
    
    
    
    
    
    
    
    
    14,142Total Assets
    
    $
    804,797
    
    
    
    
    
    
    
    
    
    
    $
    757,782Liabilities and Shareholders EquityInterest-bearing demand deposits
    
    $
    82,970
    
    
    $
    64
    
    
    
    0.31
    %
    
    $
    81,846
    
    
    $
    39
    
    
    
    0.19
    %Savings deposits
    
    
    100,680
    
    
    
    87
    
    
    
    0.34
    %
    
    
    106,241
    
    
    
    79
    
    
    
    0.30
    %Money market deposits
    
    
    91,261
    
    
    
    461
    
    
    
    2.00
    %
    
    
    93,232
    
    
    
    263
    
    
    
    1.12
    %Retail certificates of deposit
    
    
    181,242
    
    
    
    1,467
    
    
    
    3.21
    %
    
    
    163,459
    
    
    
    1,086
    
    
    
    2.64
    %Brokered certificates of deposit
    
    
    42,108
    
    
    
    378
    
    
    
    3.56
    %
    
    
    3,175
    
    
    
    33
    
    
    
    4.13
    %Public fund certificates of deposit
    
    
    62,777
    
    
    
    568
    
    
    
    3.59
    %
    
    
    50,890
    
    
    
    213
    
    
    
    1.67
    %Short-term borrowings
    
    
    22,093
    
    
    
    197
    
    
    
    3.54
    %
    
    
    18,998
    
    
    
    61
    
    
    
    1.28
    %FHLB advances
    
    
    53,590
    
    
    
    403
    
    
    
    2.98
    %
    
    
    77,331
    
    
    
    536
    
    
    
    2.76
    %Total Interest -Bearing Liabilities
    
    $
    636,721
    
    
    $
    3,625
    
    
    
    2.26
    %
    
    $
    595,172
    
    
    $
    2,310
    
    
    
    1.54
    %Noninterest-bearing deposits
    
    
    91,475
    
    
    
    
    
    
    
    
    
    
    
    88,222Other liabilities
    
    
    5,797
    
    
    
    
    
    
    
    
    
    
    
    4,889Shareholders Equity
    
    
    70,804
    
    
    
    
    
    
    
    
    
    
    
    69,499Total Liabilities and
Shareholders equity
    
    $
    804,797
    
    
    
    
    
    
    
    
    
    
    $
    757,782Net Interest Income and Margin (FTE)
    
    
    
    
    
    $
    7,519
    
    
    
    3.97
    %
    
    
    
    
    
    $
    7,080
    
    
    
    3.95
    %Taxable equivalent adjustment
    
    
    
    
    
    
    (49
    )
    
    
    -0.03
    %
    
    
    
    
    
    
    (47
    )
    
    
    -0.03
    %Net Interest Income Per
Financial Statements
    
    
    
    
    
    $
    7,470
    
    
    
    
    
    
    
    
    
    
    $
    7,033Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    3.94
    %
    
    
    
    
    
    
    
    
    
    
    3.92
    %
 Rate/Volume Analysis of Net Interest Income (FTE)
 For the Three Months Ended September 30,Increase (Decrease) in Interest Income/Expense2005 and 2004(Dollars in thousands)
    
    Volume
    
    
    Rate
    
    
    TotalSecurities-taxable
    
    $
    (16
    )
    
    $
    215
    
    
    $
    199Securities-tax exempt
    
    
    93
    
    
    
    (85
    )
    
    
    8Federal funds sold and short-term investments
    
    
    26
    
    
    
    6
    
    
    
    32Commercial loans
    
    
    574
    
    
    
    879
    
    
    
    1,453Real estate mortgage loans
    
    
    (306
    )
    
    
    (74
    )
    
    
    (380
    )Installment loans
    
    
    (137
    )
    
    
    (112
    )
    
    
    (249
    )Purchased installment loans
    
    
    201
    
    
    
    93
    
    
    
    294Home equity lines
    
    
    75
    
    
    
    322
    
    
    
    397Total Interest Income
    
    $
    510
    
    
    $
    1,244
    
    
    $
    1,754Interest-bearing demand deposits
    
    $
    1
    
    
    $
    24
    
    
    $
    25Savings deposit
    
    
    (5
    )
    
    
    13
    
    
    
    8Money market deposits
    
    
    (10
    )
    
    
    208
    
    
    
    198Retail certificates of deposit
    
    
    136
    
    
    
    245
    
    
    
    381Brokered certificates of deposit
    
    
    418
    
    
    
    (73
    )
    
    
    345Public fund certificates of deposit
    
    
    93
    
    
    
    262
    
    
    
    355Short-term borrowings
    
    
    24
    
    
    
    112
    
    
    
    136FHLB advances
    
    
    (160
    )
    
    
    27
    
    
    
    (133
    )Total Interest Expense
    
    $
    497
    
    
    $
    818
    
    
    $
    1,315Net Interest Income (FTE)
    
    $
    13
    
    
    $
    426
    
    
    $
    439
 23




---



##### 



Table 2: Condensed Consolidated Average Balance Sheets  Interest, Rate, and Rate/ Volume
differentials are stated on a Fully-Tax Equivalent (FTE) Basis.
 For the Nine Months Ended September 30,2005
    
    2004Average
    
    
    
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateAssets:Securities-taxable
    
    $
    139,250
    
    
    $
    3,461
    
    
    
    3.32
    %
    
    $
    144,095
    
    
    $
    3,074
    
    
    
    2.85
    %Securities-tax
exempt
    
    
    11,535
    
    
    
    486
    
    
    
    5.63
    %
    
    
    11,416
    
    
    
    549
    
    
    
    6.42
    %Federal funds sold
and
short-term
investments
    
    
    5,100
    
    
    
    61
    
    
    
    1.60
    %
    
    
    4,180
    
    
    
    35
    
    
    
    1.12
    %Commercial loans
    
    
    355,022
    
    
    
    17,601
    
    
    
    6.63
    %
    
    
    315,469
    
    
    
    13,580
    
    
    
    5.75
    %Real estate
mortgage loans
    
    
    89,373
    
    
    
    4,150
    
    
    
    6.21
    %
    
    
    106,890
    
    
    
    5,337
    
    
    
    6.67
    %Installment loans
    
    
    38,318
    
    
    
    2,115
    
    
    
    7.38
    %
    
    
    47,514
    
    
    
    2,636
    
    
    
    7.41
    %Purchased
installment loans
    
    
    33,588
    
    
    
    1,131
    
    
    
    4.50
    %
    
    
    15,121
    
    
    
    415
    
    
    
    3.67
    %Home equity lines
    
    
    64,160
    
    
    
    2,850
    
    
    
    5.94
    %
    
    
    60,063
    
    
    
    1,880
    
    
    
    4.18
    %Total Earning
Assets
    
    $
    736,346
    
    
    $
    31,855
    
    
    
    5.78
    %
    
    $
    704,748
    
    
    $
    27,506
    
    
    
    5.21
    %Allowance for loan
loss
    
    
    (7,722
    )
    
    
    
    
    
    
    
    
    
    
    (8,024
    )Cash and due from
banks
    
    
    24,909
    
    
    
    
    
    
    
    
    
    
    
    24,593Bank owned life
insurance
    
    
    13,585
    
    
    
    
    
    
    
    
    
    
    
    12,953Other assets
    
    
    23,554
    
    
    
    
    
    
    
    
    
    
    
    19,999Total Assets
    
    $
    790,672
    
    
    
    
    
    
    
    
    
    
    $
    754,269Liabilities and
Shareholders
EquityInterest-bearing
demand deposits
    
    $
    83,566
    
    
    $
    151
    
    
    
    0.24
    %
    
    $
    80,958
    
    
    $
    113
    
    
    
    0.19
    %Savings deposits
    
    
    103,305
    
    
    
    246
    
    
    
    0.32
    %
    
    
    106,194
    
    
    
    241
    
    
    
    0.30
    %Money market
deposits
    
    
    91,271
    
    
    
    1,160
    
    
    
    1.70
    %
    
    
    92,747
    
    
    
    714
    
    
    
    1.03
    %Retail certificates
of deposit
    
    
    174,777
    
    
    
    3,986
    
    
    
    3.05
    %
    
    
    163,891
    
    
    
    3,273
    
    
    
    2.67
    %Brokered
certificates of
deposit
    
    
    35,543
    
    
    
    880
    
    
    
    3.31
    %
    
    
    3,176
    
    
    
    63
    
    
    
    2.65
    %Public fund
certificates of
deposit
    
    
    49,723
    
    
    
    1,151
    
    
    
    3.09
    %
    
    
    47,440
    
    
    
    529
    
    
    
    1.49
    %Short-term
borrowings
    
    
    17,437
    
    
    
    382
    
    
    
    2.93
    %
    
    
    18,980
    
    
    
    154
    
    
    
    1.08
    %FHLB advances
    
    
    63,593
    
    
    
    1,387
    
    
    
    2.92
    %
    
    
    77,485
    
    
    
    1,515
    
    
    
    2.61
    %Total Interest -
Bearing
Liabilities
    
    $
    619,215
    
    
    $
    9,343
    
    
    
    2.02
    %
    
    $
    590,871
    
    
    $
    6,602
    
    
    
    1.49
    %Noninterest-bearing
deposits
    
    
    94,969
    
    
    
    
    
    
    
    
    
    
    
    89,476Other liabilities
    
    
    5,764
    
    
    
    
    
    
    
    
    
    
    
    4,927Shareholders Equity
    
    
    70,724
    
    
    
    
    
    
    
    
    
    
    
    68,995Total
Liabilities and
Shareholders
equity
    
    $
    790,672
    
    
    
    
    
    
    
    
    
    
    $
    754,269Net Interest Income
and Margin (FTE)
    
    
    
    
    
    $
    22,512
    
    
    
    4.09
    %
    
    
    
    
    
    $
    20,904
    
    
    
    3.96
    %Taxable equivalent
adjustment
    
    
    
    
    
    
    (153
    )
    
    
    -0.03
    %
    
    
    
    
    
    
    (174
    )
    
    
    -0.03
    %Net Interest Income
Per Financial
Statements
    
    
    
    
    
    $
    22,359
    
    
    
    
    
    
    
    
    
    
    $
    20,730Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    4.06
    %
    
    
    
    
    
    
    
    
    
    
    3.93
    %
 Rate/Volume Analysis of Net Interest Income (FTE)
 For the Nine Months Ended September 30,Increase (Decrease) in Interest Income/Expense 2005 and(Dollars in thousands)
    
    2004Volume
    
    Rate
    
    TotalSecurities-taxable
    
    $
    (125
    )
    
    $
    512
    
    
    $
    387Securities-tax exempt
    
    
    5
    
    
    
    (68
    )
    
    
    (63
    )Federal funds sold and short-term investments
    
    
    10
    
    
    
    16
    
    
    
    26Commercial loans
    
    
    1,837
    
    
    
    2,184
    
    
    
    4,021Real estate mortgage loans
    
    
    (861
    )
    
    
    (326
    )
    
    
    (1,187
    )Installment loans
    
    
    (512
    )
    
    
    (9
    )
    
    
    (521
    )Purchased installment loans
    
    
    535
    
    
    
    181
    
    
    
    716Home equity lines
    
    
    172
    
    
    
    798
    
    
    
    970Total Interest Income
    
    $
    1,061
    
    
    $
    3,288
    
    
    $
    4,349Interest-bearing demand deposits
    
    $
    5
    
    
    $
    33
    
    
    $
    38Savings deposit
    
    
    (7
    )
    
    
    12
    
    
    
    5Money market deposits
    
    
    (19
    )
    
    
    465
    
    
    
    446Retail certificates of deposit
    
    
    236
    
    
    
    477
    
    
    
    713Brokered certificates of deposit
    
    
    670
    
    
    
    147
    
    
    
    817Public fund certificates of deposit
    
    
    51
    
    
    
    571
    
    
    
    622Short-term borrowings
    
    
    (37
    )
    
    
    265
    
    
    
    228FHLB advances
    
    
    (245
    )
    
    
    117
    
    
    
    (128
    )Total Interest Expense
    
    $
    654
    
    
    $
    2,087
    
    
    $
    2,741Net Interest Income (FTE)
    
    $
    407
    
    
    $
    1,201
    
    
    $
    1,608
 24




---



##### 



Noninterest Income
 Table 3: Details on Noninterest Income
 Three Months Ended
    
    
    For the Nine MonthsSeptember 30,
    
    
    Ended September 30,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Deposit service charges
    
    $
    1,152
    
    
    $
    1,131
    
    
    $
    3,112
    
    
    $
    3,146Trust and investment management services
    
    
    555
    
    
    
    539
    
    
    
    1,627
    
    
    
    1,611Mortgage banking revenue
    
    
    242
    
    
    
    108
    
    
    
    967
    
    
    
    108Income from investment in life insurance
    
    
    117
    
    
    
    157
    
    
    
    426
    
    
    
    477Securities gains, net
    
    
    
    
    
    
    158
    
    
    
    174
    
    
    
    381Gains on sales of loans
    
    
    
    
    
    
    17
    
    
    
    132
    
    
    
    100Gains (losses) on sales of other assets, net
    
    
    (31
    )
    
    
    285
    
    
    
    (32
    )
    
    
    285Other noninterest income
    
    
    573
    
    
    
    716
    
    
    
    1,768
    
    
    
    2,494Total noninterest income
    
    $
    2,608
    
    
    $
    3,111
    
    
    $
    8,174
    
    
    $
    8,602
 Three Months Ended September 30, 2005 as compared to the Three Months Ended September 30, 2004
  25




---



##### 



Nine Months Ended September 30, 2005 as compared to the Nine Months Ended September 30, 2004
  Noninterest Expense
 Table 4: Details on Noninterest Expense
 For the Three Months
    
    
    For the Nine MonthsEnded September 30,
    
    
    Ended September 30,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Salaries and employee benefits
    
    $
    3,414
    
    
    $
    3,223
    
    
    $
    11,653
    
    
    $
    9,168Net occupancy
    
    
    402
    
    
    
    407
    
    
    
    1,368
    
    
    
    1,190Furniture and equipment
    
    
    746
    
    
    
    717
    
    
    
    2,281
    
    
    
    2,046Electronic banking expenses
    
    
    136
    
    
    
    350
    
    
    
    400
    
    
    
    1,075Supplies, postage, and delivery
    
    
    290
    
    
    
    421
    
    
    
    934
    
    
    
    930Outside services
    
    
    394
    
    
    
    306
    
    
    
    1,224
    
    
    
    840Marketing and public relations
    
    
    258
    
    
    
    264
    
    
    
    863
    
    
    
    757Ohio franchise tax
    
    
    179
    
    
    
    181
    
    
    
    561
    
    
    
    549Goodwill impairment
    
    
    
    
    
    
    
    
    
    
    311
    
    
    
    Other noninterest expense
    
    
    945
    
    
    
    891
    
    
    
    3,312
    
    
    
    2,443Total noninterest expense
    
    $
    6,764
    
    
    $
    6,760
    
    
    $
    22,907
    
    
    $
    18,998
 Three Months Ended September 30, 2005 as compared to the Three Months Ended September 30, 2004
  26




---



##### 



Nine Months Ended September 30, 2005 as compared to the Nine Months Ended September 30, 2004
  Income taxes
  27




---



##### 



Balance Sheet Analysis
 Overview
  Securities
  Loans
    28




---



##### 



Deposits
     Table 5: Deposits
 Average Balances OutstandingFor the Nine Month Period Ended September 30,Percent of
    
    
    
    
    
    
    
    
    
    Percent of(Dollars in thousands)
    
    2005
    
    Deposits
    
    Rate
    
    2004
    
    Deposits
    
    RateDemand deposits
    
    $
    94,969
    
    
    
    15.00
    %
    
    
    0.00
    %
    
    $
    89,476
    
    
    
    15.32
    %
    
    
    0.00
    %Interest-bearing demand
    
    
    83,566
    
    
    
    13.20
    %
    
    
    0.24
    %
    
    
    80,958
    
    
    
    13.87
    %
    
    
    0.19
    %Savings
    
    
    103,305
    
    
    
    16.32
    %
    
    
    0.32
    %
    
    
    106,194
    
    
    
    18.19
    %
    
    
    0.30
    %Money market deposits
    
    
    91,271
    
    
    
    14.42
    %
    
    
    1.70
    %
    
    
    92,747
    
    
    
    15.88
    %
    
    
    1.03
    %Retail certificates of deposit
    
    
    174,777
    
    
    
    27.60
    %
    
    
    3.05
    %
    
    
    163,891
    
    
    
    28.07
    %
    
    
    2.67
    %Brokered certificates of deposit
    
    
    35,543
    
    
    
    5.61
    %
    
    
    3.31
    %
    
    
    3,175
    
    
    
    0.54
    %
    
    
    2.65
    %Public fund certificates of deposit
    
    
    49,723
    
    
    
    7.85
    %
    
    
    3.09
    %
    
    
    47,440
    
    
    
    8.13
    %
    
    
    1.49
    %Total Deposits
    
    $
    633,154
    
    
    
    100.00
    %
    
    
    1.60
    %
    
    $
    583,882
    
    
    
    100.00
    %
    
    
    1.13
    %
 Borrowings
  Regulatory Capital
  29




---



##### 



Table 6: Capital Ratios
 September 30,
    
    December 31,
    
    Well-Capitalized2005
    
    2004
    
    RatioLorain National BankTier 1 Capital (average assets)
    
    
    7.62
    %
    
    
    7.86
    %
    
    
    5.00
    %Tier 1 Capital (risk weighted)
    
    
    9.20
    %
    
    
    9.36
    %
    
    
    6.00
    %Total Capital (risk weighted)
    
    
    10.97
    %
    
    
    11.13
    %
    
    
    10.00
    %LNB Bancorp, Inc.Tier 1 Capital (average assets)
    
    
    8.53
    %
    
    
    9.05
    %
    
    
    5.00
    %Tier 1 Capital (risk weighted)
    
    
    10.22
    %
    
    
    10.58
    %
    
    
    6.00
    %Total Capital (risk weighted)
    
    
    11.40
    %
    
    
    11.72
    %
    
    
    10.00
    %
  ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
 RISK ELEMENTS
  Credit Risk Management
  30




---



##### 



Nonperforming Assets
     31




---



##### 



Table 7: Nonperforming Assets
 September 30,
    
    
    December 31,(Dollars in thousands)
    
    2005
    
    
    2004Commercial
    
    $
    6,364
    
    
    $
    3,255Real estate mortgage
    
    
    919
    
    
    
    1,116Installment
    
    
    148
    
    
    
    150Purchased installment
    
    
    
    
    
    
    Home equity lines
    
    
    21
    
    
    
    400Total nonperforming loans
    
    
    7,452
    
    
    
    4,921Other foreclosed assets
    
    
    399
    
    
    
    420Total nonperforming assets
    
    $
    7,851
    
    
    $
    5,341Allowance for loan losses to nonperforming loans
    
    
    105.9
    %
    
    
    150.1
    %Nonperforming loans to total loans
    
    
    1.25
    %
    
    
    0.85
    %Nonperforming assets to total assets
    
    
    0.97
    %
    
    
    0.68
    %
 Provision and Allowance for Loan Losses
  Table 8: Analysis of Allowance for Loan Losses
 For the Nine
    
    
    For the NineFor the Three Months
    
    
    For the Three Months
    
    
    Months Ended
    
    
    Months EndedEnded September 30,
    
    
    Ended September 30,
    
    
    September 30,
    
    
    September 30,(Dollars in thousands)
    
    2005
    
    
    2004
    
    
    2005
    
    
    2004Balance at beginning of period
    
    $
    7,793
    
    
    $
    7,989
    
    
    $
    7,386
    
    
    $
    7,730Charge-offs:Commercial
    
    
    104
    
    
    
    886
    
    
    
    387
    
    
    
    1,309Real estate mortgage
    
    
    
    
    
    
    9
    
    
    
    
    
    
    
    21Installment
    
    
    105
    
    
    
    191
    
    
    
    307
    
    
    
    556Purchased installment
    
    
    32
    
    
    
    
    
    
    
    33
    
    
    
    Home equity lines
    
    
    35
    
    
    
    
    
    
    
    60
    
    
    
    Total charge-offs
    
    
    276
    
    
    
    1,086
    
    
    
    787
    
    
    
    1,886Recoveries:Commercial
    
    
    20
    
    
    
    16
    
    
    
    51
    
    
    
    44Real Estate Mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Installment
    
    
    53
    
    
    
    33
    
    
    
    141
    
    
    
    114Purchased installment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Home equity lines
    
    
    
    
    
    
    
    
    
    
    1
    
    
    
    Total
recoveries
    
    
    73
    
    
    
    49
    
    
    
    193
    
    
    
    158Net charge-offs
    
    
    (203
    )
    
    
    (1,037
    )
    
    
    (594
    )
    
    
    (1,728
    )Provision for loan losses
    
    
    300
    
    
    
    399
    
    
    
    1,098
    
    
    
    1,349Balance at end of period
    
    $
    7,890
    
    
    $
    7,351
    
    
    $
    7,890
    
    
    $
    7,351
 32




---



##### 



Market Risk Management
    33




---



##### 



ITEM 4. Controls and Procedures
   34




---



##### 



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
  (a) Total
    
    (b)
    
    (c) Total Number of
    
    (d) Maximum NumberNumber of
    
    Average
    
    Shares (or Units)
    
    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 ProgramsJuly 1, 2005 
July 31, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    332,000August 1,
2005 
August 31, 2005
    
    
    40,000
    
    
    $
    17.56
    
    
    
    40,000
    
    
    
    292,000September 1, 2005 
September 30, 2005
    
    
    30,000
    
    
    $
    17.40
    
    
    
    30,000
    
    
    
    262,000Total
    
    
    70,000
    
    
    $
    17.49
    
    
    
    70,000
    
    
    
    262,000
  Item 5. Other Information
  35




---



##### 



Item 6. Exhibits
  36




---



##### 



SIGNATURE
  LNB BANCORP, INC.
(Registrant)Date: November 8, 2005
    
    /s/ Terry M. WhiteTerry M. White
Chief Financial Officer(Duly Authorized Officer, Principal FinancialFinancial Officer, and Chief Accounting Officer)
 37




---



##### 



Exhibit10.1
    
    Employment agreement between the Corporation and Mr. Richard E. Lucas10.2
    
    Stock option agreement between the Corporation and Mr. Frank A. Soltis31.1
    
    Chief Executive Officer Rule 13a-14(a)/15d-14(a) Certification.31.2
    
    Chief Financial Officer Rule 13a-14(a)/15d-14(a) Certification.32.1
    
    Certification pursuant to 18 U.S.C. section 1350, as enacted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    Certification pursuant to 18 U.S.C. section 1350, as enacted pursuant
to section 906 of the Sarbanes-Oxley Act of 2002.
 38