##### Table of Contents



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 June 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
    
    34-1406303State or other jurisdiction(of Incorporation or organization)
    
    (I.R.S. Employer Identification No.)457 Broadway, Lorain, Ohio
    
    44052 - 1769(Address of principal executive offices)
    
    (Zip Code)
 
 
 þ o
 þ o




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Part I Financial InformationItem 1. Financial Statements.Consolidated Balance Sheets (unaudited)
June 30, 2005 and December 31, 2004Consolidated Statements of Income (unaudited)
For the three and six months ended June 30, 2005 and June 30, 2004Consolidated Statements of Changes in Shareholders Equity (unaudited)
For the six months ended June 30, 2005 and June 30, 2004Consolidated Statements of Cash Flows (unaudited)
For the six months ended June 30, 2005 and June 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 1. Legal Proceedings.Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.Item 3. Defaults Upon Senior Securities.Item 4. Submission of Matters to a Vote of Security Holders.Item 5. Other Information.Item 6. Exhibits.SignaturesExhibit 31(I)(A) 302 Certification - CEOExhibit 31(I)(B) 302 Certification - CFOExhibit 32(A) 906 Certification - CEOExhibit 32(B) 906 Certification - CFO
  2




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##### Table of Contents



Consolidated Balance Sheets
 (Dollars in thousands except share and per share amounts)
    
    June 30, 2005
    
    December 31, 2004(Unaudited)AssetsCash and cash equivalents:Cash and due from banks
    
    $
    30,096
    
    
    $
    23,123Short-term investments
    
    
    
    
    
    
    3,695Total cash and cash equivalents
    
    
    30,096
    
    
    
    26,818Investment Securities:Available for sale, at fair value
    
    
    144,718
    
    
    
    145,588Federal Home Loan Bank and Federal Reserve stock
    
    
    4,139
    
    
    
    4,033Total securities
    
    
    148,857
    
    
    
    149,621Loans:Loans held for sale
    
    
    3,867
    
    
    
    3,067Portfolio loans
    
    
    578,331
    
    
    
    572,157Allowance for loan losses
    
    
    (7,793
    )
    
    
    (7,386
    )Net loans
    
    
    574,405
    
    
    
    567,838Bank premises and equipment, net
    
    
    11,179
    
    
    
    11,493Other real estate owned
    
    
    357
    
    
    
    420Intangible assets
    
    
    3,402
    
    
    
    3,801Other assets
    
    
    22,782
    
    
    
    21,658Total Assets
    
    $
    791,078
    
    
    $
    781,649LiabilitiesDeposits:Noninterest-bearing
    
    $
    93,816
    
    
    $
    96,280Interest bearing
    
    
    545,001
    
    
    
    509,263Total deposits
    
    
    638,817
    
    
    
    605,543Short-term borrowings
    
    
    13,241
    
    
    
    31,619Federal Home Loan Bank advances
    
    
    62,461
    
    
    
    69,296Accrued interest, taxes and other liabilities
    
    
    6,243
    
    
    
    4,617Total Liabilities
    
    
    720,762
    
    
    
    711,075Shareholders EquityCommon stock, par value $1 per share, authorized 15,000,000
shares,
issued 6,771,867 at June 30, 2005 and 6,766,867 at December 31,
2004
    
    
    6,772
    
    
    
    6,767Additional paid-in capital
    
    
    26,334
    
    
    
    26,243Retained earnings
    
    
    41,322
    
    
    
    41,291Accumulated other comprehensive loss
    
    
    (1,682
    )
    
    
    (1,297
    )Treasury stock at cost, 125,686 shares
    
    
    (2,430
    )
    
    
    (2,430
    )Total Shareholders Equity
    
    
    70,316
    
    
    
    70,574Total Liabilities and Shareholders Equity
    
    $
    791,078
    
    
    $
    781,649
 See Notes to Consolidated Financial Statements
 3




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##### Table of Contents



Consolidated Statements of Income
 For the Three Months
    
    For the Six Months EndedEnded June 30,
    
    June 30,(Dollars in thousands except share and per share amounts)
    
    2005
    
    2004
    
    2005
    
    2004(unaudited)
    
    
    
    
    
    (unaudited)Interest IncomeInterest and fees on loans
    
    $
    9,302
    
    
    $
    7,882
    
    
    $
    18,135
    
    
    $
    15,651Interest and dividends on investment securities:Taxable
    
    
    1,106
    
    
    
    1,007
    
    
    
    2,173
    
    
    
    2,031Tax Exempt
    
    
    112
    
    
    
    128
    
    
    
    226
    
    
    
    273Interest on cash equivalents
    
    
    35
    
    
    
    19
    
    
    
    73
    
    
    
    33Total interest income
    
    
    10,555
    
    
    
    9,036
    
    
    
    20,607
    
    
    
    17,988Interest ExpenseDeposits
    
    
    2,410
    
    
    
    1,607
    
    
    
    4,540
    
    
    
    3,221Short-term borrowings
    
    
    105
    
    
    
    50
    
    
    
    194
    
    
    
    91Federal Home Loan Bank advances
    
    
    483
    
    
    
    528
    
    
    
    984
    
    
    
    979Total interest expense
    
    
    2,998
    
    
    
    2,185
    
    
    
    5,718
    
    
    
    4,291Net Interest Income
    
    
    7,557
    
    
    
    6,851
    
    
    
    14,889
    
    
    
    13,697Provision for Loan Losses
    
    
    399
    
    
    
    425
    
    
    
    798
    
    
    
    950Net interest income after provision for loan losses
    
    
    7,158
    
    
    
    6,426
    
    
    
    14,091
    
    
    
    12,747Noninterest IncomeDeposit service charges
    
    
    1,052
    
    
    
    1,031
    
    
    
    1,960
    
    
    
    2,015Trust and investment management services
    
    
    555
    
    
    
    486
    
    
    
    1,072
    
    
    
    1,072Mortgage banking revenue
    
    
    355
    
    
    
    
    
    
    
    725Income from investment in life insurance
    
    
    116
    
    
    
    161
    
    
    
    309
    
    
    
    320Securities gains (losses), net
    
    
    (6
    )
    
    
    
    
    
    
    174
    
    
    
    223Gain on sale of loans
    
    
    
    
    
    
    46
    
    
    
    132
    
    
    
    83Loss on sale of other assets, net
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Other noninterest income
    
    
    568
    
    
    
    888
    
    
    
    1,195
    
    
    
    1,778Total noninterest income
    
    
    2,639
    
    
    
    2,612
    
    
    
    5,566
    
    
    
    5,491Noninterest ExpenseSalaries and employee benefits
    
    
    4,260
    
    
    
    2,907
    
    
    
    8,238
    
    
    
    5,945Net occupancy
    
    
    449
    
    
    
    409
    
    
    
    966
    
    
    
    783Furniture and equipment
    
    
    802
    
    
    
    659
    
    
    
    1,535
    
    
    
    1,329Electronic banking expenses
    
    
    141
    
    
    
    393
    
    
    
    264
    
    
    
    725Supplies, postage and delivery
    
    
    273
    
    
    
    257
    
    
    
    644
    
    
    
    509Outside services
    
    
    521
    
    
    
    300
    
    
    
    830
    
    
    
    534Marketing and public relations
    
    
    298
    
    
    
    314
    
    
    
    605
    
    
    
    493Ohio franchise tax
    
    
    200
    
    
    
    180
    
    
    
    382
    
    
    
    368Goodwill impairment
    
    
    311
    
    
    
    
    
    
    
    311
    
    
    
    Other noninterest expense
    
    
    1,217
    
    
    
    844
    
    
    
    2,368
    
    
    
    1,552Total noninterest expense
    
    
    8,472
    
    
    
    6,263
    
    
    
    16,143
    
    
    
    12,238Income before income tax expense
    
    
    1,325
    
    
    
    2,775
    
    
    
    3,514
    
    
    
    6,000Income tax expense
    
    
    473
    
    
    
    795
    
    
    
    1,091
    
    
    
    1,764Net Income
    
    $
    852
    
    
    $
    1,980
    
    
    $
    2,423
    
    
    $
    4,236Net Income Per Common ShareBasic
    
    $
    0.13
    
    
    $
    0.30
    
    
    $
    0.36
    
    
    $
    0.64Diluted
    
    
    0.13
    
    
    
    0.30
    
    
    
    0.36
    
    
    
    0.64Dividends declared
    
    
    0.18
    
    
    
    0.18
    
    
    
    0.36
    
    
    
    0.36Average Common Shares OutstandingBasic
    
    
    6,642,390
    
    
    
    6,628,515
    
    
    
    6,641,789
    
    
    
    6,623,156Diluted
    
    
    6,642,393
    
    
    
    6,628,856
    
    
    
    6,641,790
    
    
    
    6,623,953
 See Notes to Consolidated Financial Statements
 4




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##### Table of Contents



Consolidated Statements of Shareholders Equity
 AccumulatedAdditional
    
    
    
    
    
    OtherCommon
    
    Paid-in
    
    Retained
    
    Comprehensive
    
    Treasury(Dollars in thousands except per share amounts)
    
    Stock
    
    Capital
    
    Earnings
    
    Loss
    
    Stock
    
    TotalBalance, January 1, 2004 (unaudited)
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    38,714
    
    
    $
    (704
    )
    
    $
    (2,885
    )
    
    $
    68,135Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    4,236
    
    
    
    
    
    
    
    
    
    
    
    4,236Other comprehensive income, net of tax:Minimum pension liability
    
    
    
    
    
    
    
    
    
    
    0
    
    
    
    (381
    )
    
    
    
    
    
    
    (381
    )Change in unrealized losses
on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,766
    )
    
    
    
    
    
    
    (1,766
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,470Common dividends declared, $.36 per share
    
    
    
    
    
    
    
    
    
    
    (2,386
    )
    
    
    
    
    
    
    
    
    
    
    (2,386
    )Issuance of Treasury stock under
stock option agreements
    
    
    
    
    
    
    
    
    
    
    (121
    )
    
    
    
    
    
    
    454
    
    
    
    333Balance, June 30, 2004
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    40,443
    
    
    $
    (2,851
    )
    
    $
    (2,431
    )
    
    $
    68,171Balance, January 1, 2005 (unaudited)
    
    $
    6,767
    
    
    $
    26,243
    
    
    $
    41,291
    
    
    $
    (1,297
    )
    
    $
    (2,430
    )
    
    $
    70,574Comprehensive income:Net income
    
    
    
    
    
    
    
    
    
    
    2,423
    
    
    
    
    
    
    
    
    
    
    
    2,423Other comprehensive loss, net of tax:Change in unrealized losses
on securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (385
    )
    
    
    
    
    
    
    (385
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,038Issuance of common stock under employment agreement
    
    
    5
    
    
    
    91
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    96Common dividends declared, $.36 per share
    
    
    
    
    
    
    
    
    
    
    (2,392
    )
    
    
    
    
    
    
    
    
    
    
    (2,392
    )Balance, June 30, 2005
    
    $
    6,772
    
    
    $
    26,334
    
    
    $
    41,322
    
    
    $
    (1,682
    )
    
    $
    (2,430
    )
    
    $
    70,316
 See Notes to Consolidated Financial Statements
 5




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##### Table of Contents



Consolidated Statements of Cash Flows
 For the Six Months EndedJune 30,(Dollars in thousands)
    
    2005
    
    2004(unaudited)Cash flows from operating activities:Net income
    
    $
    2,423
    
    
    $
    4,236Adjustments to reconcile net income to net cash
provided by (used in) operating activities:Provision for loan losses
    
    
    798
    
    
    
    950Depreciation and amortization
    
    
    808
    
    
    
    933Securities gains, net
    
    
    (174
    )
    
    
    (223
    )Amortization of premiums and discounts, net
    
    
    362
    
    
    
    377Deferred loan fee amortization
    
    
    (179
    )
    
    
    171Deferred income taxes
    
    
    358
    
    
    
    Gain on sale of other assets, net
    
    
    (131
    )
    
    
    (83
    )Other, net
    
    
    (368
    )
    
    
    384Changes in other assets and liabilities:Accrued interest receviable
    
    
    226
    
    
    
    160Other assets
    
    
    (203
    )
    
    
    (656
    )Accrued interest, taxes, and other liabilities
    
    
    1,627
    
    
    
    85Net cash provided by operating activities
    
    
    5,547
    
    
    
    6,334Cash flows from investing activities:Purchases of available for sale securities
    
    
    (15,581
    )
    
    
    (33,651
    )Proceeds from principal payments and maturities of available for sale securities
    
    
    11,052
    
    
    
    33,334Proceeds from sale of available for sale securities
    
    
    4,576
    
    
    
    12,631Purchase of held to maturity securities
    
    
    
    
    
    
    (16,517
    )Proceeds from maturities of held to maturity securities
    
    
    
    
    
    
    273Net increase in portfolio loans
    
    
    (6,746
    )
    
    
    (14,561
    )Additions to premises, leasehold improvements and equipment
    
    
    (678
    )
    
    
    (1,783
    )Proceeds from the sale of premises, leasehold improvements and equipment
    
    
    11
    
    
    
    Purchases of other real estate
    
    
    (63
    )
    
    
    (278
    )Proceeds from sales of other real estate
    
    
    367
    
    
    
    271Proceeds from sales of short-term investments
    
    
    3,718
    
    
    
    Net cash used in investing activities
    
    
    (3,344
    )
    
    
    (20,281
    )Cash flows from financing activities:Net increase in deposits
    
    
    33,274
    
    
    
    9,190Net increase (decrease) in short-term borrowings
    
    
    (18,378
    )
    
    
    3,892Proceeds from Federal Home Loan Bank advances
    
    
    24,000
    
    
    
    103,000Repayment of Federal Home Loan Bank advances
    
    
    (35,333
    )
    
    
    (97,239
    )Issuance of Common stock
    
    
    (96
    )
    
    
    Proceeds from exercise of employee stock options
    
    
    
    
    
    
    333Dividends paid
    
    
    (2,392
    )
    
    
    (2,448
    )Net cash provided by financing activities
    
    
    1,075
    
    
    
    16,728Net increase in cash and cash equivalents
    
    
    3,278
    
    
    
    2,781Cash and cash equivalents, January 1
    
    
    26,818
    
    
    
    27,749Cash and cash equivalents, June 30
    
    $
    30,096
    
    
    $
    30,530Supplemental disclosure of cash flow information:Cash paid during the period for:Interest
    
    $
    5,718
    
    
    $
    4,310Income taxes
    
    
    961
    
    
    
    825Supplemental disclosures of noncash investing and financing activities:Change in fair value of available-for-sale investment securities, net of tax
    
    
    (385
    )
    
    
    (1,093
    )Transfer of loans to other real estate owned
    
    
    383
    
    
    
    1,046
 See Notes to Consolidated Financial Statements
 6




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##### Table of Contents



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




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##### Table of Contents



Securities
  Federal Reserve Bank (FRB) and Federal Home Loan Bank (FHLB) Stock
  Loans
     Allowance for Loan Losses
  8




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##### Table of Contents



Bank Premises and Equipment
  Goodwill and Core Deposit Intangibles
  Income Taxes
  Comprehensive Income
  Stock-Based Compensation
  9




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##### Table of Contents



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




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##### Table of Contents



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 Ended
    
    For the Six Months EndedJune 30,
    
    June 30,(Dollars in thousands except share and per share amounts)
    
    2005
    
    2004
    
    2005
    
    2004Net income available to common shareholders
    
    $
    852
    
    
    $
    1,980
    
    
    $
    2,423
    
    
    $
    4,236Weighted average common shares outstanding
    
    
    6,642,390
    
    
    
    6,628,515
    
    
    
    6,641,789
    
    
    
    6,623,156Dilutive effect of stock options
    
    
    3
    
    
    
    341
    
    
    
    1
    
    
    
    797Diluted weighted average common shares outstanding
    
    
    6,642,393
    
    
    
    6,628,856
    
    
    
    6,641,790
    
    
    
    6,623,953Basic earnings per common share
    
    $
    0.13
    
    
    $
    0.30
    
    
    
    0.36
    
    
    $
    0.64Diluted earnings per common share
    
    $
    0.13
    
    
    $
    0.30
    
    
    
    0.36
    
    
    $
    0.64
  4. Securities
  June 30, 2005Amortized
    
    Unrealized
    
    Unrealized
    
    Fair(Dollars in thousands)
    
    Cost
    
    Gains
    
    Losses
    
    ValueSecurities available for sale:U.S. Government agencies
and corporations
    
    $
    135,381
    
    
    $
    71
    
    
    $
    (2,440
    )
    
    $
    133,012State and political subdivisions
    
    
    11,183
    
    
    
    418
    
    
    
    (15
    )
    
    
    11,586Equity securities
    
    
    52
    
    
    
    68
    
    
    
    
    
    
    
    120Federal Home Loan Bank and
Federal Reserve Bank stock
    
    
    4,139
    
    
    
    
    
    
    
    
    
    
    
    4,139Total securities
    
    $
    150,756
    
    
    $
    556
    
    
    $
    (2,455
    )
    
    $
    148,857
 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
 11




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##### Table of Contents



June 30, 2005Less 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
    
    $
    7,203
    
    
    $
    (61
    )
    
    $
    53,541
    
    
    $
    (1,127
    )
    
    $
    60,744
    
    
    $
    (1,188
    )U.S. Government agency
mortgage-backed securities
    
    
    12,526
    
    
    
    (136
    )
    
    
    47,487
    
    
    
    (1,115
    )
    
    
    60,013
    
    
    
    (1,251
    )State and political subdivisions
    
    
    2,007
    
    
    
    (5
    )
    
    
    836
    
    
    
    (11
    )
    
    
    2,843
    
    
    
    (16
    )Total
    
    $
    21,736
    
    
    $
    (202
    )
    
    $
    101,864
    
    
    $
    (2,253
    )
    
    $
    123,600
    
    
    $
    (2,455
    )
 5. Loans
  (Dollars in thousands)
    
    June 30, 2005
    
    December 31, 2004Commercial
    
    $
    355,093
    
    
    $
    339,439Real Estate Mortgage
    
    
    87,272
    
    
    
    112,787Installment
    
    
    37,319
    
    
    
    33,682Purchased Installment
    
    
    37,287
    
    
    
    27,173Home Equity Lines
    
    
    65,227
    
    
    
    62,143Total loans
    
    
    582,198
    
    
    
    575,224Allowance for loan losses
    
    
    (7,793
    )
    
    
    (7,386
    )Net loans
    
    $
    574,405
    
    
    $
    567,838
  6. Retirement Pension Plan
   12




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##### Table of Contents



For the Three Months
    
    For the Six Months EndedEnded June 30
    
    June 30(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Interest cost on projected benefit obligation
    
    
    100
    
    
    
    113
    
    
    
    200
    
    
    
    226Expected return on plan assets
    
    
    (125
    )
    
    
    (94
    )
    
    
    (250
    )
    
    
    (188
    )Amortization of unrecognized prior service liability
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Recognized actuarial (gain) or loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net periodic pension cost
    
    $
    25
    
    
    $
    19
    
    
    $
    50
    
    
    $
    38Loss recognized due to curtailment
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Loss recognized due to settlement
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total pension cost
    
    $
    25
    
    
    $
    19
    
    
    $
    50
    
    
    $
    38
 Weighted-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
    
    
    
    11,9392004
    
    
    10,000
    
    
    
    19.60
    
    
    
    10,0002005
    
    
    30,000
    
    
    
    19.17
    
    
    
    02005
    
    
    2,500
    
    
    
    16.50
    
    
    
    0Totals
    
    
    54,439
    
    
    $
    19.06
    
    
    
    22,939
   For the Three Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,(Dollars in thousands, except per share amounts)
    
    2005
    
    2004
    
    2005
    
    2004Net Income, as reported
    
    $
    852
    
    
    $
    1,980
    
    
    $
    2,423
    
    
    $
    4,236Add: Stock-based compensation, net of tax, as reported
    
    
    62
    
    
    
    
    
    
    
    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
    
    
    (78
    )
    
    
    (6
    )
    
    
    (88
    )
    
    
    (12
    )Pro forma net income available to common shareholders
    
    $
    836
    
    
    $
    1,974
    
    
    $
    2,397
    
    
    $
    4,224Pro forma net income per share:Basic  as reported
    
    $
    0.13
    
    
    $
    0.30
    
    
    $
    0.36
    
    
    $
    0.64Basic  pro forma
    
    
    0.13
    
    
    
    0.30
    
    
    
    0.36
    
    
    
    0.64Diluted  as reported
    
    
    0.13
    
    
    
    0.30
    
    
    
    0.36
    
    
    
    0.64Diluted  pro forma
    
    
    0.13
    
    
    
    0.30
    
    
    
    0.36
    
    
    
    0.64
 13




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##### Table of Contents



8. Interest-Bearing Deposits
  June 30,
    
    December 31,(Dollars in thousands)
    
    2005
    
    2004Interest-bearing demand
    
    $
    79,371
    
    
    $
    82,672Savings
    
    
    103,038
    
    
    
    104,309Money market
    
    
    90,362
    
    
    
    93,188Time:Retail certificates of deposit
    
    
    180,860
    
    
    
    167,192Brokered certificates of deposit
    
    
    33,691
    
    
    
    22,824Public fund certificates of deposit
    
    
    57,679
    
    
    
    39,078Total time deposits
    
    
    272,230
    
    
    
    229,094Total Interest-bearing deposits
    
    $
    545,001
    
    
    $
    509,263
  9. Short-Term Borrowings
  June 30,
    
    December 31,(Dollars in thousands)
    
    2005
    
    2004Securities sold under agreements to repurchase
    
    $
    13,241
    
    
    $
    11,619Federal funds purchased
    
    
    
    
    
    
    20,000Total Short-term borrowings
    
    $
    13,241
    
    
    $
    31,619
 10. Federal Home Loan Bank Advances
  June 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%, due July 22, 2005
    
    
    16,000
    
    
    
    16,000FHLB advance  2.21%, due September 9, 2005
    
    
    360
    
    
    
    360FHLB advance  2.87%, due September 30, 2005
    
    
    5,000
    
    
    
    5,000FHLB 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
    
    
    101
    
    
    
    106Total FHLB advances
    
    $
    62,461
    
    
    $
    69,296
 14




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##### Table of Contents



ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations.
 FINANCIAL REVIEW
   Introduction (Dollars in thousands except per
share data)
    Results of Operations (Dollars in thousands
except per share data)
 Net Interest Income
  15




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##### Table of Contents



Three Months Ended June 30, 2005 as compared to the Three Months Ended June 30, 2004
     Average Balances
   16




---



##### Table of Contents



Six Months Ended June 30, 2005 as compared to the Six Months Ended June 30, 2004
    Average Balances
   17




---



##### Table of Contents



Tax Equivalent Adjustments to Yields and Margins
   18




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##### Table of Contents



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 June 30,2005
    
    2004Average
    
    
    
    
    
    
    
    
    

    Average(Dollars in thousands)
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateAssets:Securities-taxable
    
    $
    132,013
    
    
    $
    1,106
    
    
    
    3.36
    %
    
    $
    138,573
    
    
    $
    1,007
    
    
    
    2.92
    %Securities-tax exempt
    
    
    11,542
    
    
    
    128
    
    
    
    4.45
    %
    
    
    12,460
    
    
    
    148
    
    
    
    4.78
    %Federal funds sold and
short-term investments
    
    
    9,440
    
    
    
    34
    
    
    
    1.44
    %
    
    
    9,755
    
    
    
    19
    
    
    
    0.78
    %Commercial loans
    
    
    351,984
    
    
    
    5,881
    
    
    
    6.70
    %
    
    
    310,146
    
    
    
    4,488
    
    
    
    5.82
    %Real estate mortgage loans
    
    
    91,920
    
    
    
    1,385
    
    
    
    6.04
    %
    
    
    108,633
    
    
    
    1,757
    
    
    
    6.51
    %Installment loans
    
    
    38,903
    
    
    
    728
    
    
    
    7.51
    %
    
    
    48,904
    
    
    
    882
    
    
    
    7.25
    %Purchased installment loans
    
    
    29,755
    
    
    
    360
    
    
    
    4.85
    %
    
    
    12,317
    
    
    
    146
    
    
    
    4.77
    %Home equity lines
    
    
    63,210
    
    
    
    949
    
    
    
    6.02
    %
    
    
    59,513
    
    
    
    609
    
    
    
    4.12
    %Total Earning Assets
    
    $
    728,767
    
    
    $
    10,571
    
    
    
    5.82
    %
    
    $
    700,301
    
    
    $
    9,056
    
    
    
    5.20
    %Allowance for loan loss
    
    
    (7,618
    )
    
    
    
    
    
    
    
    
    
    
    (7,971
    )Cash and due from banks
    
    
    25,225
    
    
    
    
    
    
    
    
    
    
    
    24,490Bank owned life insurance
    
    
    13,522
    
    
    
    
    
    
    
    
    
    
    
    12,873Other assets
    
    
    23,597
    
    
    
    
    
    
    
    
    
    
    
    22,801Total Assets
    
    $
    783,493
    
    
    
    
    
    
    
    
    
    
    $
    752,494Liabilities and Shareholders EquityInterest-bearing demand deposits
    
    $
    83,869
    
    
    
    44
    
    
    
    0.21
    %
    
    $
    80,509
    
    
    $
    38
    
    
    
    0.19
    %Savings deposits
    
    
    104,639
    
    
    
    82
    
    
    
    0.31
    %
    
    
    106,170
    
    
    

    85
    
    
    
    0.32
    %Money market deposits
    
    
    91,276
    
    
    
    370
    
    
    
    1.63
    %
    
    
    92,501
    
    
    
    263
    
    
    
    1.14
    %Retail certificates of deposit
    
    
    171,492
    
    
    
    1,317
    
    
    
    3.08
    %
    
    
    164,109
    
    
    
    1,046
    
    
    
    2.56
    %Brokered Certificates of deposit
    
    
    32,248
    
    
    
    243
    
    
    
    3.02
    %
    
    
    343
    
    
    
    3
    
    
    
    3.52
    %Public fund certificates of deposit
    
    
    43,046
    
    
    
    354
    
    
    
    3.30
    %
    
    
    48,530
    
    
    
    173
    
    
    
    1.43
    %Short-term borrowings
    
    
    15,070
    
    
    
    105
    
    
    
    2.79
    %
    
    
    18,971
    
    
    
    49
    
    
    
    1.04
    %FHLB advances
    
    
    68,678
    
    
    
    483
    
    
    
    2.82
    %
    
    
    77,563
    
    
    
    528
    
    
    
    2.74
    %Total Interest-Bearing Liabilities
    
    $
    610,318
    
    
    $
    2,998
    
    
    
    1.97
    %
    
    $
    588,696
    
    
    $
    2,185
    
    
    
    1.49
    %Noninterest-bearing deposits
    
    
    96,745
    
    
    
    
    
    
    
    
    
    
    
    90,110Other liabilities
    
    
    5,747
    
    
    
    
    
    
    
    
    
    
    
    4,948Shareholders Equity
    
    
    70,683
    
    
    
    
    
    
    
    
    
    
    
    68,740Total Liabilities and
Shareholders equity
    
    $
    783,493
    
    
    
    
    
    
    
    
    
    
    $
    752,494Net Interest Income and Margin (FTE)
    
    
    
    
    
    $
    7,573
    
    
    
    4.17
    %
    
    
    
    
    
    $
    6,871
    
    
    
    3.95
    %Taxable equivalent adjustment
    
    
    
    
    
    
    (16
    )
    
    
    -0.01
    %
    
    
    
    
    
    
    (20
    )
    
    
    -0.01
    %Net Interest Income Per
Financial Statements
    
    
    
    
    
    $
    7,557
    
    
    
    
    
    
    
    
    
    
    $
    6,851Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    4.16
    %
    
    
    
    
    
    
    
    
    
    
    3.93
    %
 Rate/Volume Analysis of Net Interest Income (FTE)
 For the Three Months Ended June 30,Increase (Decrease) in Interest(Dollars in thousands)
    
    Income/Expense 2005 and 2004Volume
    
    Rate
    
    TotalSecurities-taxable
    
    
    (61
    )
    
    
    160
    
    
    
    99Securities-tax exempt
    
    
    (10
    )
    
    
    (10
    )
    
    
    (20
    )Federal funds sold and
short-term investments
    
    
    (1
    )
    
    
    16
    
    
    
    15Commercial loans
    
    
    660
    
    
    
    733
    
    
    
    1,393Real estate mortgage loans
    
    
    (262
    )
    
    
    (110
    )
    
    
    (372
    )Installment loans
    
    
    (177
    )
    
    
    23
    
    
    
    (154
    )Purchased installment loans
    
    
    208
    
    
    
    6
    
    
    
    214Home equity lines
    
    
    53
    
    
    
    287
    
    
    
    340Total Interest Income
    
    
    410
    
    
    
    1,105
    
    
    
    1,515Interest-bearing demand deposits
    
    
    2
    
    
    
    4
    
    
    
    6Savings deposit
    
    
    (1
    )
    
    
    (2
    )
    
    
    (3
    )Money market deposits
    
    
    (5
    )
    
    
    112
    
    
    
    107Retail certificates of deposit
    
    
    55
    
    
    
    216
    
    
    
    271Brokered certificates of deposit
    
    
    238
    
    
    
    2
    
    
    
    240Public fund certificates of deposit
    
    
    (56
    )
    
    
    237
    
    
    
    181Short-term borrowings
    
    
    (39
    )
    
    
    95
    
    
    
    56FHLB advances
    
    
    (58
    )
    
    
    13
    
    
    
    (45
    )Total Interest Expense
    
    
    136
    
    
    
    677
    
    
    
    813Net Interest Income (FTE)
    
    
    274
    
    
    
    428
    
    
    
    702
 19




---



##### Table of Contents



Table 2: Condensed Consolidated Average Balance Sheets  Interest, Rate, and Rate/ Volume
differentials are stated on a Fully-Tax Equivalent (FTE) Basis.
 For the Six Months Ended June 30,2005
    
    2004Average
    
    
    
    
    
    
    
    
    
    Average(Dollars in thousands)
    
    Balance
    
    Interest
    
    Rate
    
    Balance
    
    Interest
    
    RateAssets:Securities-taxable
    
    $
    132,441
    
    
    $
    2,173
    
    
    
    3.31
    %
    
    $
    138,678
    
    
    $
    2,031
    
    
    
    2.95
    %Securities-tax exempt
    
    
    11,587
    
    
    
    286
    
    
    
    4.98
    %
    
    
    12,597
    
    
    
    350
    
    
    
    5.59
    %Federal funds sold and
short-term investments
    
    
    9,453
    
    
    
    73
    
    
    
    1.56
    %
    
    
    8,441
    
    
    
    33
    
    
    
    0.79
    %Commercial loans
    
    
    350,181
    
    
    
    11,366
    
    
    
    6.55
    %
    
    
    307,625
    
    
    
    8,799
    
    
    
    5.75
    %Real estate mortgage loans
    
    
    93,171
    
    
    
    2,842
    
    
    
    6.15
    %
    
    
    109,807
    
    
    
    3,648
    
    
    
    6.68
    %Installment loans
    
    
    39,407
    
    
    
    1,493
    
    
    
    7.64
    %
    
    
    49,509
    
    
    
    1,765
    
    
    
    7.17
    %Purchased installment loans
    
    
    28,578
    
    
    
    652
    
    
    
    4.60
    %
    
    
    11,246
    
    
    
    230
    
    
    
    4.12
    %Home equity lines
    
    
    62,782
    
    
    
    1,782
    
    
    
    5.72
    %
    
    
    59,152
    
    
    
    1,209
    
    
    
    4.11
    %Total Earning Assets
    
    $
    727,600
    
    
    $
    20,667
    
    
    
    5.73
    %
    
    $
    697,055
    
    
    $
    18,065
    
    
    
    5.21
    %Allowance for loan loss
    
    
    (7,568
    )
    
    
    
    
    
    
    
    
    
    
    (7,938
    )Cash and due from banks
    
    
    25,242
    
    
    
    
    
    
    
    
    
    
    
    24,344Bank owned life insurance
    
    
    13,522
    
    
    
    
    
    
    
    
    
    
    
    12,873Other assets
    
    
    23,431
    
    
    
    
    
    
    
    
    
    
    
    22,602Total Assets
    
    $
    782,227
    
    
    
    
    
    
    
    
    
    
    $
    748,936Liabilities and Shareholders EquityInterest-bearing demand deposits
    
    $
    83,962
    
    
    
    86
    
    
    
    0.21
    %
    
    $
    80,175
    
    
    $
    74
    
    
    
    0.19
    %Savings deposits
    
    
    104,415
    
    
    
    160
    
    
    
    0.31
    %
    
    
    105,134
    
    
    
    162
    
    
    
    0.31
    %Money market deposits
    
    
    92,141
    
    
    
    699
    
    
    
    1.53
    %
    
    
    91,202
    
    
    
    452
    
    
    
    1.00
    %Retail certificates of deposit
    
    
    169,954
    
    
    
    2,510
    
    
    
    2.98
    %
    
    
    153,723
    
    
    
    2,187
    
    
    
    2.86
    %Brokered Certificates of deposit
    
    
    32,248
    
    
    
    486
    
    
    
    3.04
    %
    
    
    134
    
    
    
    2
    
    
    
    3.00
    %Public fund certificates of deposit
    
    
    41,321
    
    
    
    599
    
    
    
    2.92
    %
    
    
    60,879
    
    
    
    344
    
    
    
    1.14
    %Short-term borrowings
    
    
    15,055
    
    
    
    194
    
    
    
    2.60
    %
    
    
    18,464
    
    
    
    91
    
    
    
    0.99
    %FHLB advances
    
    
    69,340
    
    
    
    984
    
    
    
    2.86
    %
    
    
    76,658
    
    
    
    979
    
    
    
    2.57
    %Total Interest-Bearing Liabilities
    
    $
    608,436
    
    
    $
    5,718
    
    
    
    1.90
    %
    
    $
    586,369
    
    
    $
    4,291
    
    
    
    1.47
    %Noninterest-bearing deposits
    
    
    97,404
    
    
    
    
    
    
    
    
    
    
    
    88,822Other liabilities
    
    
    5,692
    
    
    
    
    
    
    
    
    
    
    
    4,964Shareholders Equity
    
    
    70,695
    
    
    
    
    
    
    
    
    
    
    
    68,781Total Liabilities and
Shareholders equity
    
    $
    782,227
    
    
    
    
    
    
    
    
    
    
    $
    748,936Net Interest Income and Margin (FTE)
    
    
    
    
    
    $
    14,949
    
    
    
    4.14
    %
    
    
    
    
    
    $
    13,774
    
    
    
    3.97
    %Taxable equivalent adjustment
    
    
    
    
    
    
    (60
    )
    
    
    -0.02
    %
    
    
    
    
    
    
    (77
    )
    
    
    -0.02
    %Net Interest Income Per
Financial Statements
    
    
    
    
    
    $
    14,889
    
    
    
    
    
    
    
    
    
    
    $
    13,697Net Interest Margin
    
    
    
    
    
    
    
    
    
    
    4.13
    %
    
    
    
    
    
    
    
    
    
    
    3.95
    %
 Rate/Volume Analysis of Net Interest Income (FTE)
 For the Six Months Ended June 30,Increase (Decrease) in Interest(Dollars in thousands)
    
    Income/Expense 2005 and 2004Volume
    
    Rate
    
    TotalSecurities-taxable
    
    
    (107
    )
    
    
    249
    
    
    
    142Securities-tax exempt
    
    
    (27
    )
    
    
    (37
    )
    
    
    (64
    )Federal funds sold and
short-term investments
    
    
    7
    
    
    
    33
    
    
    
    40Commercial loans
    
    
    1,286
    
    
    
    1,281
    
    
    
    2,567Real estate mortgage loans
    
    
    (544
    )
    
    
    (262
    )
    
    
    (806
    )Installment loans
    
    
    (358
    )
    
    
    86
    
    
    
    (272
    )Purchased installment loans
    
    
    359
    
    
    
    63
    
    
    
    422Home equity lines
    
    
    98
    
    
    
    475
    
    
    
    573Total Interest Income
    
    
    714
    
    
    
    1,888
    
    
    
    2,602Interest-bearing demand deposits
    
    
    4
    
    
    
    8
    
    
    
    12Savings deposit
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Money market deposits
    
    
    7
    
    
    
    240
    
    
    
    247Retail certificates of deposit
    
    
    229
    
    
    
    94
    
    
    
    323Brokered certificates of deposit
    
    
    478
    
    
    
    6
    
    
    
    484Public fund certificates of deposit
    
    
    (885
    )
    
    
    1,140
    
    
    
    255Short-term borrowings
    
    
    (59
    )
    
    
    162
    
    
    
    103FHLB advances
    
    
    177
    
    
    
    (172
    )
    
    
    5Total Interest Expense
    
    
    (50
    )
    
    
    1,477
    
    
    
    1,427Net Interest Income (FTE)
    
    
    764
    
    
    
    411
    
    
    
    1,175
 20




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##### Table of Contents



Noninterest Income
 Table 3: Details on Noninterest Income
 Three Months Ended June
    
    For Six Months Ended June30,
    
    30,(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Deposit service charges
    
    
    1,052
    
    
    
    1,031
    
    
    
    1,960
    
    
    
    2,015Trust and investment management services
    
    $
    555
    
    
    $
    486
    
    
    $
    1,072
    
    
    $
    1,072Mortgage banking revenue
    
    
    355
    
    
    
    
    
    
    
    725
    
    
    
    Income from investment in life insurance
    
    
    116
    
    
    
    161
    
    
    
    309
    
    
    
    320Securities gains (losses), net
    
    
    (6
    )
    
    
    
    
    
    
    174
    
    
    
    223Gain on sale of loans
    
    
    
    
    
    
    46
    
    
    
    132
    
    
    
    83Loss on sale of other assets, net
    
    
    (1
    )
    
    
    
    
    
    
    (1
    )
    
    
    Other noninterest income
    
    
    568
    
    
    
    888
    
    
    
    1,195
    
    
    
    1,778Total noninterest income
    
    $
    2,639
    
    
    $
    2,612
    
    
    $
    5,566
    
    
    $
    5,491
 Three Months Ended June 30, 2005 as compared to the Three Months Ended June 30, 2004
  Six Months Ended June 30, 2005 as compared to the Six Months Ended June 30, 2004
  21




---



##### Table of Contents



Noninterest Expense
 Table 4: Details on Noninterest Expense
 For
the Three months
    

For
the six months EndedEnded June 30,
    
    June 30,(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Salaries and employee benefits
    
    $
    4,260
    
    
    $
    2,907
    
    
    $
    8,238
    
    
    
    5,945Net occupancy
    
    
    449
    
    
    
    409
    
    
    
    966
    
    
    
    783Furniture and equipment
    
    
    802
    
    
    
    659
    
    
    
    1,535
    
    
    
    1,329Electronic banking expenses
    
    
    141
    
    
    
    393
    
    
    
    264
    
    
    
    725Supplies, postage and delivery
    
    
    273
    
    
    
    257
    
    
    
    644
    
    
    
    509Outside services
    
    
    521
    
    
    
    300
    
    
    
    830
    
    
    
    534Marketing and public relations
    
    
    298
    
    
    
    314
    
    
    
    605
    
    
    
    493Ohio franchise tax
    
    
    200
    
    
    
    180
    
    
    
    382
    
    
    
    368Goodwill impairment
    
    
    311
    
    
    
    
    
    
    
    311
    
    
    
    Other noninterest expense
    
    
    1,217
    
    
    
    844
    
    
    
    2,368
    
    
    
    1,552Total noninterest expense
    
    $
    8,472
    
    
    $
    6,263
    
    
    $
    16,143
    
    
    
    12,238
 Three Months Ended June 30, 2005 as compared to the Three Months Ended June 30, 2004
  22




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##### Table of Contents



Six Months Ended June 30, 2005 as compared to the Six Months Ended June 30, 2004
  Income taxes
  Balance Sheet Analysis
 Overview
  Securities
  23




---



##### Table of Contents



Loans
    Deposits
     Table 5: Deposits
 June 30,Percent of
    
    
    
    
    
    
    
    
    
    Percent of(Dollars in thousands)
    
    2005
    
    Deposits
    
    Rate
    
    2004
    
    Deposits
    
    RateDemand deposits
    
    $
    97,404
    
    
    
    15.7
    %
    
    
    0.00
    %
    
    $
    88,822
    
    
    
    15.3
    %
    
    
    0.00
    %Interest-bearing demand
    
    
    83,962
    
    
    
    13.5
    %
    
    
    0.21
    %
    
    
    80,175
    
    
    
    13.8
    %
    
    
    0.19
    %Savings
    
    
    104,415
    
    
    
    16.8
    %
    
    
    0.31
    %
    
    
    105,134
    
    
    
    18.1
    %
    
    
    0.31
    %Money market
    
    
    92,141
    
    
    
    14.8
    %
    
    
    1.53
    %
    
    
    91,202
    
    
    
    15.7
    %
    
    
    1.00
    %Retail certificates of deposit
    
    
    169,954
    
    
    
    27.3
    %
    
    
    2.98
    %
    
    
    153,723
    
    
    
    26.5
    %
    
    
    2.86
    %Brokered certificates of deposit
    
    
    32,248
    
    
    
    5.2
    %
    
    
    3.04
    %
    
    
    84
    
    
    
    0.0
    %
    
    
    4.79
    %Public fund certificates of deposit
    
    
    41,321
    
    
    
    6.6
    %
    
    
    2.92
    %
    
    
    60,929
    
    
    
    10.5
    %
    
    
    1.14
    %Total Deposits
    
    $
    621,445
    
    
    
    100.0
    %
    
    
    1.47
    %
    
    $
    580,069
    
    
    
    100.0
    %
    
    
    1.12
    %
 24




---



##### Table of Contents



Borrowings
  Regulatory Capital
   Table 6: Capital Ratios
 June 30,
    
    December 31,
    
    Well-Capitalized2005
    
    2004
    
    RatioLorain National BankTier 1 Capital (average assets)
    
    
    7.71
    %
    
    
    7.86
    %
    
    
    5.00
    %Tier 1 Capital (risk weighted)
    
    
    9.28
    %
    
    
    9.36
    %
    
    
    6.00
    %Total Capital (risk weighted)
    
    
    11.09
    %
    
    
    11.13
    %
    
    
    10.00
    %LNB Bancorp, Inc.Tier 1 Capital (average assets)
    
    
    8.77
    %
    
    
    9.05
    %
    
    
    5.00
    %Tier 1 Capital (risk weighted)
    
    
    10.51
    %
    
    
    10.58
    %
    
    
    6.00
    %Total Capital (risk weighted)
    
    
    11.71
    %
    
    
    11.72
    %
    
    
    10.00
    %
  25




---



##### Table of Contents



ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.
 RISK ELEMENTS
  Credit Risk Management
   Nonperforming Assets
   26




---



##### Table of Contents



Table 7: Nonperforming Assets
 (Dollars in thousands)
    
    2005
    
    2004Commercial
    
    $
    5,999
    
    
    $
    3,255Real estate mortgage
    
    
    1,019
    
    
    
    1,116Installment
    
    
    159
    
    
    
    150Purchased installment
    
    
    
    
    
    
    Home equity lines
    
    
    56
    
    
    
    400Total nonperforming loans
    
    
    7,233
    
    
    
    4,921Other foreclosed assets
    
    
    357
    
    
    
    420Total nonperforming assets
    
    $
    7,590
    
    
    $
    5,341Allowance for loan losses to nonperforming loans
    
    
    107.7
    %
    
    
    150.1
    %Nonperforming loans to total loans
    
    
    1.24
    %
    
    
    0.85
    %Nonperforming assets to total assets
    
    
    0.96
    %
    
    
    0.68
    %
 Provision and Allowance for Loan Losses
  27




---



##### Table of Contents



Table 8: Analysis of Allowance for Loan Losses
 For the Three Months
    
    For the Three Months
    
    For the Six Months
    
    For the Six MonthsEnded June 30,
    
    Ended June 30,
    
    Ended June 30,
    
    Ended June 30,(Dollars in thousands)
    
    2005
    
    2004
    
    2005
    
    2004Balance at beginning of period
    
    $
    7,545
    
    
    $
    7,819
    
    
    $
    7,386
    
    
    $
    7,730Charge-offs:Commercial
    
    
    109
    
    
    
    50
    
    
    
    283
    
    
    
    235Real estate mortgage
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    200Installment
    
    
    25
    
    
    
    134
    
    
    
    202
    
    
    
    269Purchased installment
    
    
    1
    
    
    
    
    
    
    
    1
    
    
    
    Home equity lines
    
    
    73
    
    
    
    98
    
    
    
    25
    
    
    
    98Credit cards
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    2Total charge-offs
    
    
    208
    
    
    
    286
    
    
    
    511
    
    
    
    804Recoveries:Commercial
    
    
    10
    
    
    
    
    
    
    
    31
    
    
    
    27Real Estate Mortgage
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Installment
    
    
    
    
    
    
    29
    
    
    
    87
    
    
    
    71Purchased installment
    
    
    1
    
    
    
    
    
    
    
    2
    
    
    
    Home equity lines
    
    
    46
    
    
    
    
    
    
    
    
    
    
    
    Credit cards
    
    
    
    
    
    
    2
    
    
    
    
    
    
    
    15Total recoveries
    
    
    57
    
    
    
    31
    
    
    
    120
    
    
    
    113Net charge-offs
    
    
    151
    
    
    
    255
    
    
    
    391
    
    
    
    691Provision for loan loss
    
    
    399
    
    
    
    425
    
    
    
    798
    
    
    
    950Balance at end of period
    
    $
    7,793
    
    
    $
    7,989
    
    
    $
    7,793
    
    
    $
    7,989
  Market Risk Management
   28




---



##### Table of Contents



Critical Accounting Policy and Estimates
   Allowance for loan losses
   29




---



##### Table of Contents



Pension accounting
     30




---



##### Table of Contents



Goodwill Impairment
  Income Taxes
  
 ITEM 4. Controls and Procedures
  
 PART II. OTHER INFORMATION
 
 Item 1. Legal Proceedings
  
 Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
  31




---



##### Table of Contents



(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, 2005 
January 31, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    N/AFebruary 1, 2005 
February 28, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    N/AMarch 1,
2005 
March 31, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    N/AApril 1, 2005 
April 30, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    N/AMay 1, 2005  May
31, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    N/AJune 1, 2005  June
30, 2005
    
    
    0
    
    
    
    N/A
    
    
    
    0
    
    
    
    N/ATotal
  
 Item 3. Defaults Upon Senior Securities
  
 Item 4. Submission of Matters to a Vote of Security Holders
  32




---



##### Table of Contents



Election of Directors
    
    For
    
    Withheld
    
    % of Total
SharesVoted ForTerry D. Goode
    
    
    5,294,940
    
    
    
    97,466
    
    
    
    79.73
    %James R. Herrick
    
    
    5,321,628
    
    
    
    70,778
    
    
    
    80.13
    %Benjamin G. Norton
    
    
    5,323,994
    
    
    
    68,412
    
    
    
    80.17
    %John W. Schaeffer, MD
    
    
    5,320,939
    
    
    
    71,467
    
    
    
    80.12
    %
 
 Item 5. Other Information
  
 Item 6. Exhibits and Reports on Form 8-K
  33




---



##### Table of Contents



SIGNATURE
  LNB BANCORP, INC.(Registrant)Date: August 4, 2005
    
    /s/ Terry M. WhiteTerry M. WhiteChief Financial Officer(Duly Authorized Officer, Principal FinancialOfficer, and Chief Accounting Officer)
 34




---



##### Table of Contents



S-KReference
    
    
    
    PageNumber
    
    Exhibit
    
    Number4.1
    
    
    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/A4.2
    
    
    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/A4.3
    
    
    Instruments Defining the Rights of Security Holders. (See
Exhibits 4.1 and 4.2)
    
    N/A31(i)(a)
    
    
    Chief Executive Officer Sarbanes-Oxley Act 302 Certification.31(i)(b)
    
    
    Chief Financial Officer Sarbanes-Oxley Act 302 Certification.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.
 35