##### Table of Contents









UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549


Form 10-K


ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)


OF THE SECURITIES EXCHANGE ACT OF 1934


|                                                |  |                                   
|----------------------------------------------- |  | ----------------------------------
|For the fiscal year ended
    December 31, 2005 |  | Commission file number
    0-13203

LNB Bancorp, Inc.


(Exact name of the registrant as specified in its charter)


|                                         |  |                                     
|---------------------------------------- |  | ------------------------------------
|Ohio                                     |  | 34-1406303                          
|(State of Incorporation)                 |  | (I.R.S. Employer Identification No.)
|457 Broadway, Lorain, Ohio               |  | 44052-1769                          
|(Address of principal executive offices) |  | (Zip Code)                          

(440) 244-6000


(Registrants telephone number, including area code)


Securities Registered Pursuant to Section 12(b) of the
Act:


|                    |  |                                          
|------------------- |  | -----------------------------------------
|Title of Each Class |  | Name of Each Exchange on Which Registered
|                    |  |                                          
|None                |  | None                                     

Securities Registered Pursuant to Section 12(g) of the
Act:


|                                |  |                                          
|------------------------------- |  | -----------------------------------------
|Title of Each Class             |  | Name of Each Exchange on Which Registered
|                                |  |                                          
|Common Shares                   |  |                                          
|Par Value $1.00 Per Share       |  | NASDAQ  National Market                 
|Preferred Share Purchase Rights |  |                                          

o þ


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S-K 10-K 10-K. o


12b-2




|                                   |                              |                                 
|---------------------------------- | ---------------------------- | --------------------------------
|Large Accelerated Filer          o | Accelerated Filer          þ | Non-accelerated filer          o

12b-2 o þ






DOCUMENTS INCORPORATED BY REFERENCE


10-K.










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TABLE OF CONTENTS


|                                                          |  |                                                                                                                      |    |      |    | 
|--------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------- | -- | ---- | -- | 
|                                                          |  |                                                                                                                      |    | Page |   
|                                                          |  |                                                                                                                      |    |      |   
|PART I                                                   
|Item 1.                                                   |  | Business                                                                                                             |    |      | 1  | 
|Item 1A.                                                  |  | Risk Factors                                                                                                         |    |      | 3  | 
|Item 1B.                                                  |  | Unresolved Staff Comment Letters                                                                                     |    |      | 4  | 
|Item 2.                                                   |  | Properties                                                                                                           |    |      | 4  | 
|Item 3.                                                   |  | Legal Proceedings                                                                                                    |    |      | 5  | 
|Item 4.                                                   |  | Submission of Matters to a Vote of Security Holders                                                                  |    |      | 5  | 
|                                                          |  | Supplemental Item: Executive Officers of
    the Registrant                                                          |    |      | 6  | 
|PART II                                                  
|Item 5.                                                   |  | Market for the Registrants Common Equity, Related
    Stockholder Matters and Issuer Purchases of Equity Securities |    |      | 7  | 
|Item 6.                                                   |  | Selected Financial Data                                                                                              |    |      | 9  | 
|Item 7.                                                   |  | Managements Discussion and Analysis of Financial Condition
    and Results of Operations                            |    |      | 10 | 
|Item 7A.                                                  |  | Quantitative and Qualitative Disclosures About Market Risk                                                           |    |      | 35 | 
|Item 8.                                                   |  | Financial Statements and Supplementary Data                                                                          |    |      | 37 | 
|Item 9.                                                   |  | Changes in and Disagreements With Accountants on Accounting and
    Financial Disclosure                             |    |      | 69 | 
|Item 9A.                                                  |  | Controls and Procedures                                                                                              |    |      | 69 | 
|Item 9B.                                                  |  | Other Information                                                                                                    |    |      | 71 | 
|PART III                                                 
|Item 10.                                                  |  | Directors, Executive Officers, Promoters and Control Persons of
    the Registrant                                   |    |      | 71 | 
|Item 11.                                                  |  | Executive Compensation                                                                                               |    |      | 71 | 
|Item 12.                                                  |  | Security Ownership of Certain Beneficial Owners and
    Management                                                   |    |      | 71 | 
|Item 13.                                                  |  | Certain Relationships and Related Transactions                                                                       |    |      | 72 | 
|Item 14.                                                  |  | Principal Accounting Fees and Services                                                                               |    |      | 72 | 
|PART IV                                                  
|Item 15.                                                  |  | Exhibits and Financial Statement Schedules                                                                           |    |      | 73 | 
|                                                          |  |                                                                                                                      |    |      |    | 
|Exhibit Index                                             |  |                                                                                                                      | 74 |     
|                                                          |  |                                                                                                                      |    |      |    | 
|Signatures                                                |  |                                                                                                                      | 76 |     
|                                                          |  |                                                                                                                      |    |      |    | 
|Certifications                                            |  |                                                                                                                      | 79 |     
|EX-3(a) LNB Second Amendment Article                     
|EX-3(b) LNB Amended Code of Regulations                  
|EX-10(N) SUPPLEMENTAL RETIREMENT BENEFITS AGREEMENT-SMITH
|EX-10(O) SUPPLEMENTAL RETIREMENT BENEFITS                
|EX-10(P) AMENDED SUPPLEMENTAL RETIREMENT AGREEMENT       
|EX-10(Q) AMENDED SUPPLEMENTAL RETIREMENT AGREEMENT       
|EX-10(R) RIGHTS AGREEMENT                                
|EX-10(S) BRANCH PURCHASE AND ASSUMPTION AGREEMENT        
|EX-10(T) SUPPLEMENTAL RETIREMENT AGREEMENT               
|EX-10(U) SUPPLEMENTAL RETIREMENT AGREEMENT               
|EX-10(V) SUPPLEMENTAL RETIREMENT AGREEMENT               
|EX-10(W) AGREEMENT IN FILING FEDERAL INCOME TAX          
|EX-21.1 SUBSIDIARIES                                     
|Exhibit 23.1 Consent of KPMG                             
|Exhibit 31.1 Certification of CEO                        
|Exhibit 31.2 Certification of CFO                        
|Exhibit 32.1 Certification of CEO                        
|Exhibit 32.2 Certification of CFO                        





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PART I







|        |         
|------- | --------
|Item 1. | Business

Overview


General.














Competition.


Business Strategy.


1



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Supervision and Regulation.




Employees.


Industry Segments




Available Information


www.4LNB.com 10-K, 10-Q, 8-K


Forward-Looking Statements


10-K




| |   |                                                                                                                                                                                                                                 
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | significant increases in competitive pressure in the banking and
    financial services industries;                                                                                                                             
|
| |  | changes in the interest rate environment which could reduce
    anticipated or actual margins;                                                                                                                                  
|
| |  | changes in political conditions or the legislative or regulatory
    environment;                                                                                                                                               
|
| |  | general economic conditions, either nationally or regionally
    (especially in northeastern Ohio), becoming less favorable than
    expected resulting in, among other things, a deterioration in
    credit quality of assets;
|
| |  | changes occurring in business conditions and inflation;                                                                                                                                                                         
|
| |  | changes in technology;                                                                                                                                                                                                          

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| |   |                                                                                                                                                                                                                                                                                                            
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | changes in monetary and tax policies;                                                                                                                                                                                                                                                                      
|
| |  | changes in the securities markets;                                                                                                                                                                                                                                                                         
|
| |  | changes in economic conditions and competition in the geographic
    and business areas in which the Corporation conducts its
    operations; as well as the risks and uncertainties described
    from time to time in the Corporations reports as filed
    with the Securities and Exchange Commission.








|          |             
|--------- | ------------
|Item  1A. | Risk Factors

10-K




Competition.




Interest Rate Risk.




Government Policies.




3



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General Economic Conditions.




Credit Risk.




Concentration of Credit Risk.




Dependence on Technology and Systems.







Item 1B.     Unresolved Staff
Comment Letters









|        |           
|------- | ----------
|Item 2. | Properties



4



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|                                        |  |                                        
|--------------------------------------- |  | ---------------------------------------
|Main Banking Center & Corporate Offices |  | 457 Broadway, Lorain                   
|Vermilion                               |  | 4455 East Liberty Avenue, Vermilion    
|Amherst                                 |  | 1175 Cleveland Avenue, Amherst         
|Lake Avenue                             |  | 42935 North Ridge Road, Elyria Township
|Avon                                    |  | 2100 Center Road, Avon                 
|Avon Lake                               |  | 32960 Walker Road, Avon Lake           
|Kansas Avenue                           |  | 1604 Kansas Avenue, Lorain             
|Sixth Street Drive-In                   |  | 200 Sixth Street, Lorain               
|Pearl Avenue                            |  | 2850 Pearl Avenue, Lorain              
|Oberlin Office                          |  | 40 East College Street, Oberlin        
|West Park Drive-In                      |  | 2130 West Park Drive, Lorain           
|Ely Square                              |  | 124 Middle Avenue, Elyria              
|Cleveland Street                        |  | 801 Cleveland Street, Elyria           
|Oberlin Avenue                          |  | 3660 Oberlin Avenue, Lorain            
|Olmsted Township                        |  | 27095 Bagley Road, Olmsted Township    
|Kendal at Oberlin                       |  | 600 Kendal Drive, Oberlin              
|The Renaissance                         |  | 26376 John Road, Olmsted Township      
|Village of LaGrange                     |  | 546 North Center Street, LaGrange      
|Westlake Village                        |  | 28550 Westlake Village Drive, Westlake 
|Westlake LPO                            |  | 30210 Detroit Road, Westlake           
|Elyria United Methodist Village         |  | 807 West Avenue, Elyria                
|Operations                              |  | 2130 West Park Drive, Lorain           
|Maintenance                             |  | 2140 West Park Drive, Lorain           
|Purchasing                              |  | 2150 West Park Drive, Lorain           
|Training Center                         |  | 521 Broadway, Lorain                   








|        |                  
|------- | -----------------
|Item 3. | Legal Proceedings








|        |                                                    
|------- | ---------------------------------------------------
|Item 4. | Submission of Matters to a Vote of Security Holders



5



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SUPPLEMENTAL ITEM  EXECUTIVE OFFICERS OF THE
REGISTRANT


10-K,


|                         |  |     |    |                                    |       |                                                                                                                                                                                                |               |                                                 |       |  |      | 
|------------------------ |  | --- | -- | ---------------------------------- | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ------------- | ----------------------------------------------- | ----- |  | ---- | 
|                         |  |     |    |                                    |       |                                                                                                                                                                                                |               | Executive                                       |      
|                         |  |     |    | Principal Occupation For Past Five |       | Positions and Offices Held with LNB                                                                                                                                                            |               | Officer                                         |      
|Name                     |  | Age |    |                                    | Years |                                                                                                                                                                                                | Bancorp, Inc. |                                                 | Since | 
|                         |  |     |    |                                    |       |                                                                                                                                                                                                |               |                                                 |       | 
|Daniel E. Klimas         |  |     | 47 |                                    |       | President and Chief Executive Officer, LNB Bancorp, Inc.,
    February 2005 to present. President, Northern Ohio Region,
    Huntington Bank from 2001 to February 2005.                       |               | President and Chief Executive Officer           |       |  | 2005 | 
|Paul A. Campagna         |  |     | 45 |                                    |       | Senior Vice President, LNB Bancorp, Inc. April 2002 to present.
    Vice President, Premier Bank and Trust from 1998 to 2002.                                                                  |               | Senior Vice President                           |       |  | 2004 | 
|Richard E. Lucas         |  |     | 55 |                                    |       | Executive Vice President, LNB Bancorp, Inc. June 2005 to
    present. Senior Vice President, Retail Banking, Fifth Third
    Bancorp from April 2000 to 2005.                                  |               | Executive Vice President                        |       |  | 2005 | 
|Mary E. Miles            |  |     | 47 |                                    |       | Senior Vice President, LNB Bancorp, Inc. April 2005 to present.
    President, Miles Consulting, Inc. from 2001 to 2005, Vice
    President, Tire Center, LLC prior to 2001.                   |               | Senior Vice President                           |       |  | 2005 | 
|David E. Nocjar          |  |     | 58 |                                    |       | Senior Trust Officer, LNB Bancorp, Inc., September 2002 to
    present. Trust Officer, The Lorain National Bank, August
    2000 to September 2002.                                            |               | Senior Trust Officer                            |       |  | 2002 | 
|Frank A. Soltis          |  |     | 53 |                                    |       | Senior Vice President, LNB Bancorp, Inc. July 2005 to present.
    Senior Vice President, Lakeland Financial Corporation, 1997 to
    2005.                                                    |               | Senior Vice President                           |       |  | 2005 | 
|Terry M. White           |  |     | 48 |                                    |       | Chief Financial Officer, LNB Bancorp, Inc. April 2002 to
    present. Senior Vice President, Austin Associates, LLC, June
    2000 to March 2002.                                              |               | Chief Financial Officer and Corporate Secretary |       |  | 2002 | 
|Lawrence D. Wickter, Jr. |  |     | 54 |                                    |       | Senior Vice President, LNB Bancorp, Inc., May 2005 to present.
    Self-employed Attorney, May 2003 to May 2005. Chief Credit
    Officer, Metropolitan Bank and Trust, June 1999 to May 2003. |               | Senior Vice President and Chief Credit Officer  |       |  | 2005 | 

6



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PART II





Item 5. Market for the Registrants Common Equity,
Related Stockholder Matters and Issuer Purchases of Equity
Securities


Market Information; Equity Holders; Dividends ® ®






Common Stock Trading Ranges and Cash Dividends Declared


|               |  |      |       |                |     |   |       |                    |  |   |      | 
|-------------- |  | ---- | ----- | -------------- | --- | - | ----- | ------------------ |  | - | ---- | 
|               |  | 2005 |      
|               |  |      |      
|               |  |      |       | Cash Dividends |    
|               |  | High |       |                | Low |   |       | Declared per share | 
|               |  |      |       |                |     |   |       |                    | 
|First Quarter  |  | $    | 20.55 |                |     | $ | 17.64 |                    |  | $ | 0.18 | 
|Second Quarter |  |      | 19.30 |                |     |   | 16.00 |                    |  |   | 0.18 | 
|Third Quarter  |  |      | 19.25 |                |     |   | 16.40 |                    |  |   | 0.18 | 
|Fourth Quarter |  |      | 19.00 |                |     |   | 16.62 |                    |  |   | 0.18 | 

|               |  |      |       |                |     |   |       |                    |  |   |      | 
|-------------- |  | ---- | ----- | -------------- | --- | - | ----- | ------------------ |  | - | ---- | 
|               |  | 2004 |      
|               |  |      |      
|               |  |      |       | Cash Dividends |    
|               |  | High |       |                | Low |   |       | Declared per share | 
|               |  |      |       |                |     |   |       |                    | 
|First Quarter  |  | $    | 21.60 |                |     | $ | 20.30 |                    |  | $ | 0.18 | 
|Second Quarter |  |      | 21.13 |                |     |   | 18.28 |                    |  |   | 0.18 | 
|Third Quarter  |  |      | 20.60 |                |     |   | 19.26 |                    |  |   | 0.18 | 
|Fourth Quarter |  |      | 20.70 |                |     |   | 19.45 |                    |  |   | 0.18 | 

Issuer Purchases of Equity Securities




|                                     |  |                     |        |  |                    |                     |       |                      |                      |  |                       |  |  |  |         | 
|------------------------------------ |  | ------------------- | ------ |  | ------------------ | ------------------- | ----- | -------------------- | -------------------- |  | --------------------- |  |  |  | ------- | 
|                                     |  |                     |        |  |                    | (c) Total Number of |       |                      | (d) Maximum          | 
|                                     |  |                     |        |  |                    | Shares (or Units)   |       |                      | Number of Shares (or | 
|                                     |  | (a) Total Number of |        |  | (b) Average Price  |                     |       | Purchased as Part of |                      |  | Units) that May Yet   | 
|                                     |  | Shares (or units)   |        |  | Paid per Share (or |                     |       | Publicly Announced   |                      |  | Be Purchased Under    | 
|Period                               |  | Purchased           |        |  | Unit)              |                     |       | Plans or Programs    |                      |  | the Plans or Programs | 
|                                     |  |                     |        |  |                    |                     |       |                      |                      |  |                       | 
|October 1, 2005 - October 31, 2005   |  |                     | 0      |  |                    | $                   | 0.00  |                      |                      |  | 0                     |  |  |  | 262,000 | 
|                                     |  |                     |        |  |                    |                     |       |                      |                      |  |                       | 
|November 1, 2005 - November 30, 2005 |  |                     | 55,000 |  |                    |                     | 18.08 |                      |                      |  | 55,000                |  |  |  | 207,000 | 
|                                     |  |                     |        |  |                    |                     |       |                      |                      |  |                       | 
|December 1, 2005 - December 31, 2005 |  |                     | 0      |  |                    |                     | 0.00  |                      |                      |  | 0                     |  |  |  | 207,000 | 
|                                     |  |                     |        |  |                    |                     |       |                      |                      |  |                       | 
|Total                                |  |                     | 55,000 |  |                    | $                   | 18.08 |                      |                      |  | 55,000                |  |  |  | 207,000 | 
|                                     |  |                     |        |  |                    |                     |       |                      |                      |  |                       | 

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time-to


8



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|        |                        
|------- | -----------------------
|Item 6. | Selected Financial Data

Five Year Consolidated Financial Summary


|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |         |         |        |   |         |         |        | 
|------------------------------------------ | ------------------------------------------------ | ----------------------------------------------------------- | ------- | ------- | ------ | - | ------- | ------- | ------ | - | ------- | ------- | ------ | ---- | ------- | ------- | ------ | - | ------- | ------- | ------ | 
|                                           |                                                  | Year Ended December 31,                                     |        
|                                           |                                                  |                                                             |        
|                                           |                                                  | 2005                                                        |         |         | 2004   |   |         | 2003    |        |   | 2002    |         |        | 2001 |        
|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |        
|                                           |                                                  | (Dollars in thousands, except per share amounts and ratios) |        
|Total interest income                      |                                                  | $                                                           | 43,432  |         |        | $ | 37,224  |         |        | $ | 37,860  |         |        | $    | 41,327  |         |        | $ | 45,101  |        
|Total interest expense                     |                                                  |                                                             | 13,402  |         |        |   | 9,102   |         |        |   | 9,196   |         |        |      | 12,095  |         |        |   | 16,998  |        
|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |        
|                                           |                                                  | Net interest income                                         |         |         | 30,030 |   |         |         | 28,122 |   |         |         | 28,664 |      |         |         | 29,232 |   |         |         | 28,103 | 
|Provision for loan losses                  |                                                  |                                                             | 1,248   |         |        |   | 1,748   |         |        |   | 2,695   |         |        |      | 2,200   |         |        |   | 2,200   |        
|Other income                               |                                                  |                                                             | 10,092  |         |        |   | 10,660  |         |        |   | 10,105  |         |        |      | 10,278  |         |        |   | 9,343   |        
|Net gain (loss) on sale of assets          |                                                  |                                                             | 285     |         |        |   | (218    | )       |        |   | 1,519   |         |        |      | 808     |         |        |   | 313     |        
|Other expenses                             |                                                  |                                                             | 30,267  |         |        |   | 26,290  |         |        |   | 26,467  |         |        |      | 24,753  |         |        |   | 22,946  |        
|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |        
|Income before income taxes                 |                                                  |                                                             | 8,892   |         |        |   | 10,526  |         |        |   | 11,126  |         |        |      | 13,365  |         |        |   | 12,613  |        
|Income taxes                               |                                                  |                                                             | 2,479   |         |        |   | 3,051   |         |        |   | 3,411   |         |        |      | 4,200   |         |        |   | 4,048   |        
|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |        
|                                           |                                                  | Net income                                                  |         | $       | 6,413  |   |         | $       | 7,475  |   |         | $       | 7,715  |      |         | $       | 9,165  |   |         | $       | 8,565  | 
|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |        
|Cash dividend declared                     |                                                  | $                                                           | 4,760   |         |        | $ | 4,777   |         |        | $ | 4,626   |         |        | $    | 4,468   |         |        | $ | 4,365   |        
|                                           |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |        
|Per Common Share(1)(2)                     |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |         |         |        |   |         |        
|                                           | Basic earnings                                   |                                                             | $       | 0.97    |        |   | $       | 1.13    |        |   | $       | 1.17    |        |      | $       | 1.39    |        |   | $       | 1.30    |       
|                                           | Diluted earnings                                 |                                                             |         | 0.97    |        |   |         | 1.13    |        |   |         | 1.17    |        |      |         | 1.39    |        |   |         | 1.30    |       
|                                           | Cash dividends declared                          |                                                             |         | 0.72    |        |   |         | 0.72    |        |   |         | 0.70    |        |      |         | 0.68    |        |   |         | 0.66    |       
|                                           | Book value per share                             |                                                             | $       | 10.45   |        |   | $       | 10.64   |        |   | $       | 10.30   |        |      | $       | 10.09   |        |   | $       | 9.41    |       
|Financial Ratios(3)                        |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |         |         |        |   |         |        
|                                           | Return on average assets                         |                                                             |         | 0.81    | %      |   |         | 0.98    | %      |   |         | 1.05    | %      |      |         | 1.33    | %      |   |         | 1.35    | %     
|                                           | Return on average common equity                  |                                                             |         | 9.11    |        |   |         | 10.75   |        |   |         | 11.33   |        |      |         | 14.24   |        |   |         | 14.36   |       
|                                           | Net interest margin (FTE)(4)                     |                                                             |         | 4.09    |        |   |         | 4.01    |        |   |         | 4.23    |        |      |         | 4.58    |        |   |         | 4.75    |       
|                                           | Efficiency ratio                                 |                                                             |         | 75.44   |        |   |         | 67.82   |        |   |         | 63.01   |        |      |         | 61.41   |        |   |         | 60.96   |       
|                                           | Loans to deposits                                |                                                             |         | 92.31   |        |   |         | 93.77   |        |   |         | 91.91   |        |      |         | 90.01   |        |   |         | 92.13   |       
|                                           | Dividend payout                                  |                                                             |         | 74.22   |        |   |         | 63.72   |        |   |         | 59.98   |        |      |         | 48.75   |        |   |         | 50.96   |       
|                                           | Average shareholders equity to average assets   |                                                             |         | 8.88    |        |   |         | 9.15    |        |   |         | 9.22    |        |      |         | 9.31    |        |   |         | 9.35    |       
|                                           | Net charge-offs to average loans                 |                                                             |         | 0.34    |        |   |         | 0.38    |        |   |         | 0.31    |        |      |         | 0.29    |        |   |         | 0.34    |       
|                                           | Allowance for loan losses to total loans         |                                                             |         | 1.12    |        |   |         | 1.28    |        |   |         | 1.46    |        |      |         | 1.31    |        |   |         | 1.23    |       
|                                           | Nonperforming loans to total loans               |                                                             |         | 1.10    |        |   |         | 0.86    |        |   |         | 0.96    |        |      |         | 0.37    |        |   |         | 0.30    |       
|                                           | Allowance for loan losses to nonperforming loans |                                                             |         | 101.97  |        |   |         | 150.09  |        |   |         | 149.98  |        |      |         | 357.11  |        |   |         | 447.57  |       
|At Year End                                |                                                  |                                                             |         |         |        |   |         |         |        |   |         |         |        |      |         |         |        |   |         |        
|                                           | Cash and cash equivalents                        |                                                             | $       | 23,923  |        |   | $       | 26,818  |        |   | $       | 27,749  |        |      | $       | 26,832  |        |   | $       | 31,505  |       
|                                           | Securities                                       |                                                             |         | 155,274 |        |   |         | 149,621 |        |   |         | 152,127 |        |      |         | 152,295 |        |   |         | 138,401 |       
|                                           | Gross loans                                      |                                                             |         | 591,011 |        |   |         | 575,224 |        |   |         | 533,975 |        |      |         | 509,376 |        |   |         | 477,488 |       
|                                           | Allowance for loan losses                        |                                                             |         | 6,622   |        |   |         | 7,386   |        |   |         | 7,730   |        |      |         | 6,653   |        |   |         | 5,890   |       
|                                           | Net loans                                        |                                                             |         | 584,389 |        |   |         | 567,838 |        |   |         | 526,245 |        |      |         | 502,723 |        |   |         | 471,598 |       
|                                           | Other assets                                     |                                                             |         | 37,535  |        |   |         | 37,372  |        |   |         | 35,100  |        |      |         | 33,549  |        |   |         | 23,022  |       
|                                           | Total assets                                     |                                                             |         | 801,121 |        |   |         | 781,649 |        |   |         | 741,221 |        |      |         | 715,399 |        |   |         | 664,526 |       
|                                           | Total deposits                                   |                                                             |         | 640,216 |        |   |         | 605,543 |        |   |         | 581,344 |        |      |         | 566,127 |        |   |         | 518,267 |       
|                                           | Other borrowings                                 |                                                             |         | 86,512  |        |   |         | 100,915 |        |   |         | 86,563  |        |      |         | 75,791  |        |   |         | 78,515  |       
|                                           | Other liabilities                                |                                                             |         | 5,987   |        |   |         | 4,617   |        |   |         | 5,179   |        |      |         | 6,868   |        |   |         | 5,606   |       
|                                           | Total liabilities                                |                                                             |         | 732,715 |        |   |         | 711,075 |        |   |         | 673,086 |        |      |         | 648,786 |        |   |         | 602,388 |       
|                                           | Total shareholders equity                       |                                                             |         | 68,406  |        |   |         | 70,574  |        |   |         | 68,135  |        |      |         | 66,613  |        |   |         | 62,138  |       
|Total liabilities and shareholders equity |                                                  | $                                                           | 801,121 |         |        | $ | 781,649 |         |        | $ | 741,221 |         |        | $    | 715,399 |         |        | $ | 664,526 |        






|    |                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Basic and diluted earnings per share are computed using the
    weighted-average number of shares outstanding during each year.                                                                                    
|   
|(2) | All share and per share data has been adjusted to reflect the
    three-for-two-stock split in 2003 and the 2 percent stock
    dividend in 2002 and 2001.                                                         
|   
|(3) | Financial Ratios based on average balances.                                                                                                                                                                        
|   
|(4) | Tax exempt income was converted to a fully taxable equivalent
    basis at a 35% statutory Federal income tax rate in all years
    except 2005 which was converted at a 34% statutory Federal
    income tax rate.

9



---



##### Table of Contents








|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 7. | Managements Discussion and Analysis of Financial
    Condition and Results of Operations

Introduction






| |   |                                                                                                                                                                       
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | assembling a high quality, experienced leadership team,                                                                                                               
|
| |  | broadening our retail product offerings and making a strategic
    decision to close LNB Mortgage, LLC and reestablish the mortgage
    lending operation in the Bank,
|
| |  | identifying the risk profile of the Corporation and making
    improvements to the internal audit function, the credit function
    and to loan underwriting,         
|
| |  | committing resources to the portions of the market that are
    growing rapidly by announcing plans for two new offices, and                                          
|
| |  | adjusting staffing levels throughout the Corporation to balance
    the needs of sales and support.                                                                   













10



---



##### Table of Contents





Key Indicators and Material Trends (Dollars in
thousands)






1-4




11



---



##### Table of Contents





Results of Operations (Dollars in thousands except for
per share data)




| |                    
| | -------------------
| | Summary of Earnings









| |                                                
| | -----------------------------------------------
| | 2005 versus 2004 Net Interest Income Comparison



12



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##### Table of Contents





Table 1:     Net Interest Income


|                           |  |                         |        |   |      |   |        |      |  |   |        |  
|-------------------------- |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                           |  | Year Ended December 31, |       
|                           |  |                         |       
|                           |  | 2005                    |        |   | 2004 |   |        | 2003 | 
|                           |  |                         |        |   |      |   |        |      | 
|                           |  | (Dollars in thousands)  |       
|Net interest income        |  | $                       | 30,030 |   |      | $ | 28,122 |      |  | $ | 28,664 |  
|Tax equivalent adjustments |  |                         | 201    |   |      |   | 215    |      |  |   | 383    |  
|Net interest income (FTE)  |  | $                       | 30,231 |   |      | $ | 28,337 |      |  | $ | 29,047 |  
|Net interest margin        |  |                         | 4.06   | % |      |   | 3.98   | %    |  |   | 4.17   | %
|Tax equivalent adjustments |  |                         | 0.03   | % |      |   | 0.03   | %    |  |   | 0.06   | %
|Net interest margin (FTE)  |  |                         | 4.09   | % |      |   | 4.01   | %    |  |   | 4.23   | %



| |       
| | ------
| | Yields





Table 2: Condensed Consolidated Average Balance Sheets


Interest, Rate, and Rate/ Volume differentials are stated on
a Fully-Tax Equivalent (FTE) Basis.


|                                              |  |                        |         |  |          |   |         |      |  |  |         |         |  |          |         |  |      |   |        |         |  |  |          |   |  |      |         |  |  |   |        |  |  |  |      |  
|--------------------------------------------- |  | ---------------------- | ------- |  | -------- | - | ------- | ---- |  |  | ------- | ------- |  | -------- | ------- |  | ---- | - | ------ | ------- |  |  | -------- | - |  | ---- | ------- |  |  | - | ------ |  |  |  | ---- | -
|                                              |  | Year Ended December 31 |        
|                                              |  |                        |        
|                                              |  | 2005                   |         |  | 2004     |   |         | 2003 | 
|                                              |  |                        |         |  |          |   |         |      | 
|                                              |  | Average                |         |  |          |   | Average |      |  |  |         | Average |  |          |        
|                                              |  | Balance                |         |  | Interest |   |         | Rate |  |  | Balance |         |  | Interest |         |  | Rate |   |        | Balance |  |  | Interest |   |  | Rate |        
|                                              |  |                        |         |  |          |   |         |      |  |  |         |         |  |          |         |  |      |   |        |         |  |  |          |   |  |      |        
|                                              |  | (Dollars in thousands) |        
|Assets:                                       |  |                        |         |  |          |   |         |      |  |  |         |         |  |          |         |  |      |   |        |         |  |  |          |   |  |      |         |  |  |   |        |  |  |  |      |  
|U.S. Govt agencies and corporations           |  | $                      | 140,677 |  |          | $ | 4,761   |      |  |  | 3.38    | %       |  | $        | 139,646 |  |      | $ | 4,085  |         |  |  | 2.93     | % |  | $    | 143,505 |  |  | $ | 4,572  |  |  |  | 3.19 | %
|State and political subdivisions              |  |                        | 11,437  |  |          |   | 640     |      |  |  | 5.60    |         |  |          | 10,581  |  |      |   | 674    |         |  |  | 6.37     |   |  |      | 14,268  |  |  |   | 871    |  |  |  | 6.10 |  
|Federal funds sold and short-term investments |  |                        | 2,644   |  |          |   | 87      |      |  |  | 3.29    |         |  |          | 5,289   |  |      |   | 120    |         |  |  | 2.27     |   |  |      | 3,261   |  |  |   | 39     |  |  |  | 1.20 |  
|Commercial loans                              |  |                        | 358,705 |  |          |   | 24,139  |      |  |  | 6.73    |         |  |          | 321,154 |  |      |   | 18,663 |         |  |  | 5.81     |   |  |      | 286,244 |  |  |   | 16,788 |  |  |  | 5.86 |  
|Real estate mortgage loans                    |  |                        | 87,422  |  |          |   | 5,438   |      |  |  | 6.22    |         |  |          | 105,485 |  |      |   | 7,051  |         |  |  | 6.68     |   |  |      | 127,244 |  |  |   | 9,111  |  |  |  | 7.16 |  
|Home equity lines of credit                   |  |                        | 64,727  |  |          |   | 3,996   |      |  |  | 6.17    |         |  |          | 60,466  |  |      |   | 2,730  |         |  |  | 4.51     |   |  |      | 53,540  |  |  |   | 2,245  |  |  |  | 4.19 |  
|Purchased installment loans                   |  |                        | 35,786  |  |          |   | 1,706   |      |  |  | 4.77    |         |  |          | 18,032  |  |      |   | 683    |         |  |  | 3.79     |   |  |      | 2,011   |  |  |   | 74     |  |  |  | 3.68 |  

13



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|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |         |         |         |   |        |       |        |  |        |      |      |  
|-------------------------------------------- | ---------------------------------- | ------------------------------------------ | ------- | ------- | -------- | - | ------- | ------ | ------ |  | ------- | ------- | ---- | -------- | ------- | ------- | ------- | - | ------ | ------- | ------ |  | -------- | ---- | ---- | ---- | ------- | ------- | ------- | - | ------ | ----- | ------ |  | ------ | ---- | ---- | -
|                                             |                                    | Year Ended December 31                     |        
|                                             |                                    |                                            |        
|                                             |                                    | 2005                                       |         |         | 2004     |   |         | 2003   |       
|                                             |                                    |                                            |         |         |          |   |         |        |       
|                                             |                                    | Average                                    |         |         |          |   | Average |        |        |  |         | Average |      |          |        
|                                             |                                    | Balance                                    |         |         | Interest |   |         | Rate   |        |  | Balance |         |      | Interest |         |         | Rate    |   |        | Balance |        |  | Interest |      |      | Rate |        
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|                                             |                                    | (Dollars in thousands)                     |        
|Installment loans                            |                                    |                                            | 38,122  |         |          |   | 2,866   |        |        |  | 7.52    |         |      |          | 46,378  |         |         |   | 3,433  |         |        |  | 7.40     |      |      |      | 57,077  |         |         |   | 4,543  |       |        |  | 7.96   |     
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|                                             |                                    | Total Earning Assets                       |         | $       | 739,520  |   |         | $      | 43,633 |  |         |         | 5.90 | %        |         | $       | 707,031 |   |        | $       | 37,439 |  |          |      | 5.30 | %    |         | $       | 687,150 |   |        | $     | 38,243 |  |        |      | 5.57 | %
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|Allowance for loan loss                      |                                    |                                            | (7,760  | )       |          |   |         |        |        |  |         |         |      |          | (7,878  | )       |         |   |        |         |        |  |          |      |      |      | (7,215  | )       |         |   |        |       |        |  |        |     
|Cash and due from banks                      |                                    |                                            | 24,288  |         |          |   |         |        |        |  |         |         |      |          | 24,737  |         |         |   |        |         |        |  |          |      |      |      | 24,276  |         |         |   |        |       |        |  |        |     
|Bank owned life insurance                    |                                    |                                            | 13,646  |         |          |   |         |        |        |  |         |         |      |          | 13,030  |         |         |   |        |         |        |  |          |      |      |      | 12,313  |         |         |   |        |       |        |  |        |     
|Other assets                                 |                                    |                                            | 23,593  |         |          |   |         |        |        |  |         |         |      |          | 22,617  |         |         |   |        |         |        |  |          |      |      |      | 21,696  |         |         |   |        |       |        |  |        |     
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|                                             |                                    | Total Assets                               |         | $       | 793,287  |   |         |        |        |  |         |         |      |          |         | $       | 759,537 |   |        |         |        |  |          |      |      |      |         | $       | 738,220 |   |        |       |        |  |        |      |      |  
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|Liabilities and Stockholders Equity         |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |         |         |         |   |        |      
|Consumer time deposits                       |                                    | $                                          | 179,825 |         |          | $ | 5,675   |        |        |  | 3.16    | %       |      | $        | 164,421 |         |         | $ | 4,221  |         |        |  | 2.57     | %    |      | $    | 165,541 |         |         | $ | 4,881  |       |        |  | 2.95   | %   
|Public time deposits                         |                                    |                                            | 47,145  |         |          |   | 1,551   |        |        |  | 3.29    |         |      |          | 45,576  |         |         |   | 730    |         |        |  | 1.60     |      |      |      | 48,202  |         |         |   | 746    |       |        |  | 1.55   |     
|Brokered time deposits                       |                                    |                                            | 40,942  |         |          |   | 1,429   |        |        |  | 3.49    |         |      |          | 7,012   |         |         |   | 196    |         |        |  | 2.79     |      |      |      |        |         |         |   |       |       |        |  | 0.00   |     
|Savings deposits                             |                                    |                                            | 101,808 |         |          |   | 332     |        |        |  | 0.33    |         |      |          | 105,883 |         |         |   | 322    |         |        |  | 0.30     |      |      |      | 102,100 |         |         |   | 366    |       |        |  | 0.36   |     
|Interest-bearing demand                      |                                    |                                            | 173,335 |         |          |   | 1,934   |        |        |  | 1.12    |         |      |          | 174,150 |         |         |   | 1,345  |         |        |  | 0.77     |      |      |      | 176,430 |         |         |   | 1,268  |       |        |  | 0.72   |     
|Short-term borrowings                        |                                    |                                            | 19,892  |         |          |   | 618     |        |        |  | 3.11    |         |      |          | 18,013  |         |         |   | 205    |         |        |  | 1.14     |      |      |      | 18,185  |         |         |   | 198    |       |        |  | 1.09   |     
|FHLB advances                                |                                    |                                            | 61,283  |         |          |   | 1,863   |        |        |  | 3.04    |         |      |          | 77,760  |         |         |   | 2,083  |         |        |  | 2.68     |      |      |      | 64,880  |         |         |   | 1,737  |       |        |  | 2.68   |     
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|                                             | Total Interest-Bearing Liabilities |                                            | $       | 624,230 |          |   | $       | 13,402 |        |  |         | 2.15    | %    |          | $       | 592,815 |         |   | $      | 9,102   |        |  |          | 1.54 | %    |      | $       | 575,338 |         |   | $      | 9,196 |        |  |        | 1.60 | %   
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|Noninterest-bearing deposits                 |                                    |                                            | 92,730  |         |          |   |         |        |        |  |         |         |      |          | 92,305  |         |         |   |        |         |        |  |          |      |      |      | 89,928  |         |         |   |        |       |        |  |        |     
|Other liabilities                            |                                    |                                            | 5,900   |         |          |   |         |        |        |  |         |         |      |          | 4,910   |         |         |   |        |         |        |  |          |      |      |      | 4,865   |         |         |   |        |       |        |  |        |     
|Shareholders Equity                         |                                    |                                            | 70,427  |         |          |   |         |        |        |  |         |         |      |          | 69,507  |         |         |   |        |         |        |  |          |      |      |      | 68,089  |         |         |   |        |       |        |  |        |     
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|                                             |                                    | Total Liabilities and Shareholders Equity |         | $       | 793,287  |   |         |        |        |  |         |         |      |          |         | $       | 759,537 |   |        |         |        |  |          |      |      |      |         | $       | 738,220 |   |        |       |        |  |        |      |      |  
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|Net Interest Income (FTE)                    |                                    |                                            |         |         |          | $ | 30,231  |        |        |  | 4.09    | %       |      |          |         |         |         | $ | 28,337 |         |        |  | 4.01     | %    |      |      |         |         |         | $ | 29,047 |       |        |  | 4.23   | %   
|Taxable Equivalent Adjustment                |                                    |                                            |         |         |          |   | (201    | )      |        |  | (0.03   | )       |      |          |         |         |         |   | (215   | )       |        |  | (0.03    | )    |      |      |         |         |         |   | (383   | )     |        |  | (0.06) |     
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|Net Interest Income Per Financial Statements |                                    |                                            |         |         |          | $ | 30,030  |        |        |  |         |         |      |          |         |         |         | $ | 28,122 |         |        |  |          |      |      |      |         |         |         | $ | 28,664 |       |        |  |        |     
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        
|Net Yield on Earning Assets                  |                                    |                                            |         |         |          |   |         |        |        |  | 4.06    | %       |      |          |         |         |         |   |        |         |        |  | 3.98     | %    |      |      |         |         |         |   |        |       |        |  | 4.17   | %   
|                                             |                                    |                                            |         |         |          |   |         |        |        |  |         |         |      |          |         |         |         |   |        |         |        |  |          |      |      |      |        



| |                 
| | ----------------
| | Average Balances



14



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##### Table of Contents









| |            
| | -----------
| | Rate/Volume



Table 3:     Rate/Volume Analysis of
Net Interest Income (FTE)


|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |   |      |        |   |   |        |      |  
|--------------------------------------------- | ---------------------- | ----------------------- | ------ | ----- | ----------------------- | - | ----- | ----- |  | - | ------ | ----- |  | ---- | ------ | --- | ----- | - | ---- | ------ | - | - | ------ | ---- | -
|                                              |                        | Year Ended December 31, |       
|                                              |                        |                         |       
|                                              |                        | Increase (Decrease) In  |        |       | Increase (Decrease) In  |  
|                                              |                        | Interest Income/Expense |        |       | Interest Income/Expense |  
|                                              |                        | in 2005 over 2004       |        |       | in 2004 over 2003       |  
|                                              |                        |                         |        |       |                         |  
|                                              |                        | Volume                  |        |       | Rate                    |   |       | Total |  |   | Volume |       |  | Rate |        |     | Total |  
|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |  
|                                              |                        | (Dollars in thousands)  |       
|U.S. Government agencies and corporations     |                        | $                       | 35     |       |                         | $ | 641   |       |  | $ | 676    |       |  | $    | (115   | )   |       | $ | (372 | )      |   | $ | (487   | )   
|State and political subdivisions              |                        |                         | 40     |       |                         |   | (74   | )     |  |   | (34    | )     |  |      | (224   | )   |       |   | 27   |        |   |   | (197   | )   
|Federal funds sold and short term investments |                        |                         | (48    | )     |                         |   | 15    |       |  |   | (33    | )     |  |      | 36     |     |       |   | 45   |        |   |   | 81     |     
|Commercial loans                              |                        |                         | 2,377  |       |                         |   | 3,099 |       |  |   | 5,476  |       |  |      | 2,049  |     |       |   | (174 | )      |   |   | 1,875  |     
|Real estate mortgage loans                    |                        |                         | (1,185 | )     |                         |   | (428  | )     |  |   | (1,613 | )     |  |      | (1,531 | )   |       |   | (529 | )      |   |   | (2,060 | )   
|Home equity lines of credit                   |                        |                         | 249    |       |                         |   | 1,017 |       |  |   | 1,266  |       |  |      | 299    |     |       |   | 186  |        |   |   | 485    |     
|Purchased installment loans                   |                        |                         | 723    |       |                         |   | 300   |       |  |   | 1,023  |       |  |      | 656    |     |       |   | (47  | )      |   |   | 609    |     
|Installment loans                             |                        |                         | (610   | )     |                         |   | 43    |       |  |   | (567   | )     |  |      | (837   | )   |       |   | (273 | )      |   |   | (1,110 | )   
|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |  
|                                              | Total Interest Income  |                         |        | 1,581 |                         |   |       | 4,613 |  |   |        | 6,194 |  |      |        | 333 |       |   |      | (1,137 | ) |   |        | (804 | )
|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |  
|Consumer time deposits                        |                        |                         | 458    |       |                         |   | 996   |       |  |   | 1,454  |       |  |      | (29    | )   |       |   | (631 | )      |   |   | (660   | )   
|Public time deposits                          |                        |                         | 50     |       |                         |   | 771   |       |  |   | 821    |       |  |      | (39    | )   |       |   | 23   |        |   |   | (16    | )   
|Brokered time deposits                        |                        |                         | 993    |       |                         |   | 240   |       |  |   | 1,233  |       |  |      | 144    |     |       |   | 52   |        |   |   | 196    |     
|Savings deposits                              |                        |                         | (15    | )     |                         |   | 25    |       |  |   | 10     |       |  |      | 11     |     |       |   | (55  | )      |   |   | (44    | )   
|Interest bearing demand                       |                        |                         | (9     | )     |                         |   | 598   |       |  |   | 589    |       |  |      | (18    | )   |       |   | 95   |        |   |   | 77     |     
|Short-term borrowings                         |                        |                         | 54     |       |                         |   | 359   |       |  |   | 413    |       |  |      | (2     | )   |       |   | 9    |        |   |   | 7      |     
|FHLB advances                                 |                        |                         | (394   | )     |                         |   | 174   |       |  |   | (220   | )     |  |      | 345    |     |       |   | 1    |        |   |   | 346    |     
|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |  
|                                              | Total Interest Expense |                         |        | 1,137 |                         |   |       | 3,163 |  |   |        | 4,300 |  |      |        | 412 |       |   |      | (506   | ) |   |        | (94  | )
|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |  
|Net Interest Income (FTE)                     |                        | $                       | 444    |       |                         | $ | 1,450 |       |  | $ | 1,894  |       |  | $    | (79    | )   |       | $ | (631 | )      |   | $ | (710   | )   
|                                              |                        |                         |        |       |                         |   |       |       |  |   |        |       |  |      |        |     |       |  

15



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##### Table of Contents









| |                                                
| | -----------------------------------------------
| | 2004 versus 2003 Net Interest Income Comparison





16



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##### Table of Contents



Table 4:     Details of Noninterest
Income


|                                      |                             |                          |       |        |        |   |       |        |        |   |        |        |        |      |        |      |      |    |        |     |       |   
|------------------------------------- | --------------------------- | ------------------------ | ----- | ------ | ------ | - | ----- | ------ | ------ | - | ------ | ------ | ------ | ---- | ------ | ---- | ---- | -- | ------ | --- | ----- | --
|                                      |                             |                          |       |        |        |   |       | 2005   |        |   | 2004   |       
|                                      |                             |                          |       |        |        |   |       | versus |        |   | versus |       
|                                      |                             | 2005                     |       |        | 2004   |   |       | 2003   |        |   | 2004   |        |        | 2003 |       
|                                      |                             |                          |       |        |        |   |       |        |        |   |        |        |        |      |       
|                                      |                             | (Dollars in thousands)   |       |        |        |   |      
|Investment and trust services         |                             | $                        | 1,940 |        |        | $ | 2,091 |        |        | $ | 1,762  |        |        |      | (7.2   | )%   |      |    | 18.7   | %  
|Deposit services charges              |                             |                          | 4,219 |        |        |   | 4,187 |        |        |   | 4,260  |        |        |      | 0.8    |      |      |    | (1.7   | )  
|Electronic banking fees               |                             |                          | 1,895 |        |        |   | 2,794 |        |        |   | 3,104  |        |        |      | (32.2  | )    |      |    | (10.0  | )  
|Mortgage banking revenue              |                             |                          | 959   |        |        |   | 364   |        |        |   |       |        |        |      | 163.5  |      |      |    | NM     |    
|Income from bank owned life insurance |                             |                          | 600   |        |        |   | 632   |        |        |   | 772    |        |        |      | (5.1   | )    |      |    | (18.1  | )  
|Other income                          |                             |                          | 479   |        |        |   | 592   |        |        |   | 207    |        |        |      | (19.1  | )    |      |    | 186.0  |    
|                                      |                             |                          |       |        |        |   |       |        |        |   |        |        |        |      |       
|                                      | Total fees and other income |                          |       | 10,092 |        |   |       | 10,660 |        |   |        | 10,105 |        |      |        | (5.3 | )    |    |        | 5.5 |      
|                                      |                             |                          |       |        |        |   |       |        |        |   |        |        |        |      |       
|Gain on sale of loans                 |                             |                          | 132   |        |        |   | 181   |        |        |   | 1,068  |        |        |      | (27.1  | )    |      |    | (83.1  | )  
|Gain (loss) on sale of securities     |                             |                          | 173   |        |        |   | (777  | )      |        |   | 449    |        |        |      | 122.3  |      |      |    | (273.1 | )  
|Gain (loss) on sale of other assets   |                             |                          | (20   | )      |        |   | 378   |        |        |   | 2      |        |        |      | (105.3 | )    |      |    | NM     |    
|                                      |                             |                          |       |        |        |   |       |        |        |   |        |        |        |      |       
|                                      |                             | Total Noninterest income |       | $      | 10,377 |   |       | $      | 10,442 |   |        | $      | 11,624 |      |        |      | (0.6 | )% |        |     | (10.2 | )%
|                                      |                             |                          |       |        |        |   |       |        |        |   |        |        |        |      |       



| |                                               
| | ----------------------------------------------
| | 2005 versus 2004 Noninterest Income Comparison















17



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| |                                               
| | ----------------------------------------------
| | 2004 versus 2003 Noninterest Income Comparison









18



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Table 5:     Details of Noninterest
Expense


|                               |                           |                         |        |        |      |   |        |        |  |   |        |        |  |      |       |       |  |  |       |      |   
|------------------------------ | ------------------------- | ----------------------- | ------ | ------ | ---- | - | ------ | ------ |  | - | ------ | ------ |  | ---- | ----- | ----- |  |  | ----- | ---- | --
|                               |                           | Year Ended December 31, |       
|                               |                           |                         |       
|                               |                           |                         |        | 2005   |      |   | 2004   |       
|                               |                           |                         |        | versus |      |   | versus |       
|                               |                           | 2005                    |        |        | 2004 |   |        | 2003   |  |   | 2004   |        |  | 2003 |      
|                               |                           |                         |        |        |      |   |        |        |  |   |        |        |  |      |      
|                               |                           | (Dollars in thousands)  |       
|Salaries and employee benefits |                           | $                       | 15,057 |        |      | $ | 12,995 |        |  | $ | 13,814 |        |  |      | 15.9% |       |  |  | (5.9  | )%  
|Furniture and equipment        |                           |                         | 3,001  |        |      |   | 2,784  |        |  |   | 2,517  |        |  |      | 7.8   |       |  |  | 10.6  |     
|Net occupancy                  |                           |                         | 1,830  |        |      |   | 1,633  |        |  |   | 1,585  |        |  |      | 12.1  |       |  |  | 3.0   |     
|Outside services               |                           |                         | 1,925  |        |      |   | 1,182  |        |  |   | 1,441  |        |  |      | 62.9  |       |  |  | (18.0 | )   
|Marketing and public relations |                           |                         | 1,249  |        |      |   | 1,047  |        |  |   | 762    |        |  |      | 19.3  |       |  |  | 37.4  |     
|Supplies and postage           |                           |                         | 1,245  |        |      |   | 1,208  |        |  |   | 1,137  |        |  |      | 3.1   |       |  |  | 6.2   |     
|Telecommunications             |                           |                         | 1,167  |        |      |   | 713    |        |  |   | 540    |        |  |      | 63.7  |       |  |  | 32.0  |     
|Ohio Franchise tax             |                           |                         | 772    |        |      |   | 729    |        |  |   | 673    |        |  |      | 5.9   |       |  |  | 8.3   |     
|Electronic banking expense     |                           |                         | 542    |        |      |   | 1,257  |        |  |   | 1,395  |        |  |      | (56.9 | )     |  |  | (9.9  | )   
|Other expense                  |                           |                         | 3,479  |        |      |   | 2,742  |        |  |   | 2,603  |        |  |      | 26.9  |       |  |  | 5.3   |     
|                               |                           |                         |        |        |      |   |        |        |  |   |        |        |  |      |      
|                               | Total Noninterest expense |                         | $      | 30,267 |      |   | $      | 26,290 |  |   | $      | 26,467 |  |      |       | 15.1% |  |  |       | (0.7 | )%
|                               |                           |                         |        |        |      |   |        |        |  |   |        |        |  |      |      



| |                                                
| | -----------------------------------------------
| | 2005 versus 2004 Noninterest Expense Comparison















19



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| |                                                
| | -----------------------------------------------
| | 2004 versus 2003 Noninterest Expense Comparison













20



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| |                                       
| | --------------------------------------
| | 2005 versus 2004 Income Tax Comparison





| |                                       
| | --------------------------------------
| | 2004 versus 2003 Income Tax Comparison



Balance Sheet Analysis (Dollars in thousands)




| |           
| | ----------
| | Securities



21



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Table 6:     Maturity Distribution
of Securities at Amortized Cost


|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |   |         |         |  |   |         |         | 
|----------------------------------- | ----------------------------------------- | ---------------------- | ------- | ------- | --------- | - | ------ | --------------- |  | - | ----- | ----- |  | ----- | ------- | ------- | ----- | - | ------- | ------- |  | - | ------- | ------- | 
|                                    |                                           |                        |         |         |           |   |        | At December 31, | 
|                                    |                                           |                        |         |         |           |   |        |                 | 
|                                    |                                           | From 1 to              |         |         | From 5 to |   |        | After           |  |   | 2005  |       |  | 2004  |         |         | 2003  |  
|                                    |                                           | 5 Years                |         |         | 10 Years  |   |        | 10 Years        |  |   | Total |       |  | Total |         |         | Total |  
|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |  
|                                    |                                           | (Dollars in thousands) |        
|Securities available for sale:      |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |   |         |         |  |   |         |        
|                                    | U.S. Government agencies and corporations |                        | $       | 105,816 |           |   | $      | 35,416          |  |   | $     | 4,778 |  |       | $       | 146,010 |       |   | $       | 131,789 |  |   | $       | 127,571 | 
|                                    | State and political subdivisions          |                        |         | 1,912   |           |   |        | 2,688           |  |   |       | 4,631 |  |       |         | 9,231   |       |   |         | 11,148  |  |   |         | 11,240  | 
|                                    | Equity Securities                         |                        |         | 52      |           |   |        |                |  |   |       |      |  |       |         | 52      |       |   |         | 3,938   |  |   |         | 5,137   | 
|                                    | FHLB and Federal Reserve stock            |                        |         | 3,645   |           |   |        |                |  |   |       |      |  |       |         | 3,645   |       |   |         | 4,033   |  |   |         |        | 
|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |  
|Total securities available for sale |                                           |                        | 111,425 |         |           |   | 38,104 |                 |  |   | 9,409 |       |  |       | 158,938 |         |       |   | 150,908 |         |  |   | 143,948 |        
|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |  
|Securities held to maturity:        |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |   |         |         |  |   |         |        
|                                    | U.S. Government agencies and corporations |                        |         |        |           |   |        |                |  |   |       |      |  |       |         |        |       |   |         |        |  |   |         | 2,993   | 
|                                    | State and political subdivisions          |                        |         |        |           |   |        |                |  |   |       |      |  |       |         |        |       |   |         |        |  |   |         | 1,796   | 
|                                    | Equity Securities                         |                        |         |        |           |   |        |                |  |   |       |      |  |       |         |        |       |   |         |        |  |   |         |        | 
|                                    | FHLB and Federal Reserve stock            |                        |         |        |           |   |        |                |  |   |       |      |  |       |         |        |       |   |         |        |  |   |         | 3,879   | 
|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |  
|Total securities held to maturity   |                                           |                        |        |         |           |   |       |                 |  |   |      |       |  |       |        |         |       |   |        |         |  |   | 8,668   |        
|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |  
|Total Securities                    |                                           | $                      | 111,425 |         |           | $ | 38,104 |                 |  | $ | 9,409 |       |  | $     | 158,938 |         |       | $ | 150,908 |         |  | $ | 152,616 |        
|                                    |                                           |                        |         |         |           |   |        |                 |  |   |       |       |  |       |         |         |       |  

Table 7:     The Weighted Average
Yield for Each Range of Maturities of Securities


|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       |  |      |      |   |  |      |      |  
|----------------------------------- | ----------------------------------------- | --------- | ---- | ---- | --------- |  | ---- | --------------- | - |  | ----- | ---- | - | ----- | ---- | ---- | ----- |  | ---- | ---- | - |  | ---- | ---- | -
|                                    |                                           |           |      |      |           |  |      | At December 31, |  
|                                    |                                           |           |      |      |           |  |      |                 |  
|                                    |                                           | From 1 to |      |      | From 5 to |  |      | After           |   |  | 2005  |      |   | 2004  |      |      | 2003  | 
|                                    |                                           | 5 Years   |      |      | 10 Years  |  |      | 10 Years        |   |  | Total |      |   | Total |      |      | Total | 
|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       | 
|Securities available for sale:      |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       |  |      |      |   |  |      |     
|                                    | U.S. Government agencies and corporations |           |      | 3.33 | %         |  |      | 4.16            | % |  |       | 5.21 | % |       |      | 3.59 | %     |  |      | 3.28 | % |  |      | 2.99 | %
|                                    | State and political subdivisions          |           |      | 5.47 |           |  |      | 6.10            |   |  |       | 5.93 |   |       |      | 5.88 |       |  |      | 5.29 |   |  |      | 6.43 |  
|                                    | Equity securities                         |           |      | 6.00 |           |  |      |                |   |  |       |     |   |       |      | 6.00 |       |  |      | 5.67 |   |  |      | 5.67 |  
|                                    | FHLB and Federal Reserve stock            |           |      | 5.77 |           |  |      |                |   |  |       |     |   |       |      | 5.77 |       |  |      | 4.36 |   |  |      |     |  
|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       | 
|Total securities available for sale |                                           |           | 3.45 | %    |           |  | 4.30 | %               |   |  | 5.56  | %    |   |       | 3.78 | %    |       |  | 3.54 | %    |   |  | 3.35 | %   
|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       | 
|Securities held to maturity:        |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       |  |      |      |   |  |      |     
|                                    | U.S. Government agencies and corporations |           |      |     |           |  |      |                |   |  |       |     |   |       |      |     |       |  |      |     |   |  |      | 4.25 | %
|                                    | State and political subdivisions          |           |      |     |           |  |      |                |   |  |       |     |   |       |      |     |       |  |      |     |   |  |      | 8.37 |  
|                                    | Equity securities                         |           |      |     |           |  |      |                |   |  |       |     |   |       |      |     |       |  |      |     |   |  |      |     |  
|                                    | FHLB and Federal Reserve stock            |           |      |     |           |  |      |                |   |  |       |     |   |       |      |     |       |  |      |     |   |  |      | 4.14 |  
|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       | 
|Total securities held to maturity   |                                           |           | 0.00 | %    |           |  | 0.00 | %               |   |  | 0.00  | %    |   |       | 0.00 | %    |       |  | 0.00 | %    |   |  | 5.05 | %   
|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       | 
|Total Securities                    |                                           |           | 3.45 | %    |           |  | 4.30 | %               |   |  | 5.56  | %    |   |       | 3.78 | %    |       |  | 3.54 | %    |   |  | 3.45 | %   
|                                    |                                           |           |      |      |           |  |      |                 |   |  |       |      |   |       |      |      |       | 






|    |                                                                                                                                                                                                           
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Yields on tax-exempt obligations are computed on a tax
    equivalent basis based upon a 34% statutory Federal income tax
    rate in 2005 and a 35% statutory Federal income tax rate in
    prior years.



| |      
| | -----
| | Loans



22



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loan-to




loan-to loan-to






|         |                            
|-------- | ---------------------------
|Table 8: | Loan Portfolio Distribution

|                            |             |                        |         |         |      |   |         |         |  |   |         |         |  |      |         |         |  |   |         |         | 
|--------------------------- | ----------- | ---------------------- | ------- | ------- | ---- | - | ------- | ------- |  | - | ------- | ------- |  | ---- | ------- | ------- |  | - | ------- | ------- | 
|                            |             | At December 31,        |        
|                            |             |                        |        
|                            |             | 2005                   |         |         | 2004 |   |         | 2003    |  |   | 2002    |         |  | 2001 |        
|                            |             |                        |         |         |      |   |         |         |  |   |         |         |  |      |        
|                            |             | (Dollars in thousands) |        
|Commercial                  |             | $                      | 363,144 |         |      | $ | 339,439 |         |  | $ | 303,347 |         |  | $    | 259,819 |         |  | $ | 219,511 |        
|Real Estate Mortgage        |             |                        | 81,367  |         |      |   | 112,787 |         |  |   | 113,649 |         |  |      | 141,405 |         |  |   | 158,221 |        
|Home equity lines of credit |             |                        | 66,134  |         |      |   | 62,143  |         |  |   | 57,762  |         |  |      | 48,816  |         |  |   | 37,008  |        
|Purchased installment       |             |                        | 42,023  |         |      |   | 27,833  |         |  |   | 7,218   |         |  |      |        |         |  |   |        |        
|Installment                 |             |                        | 38,343  |         |      |   | 33,022  |         |  |   | 51,999  |         |  |      | 54,219  |         |  |   | 57,886  |        
|Credit cards                |             |                        |        |         |      |   |        |         |  |   |        |         |  |      | 5,117   |         |  |   | 4,862   |        
|                            |             |                        |         |         |      |   |         |         |  |   |         |         |  |      |        
|                            | Total Loans |                        |         | 591,011 |      |   |         | 575,224 |  |   |         | 533,975 |  |      |         | 509,376 |  |   |         | 477,488 | 
|Allowance for loan losses   |             |                        | (6,622  | )       |      |   | (7,386  | )       |  |   | (7,730  | )       |  |      | (6,653  | )       |  |   | (5,890  | )      
|                            |             |                        |         |         |      |   |         |         |  |   |         |         |  |      |        
|                            | Net Loans   |                        | $       | 584,389 |      |   | $       | 567,838 |  |   | $       | 526,245 |  |      | $       | 502,723 |  |   | $       | 471,598 | 
|                            |             |                        |         |         |      |   |         |         |  |   |         |         |  |      |        

23



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|                            |  |                 |       |   |      |  |       |      |  |  |       |   |  |      |       |   |  |  |       |  
|--------------------------- |  | --------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | - |  | ---- | ----- | - |  |  | ----- | -
|                            |  | At December 31, |      
|                            |  |                 |      
|                            |  | 2005            |       |   | 2004 |  |       | 2003 |  |  | 2002  |   |  | 2001 |      
|                            |  |                 |       |   |      |  |       |      |  |  |       |   |  |      |      
|Loan Mix Percent            |  |                 |       |   |      |  |       |      |  |  |       |   |  |      |       |   |  |  |       |  
|                            |  |                 |       |   |      |  |       |      |  |  |       |   |  |      |      
|Commercial                  |  |                 | 61.4  | % |      |  | 59.1  | %    |  |  | 56.8  | % |  |      | 51.0  | % |  |  | 46.0  | %
|Real Estate Mortgage        |  |                 | 13.8  |   |      |  | 19.6  |      |  |  | 21.3  |   |  |      | 27.8  |   |  |  | 33.1  |  
|Home equity lines of credit |  |                 | 11.2  |   |      |  | 10.8  |      |  |  | 10.8  |   |  |      | 9.6   |   |  |  | 7.8   |  
|Purchased installment       |  |                 | 7.1   |   |      |  | 4.8   |      |  |  | 1.4   |   |  |      | 0.0   |   |  |  | 0.0   |  
|Installment                 |  |                 | 6.5   |   |      |  | 5.7   |      |  |  | 9.7   |   |  |      | 10.6  |   |  |  | 12.1  |  
|Credit cards                |  |                 | 0.0   |   |      |  | 0.0   |      |  |  | 0.0   |   |  |      | 1.0   |   |  |  | 1.0   |  
|                            |  |                 |       |   |      |  |       |      |  |  |       |   |  |      |      
|Total Loans                 |  |                 | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | % |  |      | 100.0 | % |  |  | 100.0 | %
|                            |  |                 |       |   |      |  |       |      |  |  |       |   |  |      |      





|         |                                                
|-------- | -----------------------------------------------
|Table 9: | Commercial Loan Maturity and Repricing Analysis

|                                                            |  |              |         | 
|----------------------------------------------------------- |  | ------------ | ------- | 
|                                                            |  | December 31, |        
|                                                            |  | 2005         |        
|                                                            |  |              |        
|                                                            |  | (Dollars in  |        
|                                                            |  | thousands)   |        
|Maturing and repricing in one year or less                  |  | $            | 216,430 | 
|Maturing and repricing after one year but within five years |  |              | 70,637  | 
|Maturing and repricing beyond five years                    |  |              | 73,491  | 
|                                                            |  |              |        
|Total Commercial Loans                                      |  | $            | 360,558 | 
|                                                            |  |              |        

Risk Elements




|    |                                                
|--- | -----------------------------------------------
|(1) | Nonperforming Loans and Potential Problem Loans





|                        |  |                        |        |  |      |   |        |      |  |   |        |  |  |      |        |  |  |   |       | 
|----------------------- |  | ---------------------- | ------ |  | ---- | - | ------ | ---- |  | - | ------ |  |  | ---- | ------ |  |  | - | ----- | 
|                        |  | 2005                   |        |  | 2004 |   |        | 2003 |  |   | 2002   |  |  | 2001 |       
|                        |  |                        |        |  |      |   |        |      |  |   |        |  |  |      |       
|                        |  | (Dollars in thousands) |       
|Potential Problem Loans |  | $                      | 14,440 |  |      | $ | 21,576 |      |  | $ | 21,747 |  |  | $    | 15,549 |  |  | $ | 8,579 | 
|                        |  |                        |        |  |      |   |        |      |  |   |        |  |  |      |       



24



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|    |                    
|--- | -------------------
|(2) | Loan Concentrations









|    |             
|--- | ------------
|(3) | Loan Quality

Provision and Allowance for Loan Losses






Allowance for Loan Losses and Provision for Loan Losses
Comparison (2005 versus 2004)




25



---



##### Table of Contents











Allowance for Loan Losses and Provision for Loan Losses
Comparison (2004 versus 2003)




26



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##### Table of Contents





|          |                                      
|--------- | -------------------------------------
|Table 10: | Analysis of Allowance for Loan Losses

|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |        |  
|---------------------------- | --------------------------- | ----------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | - | ---- | ------ | ------ | - | - | ------ | ------ | -
|                             |                             | Year Ended December 31, |       
|                             |                             |                         |       
|                             |                             | 2005                    |        |        | 2004 |   |        | 2003   |   |   | 2002   |        |   | 2001 |       
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|                             |                             | (Dollars in thousands)  |       
|Balance at beginning of year |                             | $                       | 7,386  |        |      | $ | 7,730  |        |   | $ | 6,653  |        |   | $    | 5,890  |        |   | $ | 5,250  |       
|Charge-offs:                 |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |       
|                             | Commercial                  |                         |        | (1,582 | )    |   |        | (1,619 | ) |   |        | (1,207 | ) |      |        | (738   | ) |   |        | (490   | )
|                             | Real Estate Mortgage        |                         |        | (28    | )    |   |        | (21    | ) |   |        | (1     | ) |      |        | (15    | ) |   |        | (16    | )
|                             | Home equity lines of credit |                         |        | (146   | )    |   |        | (109   | ) |   |        | (22    | ) |      |        |       |   |   |        | (9     | )
|                             | Purchased installment       |                         |        | (65    | )    |   |        |       |   |   |        |       |   |      |        |       |   |   |        |       |  
|                             | Installment                 |                         |        | (435   | )    |   |        | (586   | ) |   |        | (595   | ) |      |        | (889   | ) |   |        | (1,078 | )
|                             | Credit cards                |                         |        |       |      |   |        | (5     | ) |   |        | (133   | ) |      |        | (141   | ) |   |        | (145   | )
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|                             | Total charge-offs           |                         |        | (2,256 | )    |   |        | (2,340 | ) |   |        | (1,958 | ) |      |        | (1,783 | ) |   |        | (1,738 | )
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|Recoveries:                  |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |        |        |   |   |        |       
|                             | Commercial                  |                         |        | 75     |      |   |        | 71     |   |   |        | 87     |   |      |        | 163    |   |   |        | 64     |  
|                             | Real Estate Mortgage        |                         |        |       |      |   |        |       |   |   |        |       |   |      |        | 1      |   |   |        | 5      |  
|                             | Home equity lines of credit |                         |        | 1      |      |   |        | 1      |   |   |        |       |   |      |        |       |   |   |        | 9      |  
|                             | Purchased installment       |                         |        | 3      |      |   |        |       |   |   |        |       |   |      |        |       |   |   |        |       |  
|                             | Installment                 |                         |        | 160    |      |   |        | 158    |   |   |        | 219    |   |      |        | 157    |   |   |        | 76     |  
|                             | Credit cards                |                         |        | 5      |      |   |        | 18     |   |   |        | 34     |   |      |        | 25     |   |   |        | 24     |  
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|                             | Total recoveries            |                         |        | 244    |      |   |        | 248    |   |   |        | 340    |   |      |        | 346    |   |   |        | 178    |  
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|Net charge-offs              |                             |                         | (2,012 | )      |      |   | (2,092 | )      |   |   | (1,618 | )      |   |      | (1,437 | )      |   |   | (1,560 | )     
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|Provision for loan losses    |                             |                         | 1,248  |        |      |   | 1,748  |        |   |   | 2,695  |        |   |      | 2,200  |        |   |   | 2,200  |       
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       
|Balance at end of year       |                             | $                       | 6,622  |        |      | $ | 7,386  |        |   | $ | 7,730  |        |   | $    | 6,653  |        |   | $ | 5,890  |       
|                             |                             |                         |        |        |      |   |        |        |   |   |        |        |   |      |       

Allocation of Year-end Allowance for Loan Losses


|                            |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |       |  |  |   |       | 
|--------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- |  |  | ---- | ----- |  |  | - | ----- | 
|                            |  | At December 31,        |      
|                            |  |                        |      
|                            |  | 2005                   |       |  | 2004 |   |       | 2003 |  |   | 2002  |  |  | 2001 |      
|                            |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |      
|                            |  | (Dollars in thousands) |      
|Commercial                  |  | $                      | 5,195 |  |      | $ | 5,436 |      |  | $ | 5,495 |  |  | $    | 4,145 |  |  | $ | 3,750 | 
|Real Estate Mortgage        |  |                        | 264   |  |      |   | 161   |      |  |   | 405   |  |  |      | 412   |  |  |   | 363   | 
|Home equity lines of credit |  |                        | 216   |  |      |   | 109   |      |  |   |      |  |  |      |      |  |  |   |      | 
|Purchased installment       |  |                        | 143   |  |      |   |      |      |  |   |      |  |  |      |      |  |  |   |      | 
|Installment                 |  |                        | 381   |  |      |   | 700   |      |  |   | 1,237 |  |  |      | 1,475 |  |  |   | 1,351 | 
|Unallocated                 |  |                        | 423   |  |      |   | 980   |      |  |   | 593   |  |  |      | 621   |  |  |   | 426   | 
|                            |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |      
|Total                       |  | $                      | 6,622 |  |      | $ | 7,386 |      |  | $ | 7,730 |  |  | $    | 6,653 |  |  | $ | 5,890 | 
|                            |  |                        |       |  |      |   |       |      |  |   |       |  |  |      |      

Nonperforming Assets




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Table 11:     Nonperforming
Assets


|                                                 |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |       |       |  |   |       |       | 
|------------------------------------------------ | -------------------------- | ---------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- |  | ---- | ----- | ----- |  | - | ----- | ----- | 
|                                                 |                            | At December 31,        |      
|                                                 |                            |                        |      
|                                                 |                            | 2005                   |       |       | 2004 |   |       | 2003  |  |   | 2002  |       |  | 2001 |      
|                                                 |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |      
|                                                 |                            | (Dollars in thousands) |      
|Commercial loans                                 |                            | $                      | 5,129 |       |      | $ | 3,255 |       |  | $ | 4,104 |       |  | $    | 1,213 |       |  | $ | 546   |      
|Real Estate Mortgage                             |                            |                        | 1,182 |       |      |   | 1,116 |       |  |   | 821   |       |  |      | 461   |       |  |   | 644   |      
|Home equity lines of credit                      |                            |                        | 25    |       |      |   | 400   |       |  |   | 89    |       |  |      | 22    |       |  |   | 13    |      
|Purchased installment                            |                            |                        |      |       |      |   |      |       |  |   |      |       |  |      |      |       |  |   |      |      
|Installment loans                                |                            |                        | 158   |       |      |   | 150   |       |  |   | 140   |       |  |      | 167   |       |  |   | 113   |      
|                                                 | Total nonperforming loans  |                        |       | 6,494 |      |   |       | 4,921 |  |   |       | 5,154 |  |      |       | 1,863 |  |   |       | 1,316 | 
|Other foreclosed assets                          |                            |                        | 432   |       |      |   | 420   |       |  |   | 589   |       |  |      | 22    |       |  |   | 123   |      
|                                                 |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |      
|                                                 | Total nonperforming assets |                        | $     | 6,926 |      |   | $     | 5,341 |  |   | $     | 5,743 |  |      | $     | 1,885 |  |   | $     | 1,439 | 
|                                                 |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |      
|Loans 90 days past due accruing interest         |                            | $                      |      |       |      | $ |      |       |  | $ | 46    |       |  | $    | 45    |       |  | $ | 149   |      
|                                                 |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |      
|Allowance for loan losses to nonperforming loans |                            |                        | 102.0 | %     |      |   | 150.1 | %     |  |   | 150.0 | %     |  |      | 357.1 | %     |  |   | 447.6 | %    
|                                                 |                            |                        |       |       |      |   |       |       |  |   |       |       |  |      |      

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Funding Sources




Table 12:     Funding Sources


|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      |  |      |   |  |  |      |  
|---------------------- |  | ---------------------------- | ------- |  | ------------------ | - | ------- | ---- |  | - | ------- |  |  | ---- | ---- | - | ---- |  | ---- | - |  |  | ---- | -
|                       |  | Average Balances Outstanding |         |  | Average Rates Paid |  
|                       |  |                              |         |  |                    |  
|                       |  | 2005                         |         |  | 2004               |   |         | 2003 |  |   | 2005    |  |  | 2004 |      |   | 2003 | 
|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      | 
|                       |  | (Dollars in thousands)       |        
|Demand deposits        |  | $                            | 92,730  |  |                    | $ | 92,305  |      |  | $ | 89,928  |  |  |      | 0.00 | % |      |  | 0.00 | % |  |  | 0.00 | %
|Interest checking      |  |                              | 173,335 |  |                    |   | 174,150 |      |  |   | 176,430 |  |  |      | 1.12 |   |      |  | 0.77 |   |  |  | 0.72 |  
|Savings deposits       |  |                              | 101,808 |  |                    |   | 105,883 |      |  |   | 102,100 |  |  |      | 0.33 |   |      |  | 0.30 |   |  |  | 0.36 |  
|Consumer time deposits |  |                              | 179,825 |  |                    |   | 164,421 |      |  |   | 165,541 |  |  |      | 3.16 |   |      |  | 2.57 |   |  |  | 2.95 |  
|Public time deposits   |  |                              | 47,145  |  |                    |   | 45,576  |      |  |   | 48,202  |  |  |      | 3.29 |   |      |  | 1.60 |   |  |  | 1.55 |  
|Brokered time deposits |  |                              | 40,942  |  |                    |   | 7,012   |      |  |   |        |  |  |      | 3.49 |   |      |  | 2.79 |   |  |  | 0.00 |  
|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      | 
|Total Deposits         |  |                              | 635,785 |  |                    |   | 589,347 |      |  |   | 582,201 |  |  |      | 1.72 |   |      |  | 1.16 |   |  |  | 1.25 |  
|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      | 
|Short-term borrowings  |  |                              | 19,892  |  |                    |   | 18,013  |      |  |   | 18,185  |  |  |      | 3.11 |   |      |  | 1.14 |   |  |  | 1.90 |  
|FHLB borrowings        |  |                              | 61,283  |  |                    |   | 77,760  |      |  |   | 64,880  |  |  |      | 3.04 |   |      |  | 2.68 |   |  |  | 2.68 |  
|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      | 
|Total borrowings       |  |                              | 81,175  |  |                    |   | 95,773  |      |  |   | 83,065  |  |  |      | 3.06 |   |      |  | 2.39 |   |  |  | 2.51 |  
|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      | 
|Total Funding          |  | $                            | 716,960 |  |                    | $ | 685,120 |      |  | $ | 665,266 |  |  |      | 1.87 | % |      |  | 1.33 | % |  |  | 1.41 | %
|                       |  |                              |         |  |                    |   |         |      |  |   |         |  |  |      |      |   |      | 







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Liquidity








Table 13:     Liquidity


|                    |  |                        |         |  |          |   |        | 
|------------------- |  | ---------------------- | ------- |  | -------- | - | ------ | 
|                    |  | Borrowing              |         |  | Unused   |  
|                    |  | Capacity               |         |  | Capacity |  
|                    |  |                        |         |  |          |  
|                    |  | (Dollars in thousands) |        
|FHLB Cincinnati     |  | $                      | 70,559  |  |          | $ | 16,663 | 
|FRB Cleveland       |  |                        | 10,945  |  |          |   | 10,945 | 
|Federal Funds Lines |  |                        | 47,750  |  |          |   | 31,250 | 
|                    |  |                        |         |  |          |  
|Total               |  | $                      | 129,254 |  |          | $ | 58,858 | 
|                    |  |                        |         |  |          |  

time-to


Capital Resources




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Contractual Obligations and Commitments




Table 14:     Contractual
Obligations


|                      |       |                        |        |        |             |   |        |            |  |   |           |        |  |       |       |       |  |   |        |        | 
|--------------------- | ----- | ---------------------- | ------ | ------ | ----------- | - | ------ | ---------- |  | - | --------- | ------ |  | ----- | ----- | ----- |  | - | ------ | ------ | 
|                      |       | One Year               |        |        | Two and     |   |        | Four and   |  |   | Over Five |        |  |      
|                      |       | or Less                |        |        | Three Years |   |        | Five Years |  |   | Years     |        |  | Total |      
|                      |       |                        |        |        |             |   |        |            |  |   |           |        |  |       |      
|                      |       | (Dollars in thousands) |       
|Short-term borrowings |       | $                      | 32,616 |        |             | $ |       |            |  | $ |          |        |  | $     |      |       |  | $ | 32,616 |       
|FHLB advances         |       |                        | 23,800 |        |             |   | 20,000 |            |  |   | 10,000    |        |  |       | 96    |       |  |   | 53,896 |       
|Operating leases      |       |                        | 764    |        |             |   | 1,408  |            |  |   | 708       |        |  |       | 810   |       |  |   | 3,690  |       
|Benefit payments      |       |                        | 720    |        |             |   | 623    |            |  |   | 896       |        |  |       | 2,942 |       |  |   | 5,181  |       
|Severance payments    |       |                        | 180    |        |             |   | 247    |            |  |   | 255       |        |  |       | 198   |       |  |   | 880    |       
|                      |       |                        |        |        |             |   |        |            |  |   |           |        |  |       |      
|                      | Total |                        | $      | 58,080 |             |   | $      | 22,278     |  |   | $         | 11,859 |  |       | $     | 4,046 |  |   | $      | 96,263 | 
|                      |       |                        |        |        |             |   |        |            |  |   |           |        |  |       |      

Critical Accounting Policy and Estimates








| |   |                          
| | - | -------------------------
| |  | Allowance for loan losses



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| |   |                   
| | - | ------------------
| |  | Pension accounting





| |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. Size of employee population has stayed more or less
    stagnant over the last few years, thereby causing pension cost
    relating to this variable to be more or less the same.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|
| | 2. Actuarial assumptions are required for mortality rate,
    turnover rate, retirement rate, disability rate and the rate of
    compensation increases. These factors do not change over time,
    so the range of assumptions and their impact on pension expense
    is generally narrow.                                                                                                                                                                                                                                                                                                                                                                                                         
|
| | 3. Expected long-term rate of return on plan assets are
    based on the balance in the pension asset portfolio at the
    beginning of the plan year and the expected long-term rate of
    return on that portfolio. The expected long-term rate of return
    is designed to approximate the actual long term rate of return
    on plan assets over time. The expected long-term rate of return
    is generally held constant so the pattern of income/expense
    recognition more closely matches the stable pattern of services
    provided by the employees over the life of pension obligation.
    At December 31, 2005 the expected long term rate of return
    on plan asset was 7.50%.
|
| | 4. A discount rate is used to determine the present value
    of the future benefit obligations. It reflects the rates
    available on long-term high quality fixed income debt
    instruments, reset annually on the measurement date. The
    discount rate used in 2005 was 5.75%.                                                                                                                                                                                                                                                                                                                                                                                                               

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| |   |             
| | - | ------------
| |  | Income Taxes



Impacts of Recent 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

03-3, 03-3). 03-3 03-3


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| |                                                                                                                      
| | ---------------------------------------------------------------------------------------------------------------------
| | EITF
    No 03-01 The
    Meaning of Other-Than-Temporary Impairment and Its Application
    to Certain Investments

03-01, 03-01). 03-01 03-01 115-1,The 03-1 115-1 03-1 115-1


115-1 115-1




| |                                                            
| | -----------------------------------------------------------
| | SFAS No. 154 Accounting Changes and Error
    Corrections



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|         |                                                           
|-------- | ----------------------------------------------------------
|Item 7A. | Quantitative and Qualitative Disclosures About Market Risk

Market Risk Management












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Table 15:     GAP Analysis


|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |   |         |   |  |   |         | 
|------------------------------------- |  | ---------------------- | ------- | ----- | --------- | - | ------- | --------- |  | - | ---------- | - |  | -------- | ------ | - | ----- | - | ------- | - |  | - | ------- | 
|                                      |  | At December 31, 2005   |        
|                                      |  |                        |        
|                                      |  |                        |         | After |           |   |        
|                                      |  | 1 Year                 |         |       | 2-3 Years |   |         | 4-5 Years |  |   | 5-15 Years |   |  | 15 Years |        |   | Total |  
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  
|                                      |  | (Dollars in thousands) |        
|Securities and short-term investments |  | $                      | 32,320  |       |           | $ | 79,258  |           |  | $ | 24,710     |   |  | $        | 18,986 |   |       | $ |        |   |  | $ | 155,274 | 
|Commercial loans                      |  |                        | 216,430 |       |           |   | 38,824  |           |  |   | 31,813     |   |  |          | 52,888 |   |       |   | 20,603  |   |  |   | 360,558 | 
|Real estate mortgage loans            |  |                        | 32,137  |       |           |   | 34,791  |           |  |   | 9,157      |   |  |          | 2,478  |   |       |   | 2,804   |   |  |   | 81,367  | 
|Home equity lines of credit           |  |                        | 66,134  |       |           |   |        |           |  |   |           |   |  |          |       |   |       |   |        |   |  |   | 66,134  | 
|Purchased installment loans           |  |                        | 11,855  |       |           |   | 23,711  |           |  |   | 6,457      |   |  |          |       |   |       |   |        |   |  |   | 42,023  | 
|Installment loans                     |  |                        | 9,232   |       |           |   | 14,581  |           |  |   | 8,652      |   |  |          | 5,878  |   |       |   |        |   |  |   | 38,343  | 
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  
|Total earning assets                  |  | $                      | 368,108 |       |           | $ | 191,165 |           |  | $ | 80,789     |   |  | $        | 80,230 |   |       | $ | 23,407  |   |  | $ | 743,699 | 
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  
|Consumer time deposits                |  | $                      | 134,801 |       |           | $ | 50,715  |           |  | $ | 13,646     |   |  | $        | 28     |   |       | $ |        |   |  | $ | 199,190 | 
|Public time deposits                  |  |                        | 32,332  |       |           |   |        |           |  |   |           |   |  |          |       |   |       |   |        |   |  |   | 32,332  | 
|Brokered time deposits                |  |                        | 38,526  |       |           |   | 16,740  |           |  |   |           |   |  |          |       |   |       |   |        |   |  |   | 55,266  | 
|Savings deposits                      |  |                        | 18,925  |       |           |   | 37,851  |           |  |   | 37,852     |   |  |          |       |   |       |   |        |   |  |   | 94,628  | 
|Interest-bearing demand deposits      |  |                        | 34,241  |       |           |   | 68,481  |           |  |   | 68,481     |   |  |          |       |   |       |   |        |   |  |   | 171,203 | 
|Short-term borrowings                 |  |                        | 32,616  |       |           |   |        |           |  |   |           |   |  |          |       |   |       |   |        |   |  |   | 32,616  | 
|FHLB advances                         |  |                        | 23,800  |       |           |   | 21,863  |           |  |   | 8,233      |   |  |          |       |   |       |   |        |   |  |   | 53,896  | 
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  
|Total interest-bearing liabilities    |  | $                      | 315,241 |       |           | $ | 195,650 |           |  | $ | 128,212    |   |  | $        | 28     |   |       | $ |        |   |  | $ | 639,131 | 
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  
|Cumulative interest rate gap          |  | $                      | 52,868  |       |           | $ | 48,383  |           |  | $ | 959        |   |  | $        | 81,161 |   |       | $ | 104,568 |   |  | $ | 104,568 | 
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  
|RSA/RSL                               |  |                        | 116.8   | %     |           |   | 109.5   | %         |  |   | 100.2      | % |  |          | 112.7  | % |       |   | 116.4   | % |  |   |        | 
|                                      |  |                        |         |       |           |   |         |           |  |   |            |   |  |          |        |   |       |  

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|        |                                            
|------- | -------------------------------------------
|Item 8. | Financial Statements and Supplementary Data

Table of Contents


|                                                                                                             |  |  |    | 
|------------------------------------------------------------------------------------------------------------ |  |  | -- | 
|Consolidated Balance Sheets as of
    December 31, 2005 and 2004                                             |  |  | 38 | 
|Consolidated Statements of Income for the
    Years Ended December 31, 2005, 2004 and 2003                   |  |  | 39 | 
|Consolidated Statements of
    Shareholders Equity for the Years Ended December 31,
    2005, 2004 and 2003 |  |  | 40 | 
|Consolidated Statements of Cash Flows for
    the Years Ended December 31, 2005, 2004 and 2003               |  |  | 41 | 
|Notes to Consolidated Financial Statements
    December 31, 2005, 2004 and 2003                              |  |  | 42 | 
|Report of Independent Registered Public
    Accounting Firm                                                  |  |  | 68 | 

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##### Table of Contents






CONSOLIDATED BALANCE SHEETS


|                                              |                                                                                                                                                                        |                       |         |         |      |   |         |         |  
|--------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ------- | ------- | ---- | - | ------- | ------- | -
|                                              |                                                                                                                                                                        | At December 31,       |        
|                                              |                                                                                                                                                                        |                       |        
|                                              |                                                                                                                                                                        | 2005                  |         |         | 2004 |  
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|                                              |                                                                                                                                                                        | (Dollars in thousands |        
|                                              |                                                                                                                                                                        | except share amounts) |        
|ASSETS                                       
|Cash and due from banks                       |                                                                                                                                                                        | $                     | 23,923  |         |      | $ | 23,123  |        
|Federal funds sold and short-term investments |                                                                                                                                                                        |                       |        |         |      |   | 3,695   |        
|Securities:                                   |                                                                                                                                                                        |                       |         |         |      |   |         |        
|                                              | Available for sale, at fair value                                                                                                                                      |                       |         | 151,629 |      |   |         | 145,588 |  
|                                              | Federal Home Loan Bank and Federal Reserve stock                                                                                                                       |                       |         | 3,645   |      |   |         | 4,033   |  
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Total securities                              |                                                                                                                                                                        |                       | 155,274 |         |      |   | 149,621 |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Loans:                                        |                                                                                                                                                                        |                       |         |         |      |   |         |        
|                                              | Loans held for sale                                                                                                                                                    |                       |         | 2,586   |      |   |         | 3,067   |  
|                                              | Portfolio loans                                                                                                                                                        |                       |         | 588,425 |      |   |         | 572,157 |  
|                                              | Allowance for loan losses                                                                                                                                              |                       |         | (6,622  | )    |   |         | (7,386  | )
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Net loans                                     |                                                                                                                                                                        |                       | 584,389 |         |      |   | 567,838 |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Bank premises and equipment, net              |                                                                                                                                                                        |                       | 10,833  |         |      |   | 11,493  |        
|Other real estate owned                       |                                                                                                                                                                        |                       | 432     |         |      |   | 420     |        
|Bank owned life insurance                     |                                                                                                                                                                        |                       | 13,935  |         |      |   | 13,335  |        
|Goodwill and intangible assets, net           |                                                                                                                                                                        |                       | 3,321   |         |      |   | 3,801   |        
|Accrued interest receivable                   |                                                                                                                                                                        |                       | 3,053   |         |      |   | 2,594   |        
|Other assets                                  |                                                                                                                                                                        |                       | 5,961   |         |      |   | 5,729   |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Total Assets                                  |                                                                                                                                                                        | $                     | 801,121 |         |      | $ | 781,649 |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|                                             
|LIABILITIES                                  
|Deposits                                      |                                                                                                                                                                        |                       |         |         |      |   |         |        
|                                              | Demand and other noninterest-bearing                                                                                                                                   |                       | $       | 87,597  |      |   | $       | 96,280  |  
|                                              | Savings, money market and interest-bearing demand                                                                                                                      |                       |         | 265,831 |      |   |         | 280,169 |  
|                                              | Certificates of deposit                                                                                                                                                |                       |         | 286,788 |      |   |         | 229,094 |  
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Total deposits                                |                                                                                                                                                                        |                       | 640,216 |         |      |   | 605,543 |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Short-term borrowings                         |                                                                                                                                                                        |                       | 32,616  |         |      |   | 31,619  |        
|Federal Home Loan Bank advances               |                                                                                                                                                                        |                       | 53,896  |         |      |   | 69,296  |        
|Accrued interest payable                      |                                                                                                                                                                        |                       | 2,126   |         |      |   | 1,172   |        
|Accrued taxes, expenses and other liabilities |                                                                                                                                                                        |                       | 3,861   |         |      |   | 3,445   |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Total Liabilities                             |                                                                                                                                                                        |                       | 732,715 |         |      |   | 711,075 |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Shareholders Equity                          |                                                                                                                                                                        |                       |         |         |      |   |         |        
|                                              | Common stock, par value $1 per share, authorized
    15,000,000 shares, issued 6,771,867 shares at
    December 31, 2005 and 6,766,867 shares at
    December 31, 2004 |                       |         | 6,772   |      |   |         | 6,766   |  
|                                              | Additional paid-in capital                                                                                                                                             |                       |         | 26,334  |      |   |         | 26,243  |  
|                                              | Retained earnings                                                                                                                                                      |                       |         | 42,945  |      |   |         | 41,292  |  
|                                              | Accumulated other comprehensive loss                                                                                                                                   |                       |         | (2,996  | )    |   |         | (1,297  | )
|                                              | Treasury stock at cost, 250,694 shares in 2005 and
    125,694 shares in 2004                                                                                          |                       |         | (4,649  | )    |   |         | (2,430  | )
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Total Shareholders Equity                    |                                                                                                                                                                        |                       | 68,406  |         |      |   | 70,574  |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  
|Total Liabilities and Shareholders Equity    |                                                                                                                                                                        | $                     | 801,121 |         |      | $ | 781,649 |        
|                                              |                                                                                                                                                                        |                       |         |         |      |  

See accompanying notes to consolidated financial
statements.


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##### Table of Contents






CONSOLIDATED STATEMENTS OF INCOME


|                                  |                                               |                                                     |        |           |        |   |        |           |        |   |        |           |        | 
|--------------------------------- | --------------------------------------------- | --------------------------------------------------- | ------ | --------- | ------ | - | ------ | --------- | ------ | - | ------ | --------- | ------ | 
|                                  |                                               | Year Ended December 31,                             |       
|                                  |                                               |                                                     |       
|                                  |                                               | 2005                                                |        |           | 2004   |   |        | 2003      |       
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|                                  |                                               | (Dollars in thousands except share                  |       
|                                  |                                               | and per share amounts)                              |       
|Interest Income                   |                                               |                                                     |        |           |        |   |        |           |        |   |        |          
|                                  | Loans                                         |                                                     | $      | 38,145    |        |   | $      | 32,560    |        |   | $      | 32,759    |       
|                                  | Securities:                                   |                                                     |        |           |        |   |        |           |        |   |        |           |       
|                                  |                                               | U.S. Government agencies and corporations           |        |           | 4,487  |   |        |           | 3,784  |   |        |           | 4,155  | 
|                                  |                                               | State and political subdivisions                    |        |           | 439    |   |        |           | 459    |   |        |           | 610    | 
|                                  |                                               | Other debt and equity securities                    |        |           | 224    |   |        |           | 301    |   |        |           | 296    | 
|                                  | Federal funds sold and short-term investments |                                                     |        | 137       |        |   |        | 120       |        |   |        | 40        |       
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Total interest income             |                                               |                                                     | 43,432 |           |        |   | 37,224 |           |        |   | 37,860 |          
|Interest Expense                  |                                               |                                                     |        |           |        |   |        |           |        |   |        |          
|                                  | Deposits:                                     |                                                     |        |           |        |   |        |           |        |   |        |           |       
|                                  |                                               | Certificates of deposit, $100 and over              |        |           | 3,937  |   |        |           | 1,448  |   |        |           | 1,447  | 
|                                  |                                               | Other deposits                                      |        |           | 6,976  |   |        |           | 5,366  |   |        |           | 5,814  | 
|                                  | Federal Home Loan Bank advances               |                                                     |        | 1,862     |        |   |        | 2,066     |        |   |        | 1,737     |       
|                                  | Short-term borrowings                         |                                                     |        | 627       |        |   |        | 222       |        |   |        | 198       |       
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Total interest expense            |                                               |                                                     | 13,402 |           |        |   | 9,102  |           |        |   | 9,196  |          
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Net Interest Income               |                                               |                                                     | 30,030 |           |        |   | 28,122 |           |        |   | 28,664 |          
|Provision for Loan Losses         |                                               |                                                     | 1,248  |           |        |   | 1,748  |           |        |   | 2,695  |          
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|                                  |                                               | Net interest income after provision for loan losses |        |           | 28,782 |   |        |           | 26,374 |   |        |           | 25,969 | 
|Noninterest income                |                                               |                                                     |        |           |        |   |        |           |        |   |        |          
|                                  | Investment and trust services                 |                                                     |        | 1,940     |        |   |        | 2,091     |        |   |        | 1,762     |       
|                                  | Deposit service charges                       |                                                     |        | 4,219     |        |   |        | 4,187     |        |   |        | 4,260     |       
|                                  | Other service charges and fees                |                                                     |        | 1,895     |        |   |        | 2,794     |        |   |        | 3,104     |       
|                                  | Mortgage banking revenue                      |                                                     |        | 959       |        |   |        | 364       |        |   |        |          |       
|                                  | Income from bank owned life insurance         |                                                     |        | 600       |        |   |        | 632       |        |   |        | 772       |       
|                                  | Other income                                  |                                                     |        | 479       |        |   |        | 592       |        |   |        | 207       |       
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Total fees and other income       |                                               |                                                     | 10,092 |           |        |   | 10,660 |           |        |   | 10,105 |          
|                                  | Securities gains (losses), net                |                                                     |        | 173       |        |   |        | (777      | )      |   |        | 449       |       
|                                  | Gain on sale of loans                         |                                                     |        | 132       |        |   |        | 181       |        |   |        | 236       |       
|                                  | Gain on sale of credit card portfolio         |                                                     |        |          |        |   |        |          |        |   |        | 832       |       
|                                  | Gain (loss) on sale of other assets, net      |                                                     |        | (20       | )      |   |        | 378       |        |   |        | 2         |       
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Total noninterest income          |                                               |                                                     | 10,377 |           |        |   | 10,442 |           |        |   | 11,624 |          
|Noninterest Expense               |                                               |                                                     |        |           |        |   |        |           |        |   |        |          
|                                  | Salaries and employee benefits                |                                                     |        | 15,057    |        |   |        | 12,995    |        |   |        | 13,814    |       
|                                  | Furniture and Equipment                       |                                                     |        | 3,001     |        |   |        | 2,784     |        |   |        | 2,517     |       
|                                  | Net occupancy                                 |                                                     |        | 1,830     |        |   |        | 1,633     |        |   |        | 1,585     |       
|                                  | Outside services                              |                                                     |        | 1,925     |        |   |        | 1,182     |        |   |        | 1,441     |       
|                                  | Marketing and public relations                |                                                     |        | 1,249     |        |   |        | 1,047     |        |   |        | 762       |       
|                                  | Supplies, postage and freight                 |                                                     |        | 1,245     |        |   |        | 1,208     |        |   |        | 1,137     |       
|                                  | Telecommunications                            |                                                     |        | 1,167     |        |   |        | 713       |        |   |        | 540       |       
|                                  | Ohio Franchise tax                            |                                                     |        | 772       |        |   |        | 729       |        |   |        | 673       |       
|                                  | Electronic banking expenses                   |                                                     |        | 542       |        |   |        | 1,257     |        |   |        | 1,395     |       
|                                  | Other expense                                 |                                                     |        | 3,479     |        |   |        | 2,742     |        |   |        | 2,603     |       
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Total noninterest expense         |                                               |                                                     | 30,267 |           |        |   | 26,290 |           |        |   | 26,467 |          
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Income before income tax expense  |                                               |                                                     | 8,892  |           |        |   | 10,526 |           |        |   | 11,126 |          
|Income tax expense                |                                               |                                                     | 2,479  |           |        |   | 3,051  |           |        |   | 3,411  |          
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Net Income                        |                                               | $                                                   | 6,413  |           |        | $ | 7,475  |           |        | $ | 7,715  |          
|                                  |                                               |                                                     |        |           |        |   |        |           |       
|Net Income Per Common Share       |                                               |                                                     |        |           |        |   |        |           |        |   |        |          
|                                  | Basic                                         |                                                     | $      | 0.97      |        |   | $      | 1.13      |        |   | $      | 1.17      |       
|                                  | Diluted                                       |                                                     |        | 0.97      |        |   |        | 1.13      |        |   |        | 1.17      |       
|                                  | Dividends declared                            |                                                     |        | 0.72      |        |   |        | 0.72      |        |   |        | 0.70      |       
|Average Common Shares Outstanding |                                               |                                                     |        |           |        |   |        |           |        |   |        |          
|                                  | Basic                                         |                                                     |        | 6,612,803 |        |   |        | 6,631,392 |        |   |        | 6,605,560 |       
|                                  | Diluted                                       |                                                     |        | 6,612,852 |        |   |        | 6,632,324 |        |   |        | 6,615,654 |       

See accompanying notes to consolidated financial
statements.


39



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##### Table of Contents






CONSOLIDATED STATEMENTS OF SHAREHOLDERS EQUITY


|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |        |  
|--------------------------------------------------------------------------------------- | ------------------------------------- | --------------------------------------------------------- | ----- | ---------- | ------- | - | ------ | ----------- | ------------- | - | ------ | - | ----- | -------- | ------ | - | ------ | - | ------ | - |  | - | ------ | - | ------ | -
|                                                                                        |                                       |                                                           |       |            |         |   |        | Accumulated |               |   |        |   |      
|                                                                                        |                                       |                                                           |       |            |         |   |        | Other       |               |   |        |   |      
|                                                                                        |                                       |                                                           |       | Additional |         |   |        |             | Comprehensive |   |        |   |       |         
|                                                                                        |                                       | Common                                                    |       |            | Paid-In |   |        | Retained    |               |   | Income |   |       | Treasury |        |   |       
|                                                                                        |                                       | Stock                                                     |       |            | Capital |   |        | Earnings    |               |   | (Loss) |   |       | Stock    |        |   | Total  |  
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|                                                                                        |                                       | (Dollars in thousands except share and per share amounts) |      
|Balance, December 31, 2002                                                              |                                       | $                                                         | 4,501 |            |         | $ | 28,319 |             |               | $ | 35,639 |   |       | $        | 1,054  |   |        | $ | (2,900 | ) |  | $ | 66,613 |  
|                                                                                        | Comprehensive income:                 |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |       
|                                                                                        |                                       | Net income                                                |       |            |         |   |        |             |               |   |        |   | 7,715 |          |        |   |        |   |        |   |  |   |        |   | 7,715  |  
|                                                                                        | Other comprehensive loss, net of tax: |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |       
|                                                                                        |                                       | Minimum pension liability                                 |       |            |         |   |        |             |               |   |        |   |       |          |        |   | (381   | ) |        |   |  |   |        |   | (381   | )
|                                                                                        |                                       | Change in unrealized gains and losses on securities       |       |            |         |   |        |             |               |   |        |   |       |          |        |   | (1,377 | ) |        |   |  |   |        |   | (1,377 | )
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|Total comprehensive income                                                              |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   | 5,957  |  
|Common dividends declared, $.70 per share                                               |                                       |                                                           |       |            |         |   |        |             |               |   | (4,626 | ) |       |          |        |   |        |   |        |   |  |   | (4,626 | )
|Issuance of 722 shares of Treasury Stock                                                |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   | 15     |   |  |   | 15     |  
|Issuance of 15,425 common shares under stock option plans                               |                                       |                                                           | 15    |            |         |   | 174    |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   | 189    |  
|Payment of cash in lieu of fractional shares issued under
    three-for-two stock split |                                       |                                                           |       |            |         |   |        |             |               |   | (13    | ) |       |          |        |   |        |   |        |   |  |   | (13    | )
|Issuance of 2,250,210 common shares under three-for-two stock
    split                 |                                       |                                                           | 2,250 |            |         |   | (2,250 | )           |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |  
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|Balance, December 31, 2003                                                              |                                       | $                                                         | 6,766 |            |         | $ | 26,243 |             |               | $ | 38,715 |   |       | $        | (704   | ) |        | $ | (2,885 | ) |  | $ | 68,135 |  
|                                                                                        | Comprehensive income:                 |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |       
|                                                                                        |                                       | Net income                                                |       |            |         |   |        |             |               |   |        |   | 7,475 |          |        |   |        |   |        |   |  |   |        |   | 7,475  |  
|                                                                                        | Other comprehensive loss, net of tax: |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |       
|                                                                                        |                                       | Minimum pension liability                                 |       |            |         |   |        |             |               |   |        |   |       |          |        |   | (67    | ) |        |   |  |   |        |   | (67    | )
|                                                                                        |                                       | Change in unrealized gains and losses on securities       |       |            |         |   |        |             |               |   |        |   |       |          |        |   | (526   | ) |        |   |  |   |        |   | (526   | )
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|Total comprehensive income                                                              |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   | 6,882  |  
|Issuance of 23,103 shares of Treasury stock for stock
    options                       |                                       |                                                           |       |            |         |   |        |             |               |   | (121   | ) |       |          |        |   |        |   | 454    |   |  |   | 333    |  
|Issuance of 460 shares of Treasury stock for employee
    benefit plans                 |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   | 1      |   |  |   | 1      |  
|Common dividends declared, $.72 per share                                               |                                       |                                                           |       |            |         |   |        |             |               |   | (4,777 | ) |       |          |        |   |        |   |        |   |  |   | (4,777 | )
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|Balance December 31, 2004                                                               |                                       | $                                                         | 6,766 |            |         | $ | 26,243 |             |               | $ | 41,292 |   |       | $        | (1,297 | ) |        | $ | (2,430 | ) |  | $ | 70,574 |  
|                                                                                        | Comprehensive income:                 |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |       
|                                                                                        |                                       | Net income                                                |       |            |         |   |        |             |               |   |        |   | 6,413 |          |        |   |        |   |        |   |  |   |        |   | 6,413  |  
|                                                                                        | Other comprehensive loss, net of tax: |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   |        |   |       
|                                                                                        |                                       | Minimum pension liability                                 |       |            |         |   |        |             |               |   |        |   |       |          |        |   | (129   | ) |        |   |  |   |        |   | (129   | )
|                                                                                        |                                       | Change in unrealized gains and losses on securities       |       |            |         |   |        |             |               |   |        |   |       |          |        |   | (1,570 | ) |        |   |  |   |        |   | (1,570 | )
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|Total comprehensive income                                                              |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   | 4,714  |  
|Issuance of common stock under employment agreement                                     |                                       |                                                           | 6     |            |         |   | 91     |             |               |   |        |   |       |          |        |   |        |   |        |   |  |   | 97     |  
|Purchase of 125,000 shares of Treasury stock                                            |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |   | (2,219 | ) |  |   | (2,219 | )
|Common dividends declared, $.72 per share                                               |                                       |                                                           |       |            |         |   |        |             |               |   | (4,760 | ) |       |          |        |   |        |   |        |   |  |   | (4,760 | )
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  
|Balance December 31, 2005                                                               |                                       | $                                                         | 6,772 |            |         | $ | 26,334 |             |               | $ | 42,945 |   |       | $        | (2,996 | ) |        | $ | (4,649 | ) |  | $ | 68,406 |  
|                                                                                        |                                       |                                                           |       |            |         |   |        |             |               |   |        |   |       |          |        |   |        |  

See accompanying notes to consolidated financial
statements.


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##### Table of Contents






CONSOLIDATED STATEMENTS OF CASH FLOWS


|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |   |   |         |          |  
|----------------------------------------------------------------------------------------------- | ------------------------------------------------------------------------------------ | ----------------------- | ------- | -------- | ---- | - | ------- | -------- | - | - | ------- | -------- | -
|                                                                                                |                                                                                      | Year Ended December 31, |        
|                                                                                                |                                                                                      |                         |        
|                                                                                                |                                                                                      | 2005                    |         |          | 2004 |   |         | 2003     |  
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|                                                                                                |                                                                                      | (Dollars in thousands)  |        
|Operating Activities                                                                            |                                                                                      |                         |         |          |      |   |         |          |   |   |         |         
|                                                                                                | Net income                                                                           |                         | $       | 6,413    |      |   | $       | 7,475    |   |   | $       | 7,715    |  
|Adjustments to reconcile net income to net cash provided by
    (used in) operating activities: |                                                                                      |                         |         |          |      |   |         |          |   |   |         |         
|                                                                                                | Provision for loan losses                                                            |                         |         | 1,248    |      |   |         | 1,748    |   |   |         | 2,695    |  
|                                                                                                | Depreciation and amortization                                                        |                         |         | 1,776    |      |   |         | 1,808    |   |   |         | 1,597    |  
|                                                                                                | Amortization of premiums and discounts                                               |                         |         | 999      |      |   |         | 1,006    |   |   |         | 1,257    |  
|                                                                                                | Amortization of intangibles                                                          |                         |         | 169      |      |   |         | 130      |   |   |         | 113      |  
|                                                                                                | Impairment of goodwill                                                               |                         |         | 311      |      |   |         |         |   |   |         |         |  
|                                                                                                | Amortization of deferred loan fees                                                   |                         |         | 297      |      |   |         | 99       |   |   |         | 382      |  
|                                                                                                | Federal deferred income tax expense (benefit)                                        |                         |         | 291      |      |   |         | 183      |   |   |         | (254     | )
|                                                                                                | Issuance of stock under employment agreement                                         |                         |         | 97       |      |   |         |         |   |   |         |         |  
|                                                                                                | Origination of loans held for sale                                                   |                         |         |         |      |   |         |         |   |   |         | (24,544  | )
|                                                                                                | Proceeds from the sale of loans held for sale                                        |                         |         |         |      |   |         |         |   |   |         | 28,564   |  
|                                                                                                | Securities (gains) losses, net                                                       |                         |         | (173     | )    |   |         | 777      |   |   |         | (449     | )
|                                                                                                | Net gain from loan sales                                                             |                         |         | (132     | )    |   |         | (181     | ) |   |         | (236     | )
|                                                                                                | Net (gain) loss on sale of other assets                                              |                         |         | 20       |      |   |         | (378     | ) |   |         | (2       | )
|                                                                                                | Net decrease in accrued interest receivable and other assets                         |                         |         | (1,582   | )    |   |         | (1,919   | ) |   |         | (420     | )
|                                                                                                | Net decrease (increase) in accrued interest payable, taxes and
    other liabilities |                         |         | 1,370    |      |   |         | (562     | ) |   |         | (1,689   | )
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Net cash provided by operating activities                                                       |                                                                                      |                         | 11,104  |          |      |   | 10,186  |          |   |   | 14,729  |         
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Investing Activities                                                                            |                                                                                      |                         |         |          |      |   |         |          |   |   |         |         
|                                                                                                | Proceeds from maturities of held-to-maturity securities                              |                         |         |         |      |   |         | 1,330    |   |   |         | 5,859    |  
|                                                                                                | Proceeds from sales of available-for-sale securities                                 |                         |         | 26,343   |      |   |         | 34,941   |   |   |         | 28,488   |  
|                                                                                                | Proceeds from maturities of available-for-sale securities                            |                         |         | 4,576    |      |   |         | 29,537   |   |   |         | 106,646  |  
|                                                                                                | Purchase of held-to-maturity securities                                              |                         |         |         |      |   |         | (16,596  | ) |   |         |         |  
|                                                                                                | Purchase of available-for-sale securities                                            |                         |         | (39,198  | )    |   |         | (48,928  | ) |   |         | (143,250 | )
|                                                                                                | Purchase of Federal Home Loan Bank Stock                                             |                         |         | (210     | )    |   |         | (154     | ) |   |         | (141     | )
|                                                                                                | Sale of Federal Home Loan Bank Stock                                                 |                         |         | 598      |      |   |         |         |   |   |         |         |  
|                                                                                                | Net increase in loans made to customers                                              |                         |         | (23,529  | )    |   |         | (47,587  | ) |   |         | (30,132  | )
|                                                                                                | Proceeds from the sale of other real estate owned                                    |                         |         | 692      |      |   |         | 1,185    |   |   |         | 22       |  
|                                                                                                | Purchases of bank premises and equipment                                             |                         |         | (1,191   | )    |   |         | (2,604   | ) |   |         | (2,057   | )
|                                                                                                | Proceeds from sale of bank premises and equipment                                    |                         |         | 55       |      |   |         | 672      |   |   |         | 199      |  
|                                                                                                | Net cash paid in acquisitions                                                        |                         |         |         |      |   |         | (350     | ) |   |         |         |  
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Net cash used in investing activities                                                           |                                                                                      |                         | (31,864 | )        |      |   | (48,554 | )        |   |   | (34,366 | )       
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Financing Activities                                                                            |                                                                                      |                         |         |          |      |   |         |          |   |   |         |         
|                                                                                                | Net increase (decrease) in demand and other noninterest-bearing                      |                         |         | (8,683   | )    |   |         | 9,587    |   |   |         | 5,814    |  
|                                                                                                | Net increase (decrease) in savings, money market and
    interest-bearing demand     |                         |         | (14,338  | )    |   |         | 2,972    |   |   |         | (3,419   | )
|                                                                                                | Net increase in certificates of deposit                                              |                         |         | 57,694   |      |   |         | 11,640   |   |   |         | 12,822   |  
|                                                                                                | Net increase (decrease) in short-term borrowings                                     |                         |         | 997      |      |   |         | 16,596   |   |   |         | (11,843  | )
|                                                                                                | Proceeds from loan sales                                                             |                         |         | 4,574    |      |   |         | 3,329    |   |   |         |         |  
|                                                                                                | Proceeds from Federal Home Loan Bank advances                                        |                         |         | 148,000  |      |   |         | 104,256  |   |   |         | 247,210  |  
|                                                                                                | Prepayment of Federal Home Loan Bank advances                                        |                         |         | (163,400 | )    |   |         | (106,500 | ) |   |         | (224,595 | )
|                                                                                                | Cash paid in lieu of fractional shares related to three-for-two
    split            |                         |         |         |      |   |         |         |   |   |         | (13      | )
|                                                                                                | Proceeds from exercise of stock option plans                                         |                         |         |         |      |   |         |         |   |   |         | 189      |  
|                                                                                                | Purchase of treasury stock                                                           |                         |         | (2,219   | )    |   |         |         |   |   |         |         |  
|                                                                                                | Redemption of treasury stock                                                         |                         |         |         |      |   |         | 334      |   |   |         | 15       |  
|                                                                                                | Dividends paid                                                                       |                         |         | (4,760   | )    |   |         | (4,777   | ) |   |         | (4,626   | )
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Net cash provided by financing activities                                                       |                                                                                      |                         | 17,865  |          |      |   | 37,437  |          |   |   | 21,554  |         
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Net increase (decrease) in cash and cash equivalents                                            |                                                                                      |                         | (2,895  | )        |      |   | (931    | )        |   |   | 1,917   |         
|Cash and cash equivalents, January 1                                                            |                                                                                      |                         | 26,818  |          |      |   | 27,749  |          |   |   | 26,832  |         
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Cash and cash equivalents, December 31                                                          |                                                                                      | $                       | 23,923  |          |      | $ | 26,818  |          |   | $ | 28,749  |         
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  
|Supplemental cash flow information:                                                             |                                                                                      |                         |         |          |      |   |         |          |   |   |         |         
|Interest paid                                                                                   |                                                                                      |                         | 12,448  |          |      |   | 9,376   |          |   |   | 9,304   |         
|Income taxes paid                                                                               |                                                                                      |                         | 2,355   |          |      |   | 2,060   |          |   |   | 4,194   |         
|Transfer of loans to other real estate owned                                                    |                                                                                      |                         | 704     |          |      |   | 999     |          |   |   | 589     |         
|Transfer of held to maturity securities to available for sale                                   |                                                                                      |                         |        |          |      |   | 19,909  |          |   |   |        |         
|                                                                                                |                                                                                      |                         |         |          |      |   |         |          |  

See accompanying notes to consolidated financial
statements.


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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS




|    |                                           
|--- | ------------------------------------------
|(1) | Summary of Significant Accounting Policies



| |                      
| | ---------------------
| | Basis of Presentation





| |                 
| | ----------------
| | Use of Estimates





| |                    
| | -------------------
| | Segment Information





| |                        
| | -----------------------
| | Statement of Cash Flows





| |           
| | ----------
| | Securities



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                                                                       
| | ----------------------------------------------------------------------
| | Federal Reserve Bank (FRB) and Federal Home
    Loan Bank (FHLB) Stock





| |      
| | -----
| | Loans











| |                          
| | -------------------------
| | Allowance for Loan Losses





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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




| |                          
| | -------------------------
| | Mortgage Servicing Rights







| |                            
| | ---------------------------
| | Bank Premises and Equipment





| |                                      
| | -------------------------------------
| | Goodwill and Core Deposit Intangibles







| |                        
| | -----------------------
| | Other Real Estate Owned





| |                                                
| | -----------------------------------------------
| | Investment and Trust Services Assets and Income





| |             
| | ------------
| | Income Taxes



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                     
| | --------------------
| | Comprehensive Income





| |                         
| | ------------------------
| | Stock-Based Compensation







| |                  
| | -----------------
| | Reclassifications





|    |                   
|--- | ------------------
|(2) | Earnings Per Share



|                                                  |                            |                              |       |           |      |   |       |           |  |   |        |           | 
|------------------------------------------------- | -------------------------- | ---------------------------- | ----- | --------- | ---- | - | ----- | --------- |  | - | ------ | --------- | 
|                                                  |                            | Year Ended December 31,      |      
|                                                  |                            |                              |      
|                                                  |                            | 2005                         |       |           | 2004 |   |       | 2003      | 
|                                                  |                            |                              |       |           |      |   |       |           | 
|                                                  |                            | (Dollars in thousands except |      
|                                                  |                            | per share amounts)           |      
|Weighted average shares outstanding used in Basic |                            |                              |       |           |      |   |       |           |  |   |        |          
|                                                  | Earnings Per Share         |                              |       | 6,612,803 |      |   |       | 6,631,392 |  |   |        | 6,605,560 | 
|Dilutive effect of incentive stock options        |                            |                              | 49    |           |      |   | 932   |           |  |   | 10,094 |          
|                                                  |                            |                              |       |           |      |   |       |           | 
|Weighted average shares outstanding used in       |                            |                              |       |           |      |   |       |           |  |   |        |          
|                                                  | Diluted Earnings Per Share |                              |       | 6,612,852 |      |   |       | 6,632,324 |  |   |        | 6,615,654 | 
|                                                  |                            |                              |       |           |      |   |       |           | 
|Net Income                                        |                            | $                            | 6,413 |           |      | $ | 7,475 |           |  | $ | 7,715  |          
|                                                  |                            |                              |       |           |      |   |       |           | 
|Basic Earnings Per Share                          |                            | $                            | 0.97  |           |      | $ | 1.13  |           |  | $ | 1.17   |          
|                                                  |                            |                              |       |           |      |   |       |           | 
|Diluted Earning Per Share                         |                            | $                            | 0.97  |           |      | $ | 1.13  |           |  | $ | 1.17   |          
|                                                  |                            |                              |       |           |      |   |       |           | 



|    |                        
|--- | -----------------------
|(3) | Cash and Due from Banks



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                         
|--- | ------------------------
|(4) | Goodwill and Intangibles







|                               |                                            |                 |       |     |      |   |       |     | 
|------------------------------ | ------------------------------------------ | --------------- | ----- | --- | ---- | - | ----- | --- | 
|                               |                                            | At December 31, |      
|                               |                                            |                 |      
|                               |                                            | 2005            |       |     | 2004 |  
|                               |                                            |                 |       |     |      |  
|                               |                                            | (Dollars in     |      
|                               |                                            | thousands)      |      
|Core deposit intangibles       |                                            | $               | 1,288 |     |      | $ | 1,288 |    
|Less: accumulated amortization |                                            |                 | 1,095 |     |      |   | 983   |    
|                               |                                            |                 |       |     |      |  
|                               | Carrying value of core deposit intangibles |                 | $     | 193 |      |   | $     | 305 | 
|                               |                                            |                 |       |     |      |  



|                                     |  |                 |       |  |      |   |       | 
|------------------------------------ |  | --------------- | ----- |  | ---- | - | ----- | 
|                                     |  | At December 31, |      
|                                     |  |                 |      
|                                     |  | 2005            |       |  | 2004 |  
|                                     |  |                 |       |  |      |  
|                                     |  | (Dollars in     |      
|                                     |  | thousands)      |      
|Goodwill                             |  | $               | 2,827 |  |      | $ | 3,138 | 
|Mortgage servicing rights            |  |                 | 301   |  |      |   | 358   | 
|Core deposit intangibles             |  |                 | 193   |  |      |   | 305   | 
|                                     |  |                 |       |  |      |  
|Total goodwill and intangible assets |  | $               | 3,321 |  |      | $ | 3,801 | 
|                                     |  |                 |       |  |      |  



|                |  |                        |     |  |                    |   |    |       |  |   |     | 
|--------------- |  | ---------------------- | --- |  | ------------------ | - | -- | ----- |  | - | --- | 
|                |  | Core Deposit           |     |  | Mortgage Servicing |   |    |      
|                |  | Intangibles            |     |  | Rights             |   |    | Total | 
|                |  |                        |     |  |                    |   |    |       | 
|                |  | (Dollars in thousands) |    
|2006            |  | $                      | 113 |  |                    | $ | 49 |       |  | $ | 162 | 
|2007            |  |                        | 80  |  |                    |   | 45 |       |  |   | 125 | 
|2008            |  |                        |    |  |                    |   | 42 |       |  |   | 42  | 
|2009            |  |                        |    |  |                    |   | 39 |       |  |   | 39  | 
|2010            |  |                        |    |  |                    |   | 36 |       |  |   | 36  | 
|2011 and beyond |  |                        |    |  |                    |   | 90 |       |  |   | 90  | 

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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |           
|--- | ----------
|(5) | Securities



|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |        |   |   |         |         | 
|------------------------------ | ----------------------------------------------------- | ---------------------- | ------- | ------- | ---------- | - | --- | ---------- |  | - | ---------- | ------ | - | - | ------- | ------- | 
|                               |                                                       | At December 31, 2005   |        
|                               |                                                       |                        |        
|                               |                                                       | Amortized              |         |         | Unrealized |   |     | Unrealized |  |   |           
|                               |                                                       | Cost                   |         |         | Gains      |   |     | Losses     |  |   | Fair Value |       
|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |       
|                               |                                                       | (Dollars in thousands) |        
|Securities available for sale: |                                                       |                        |         |         |            |   |     |            |  |   |            |        |   |   |         |        
|                               | U.S. Government agencies and corporations             |                        | $       | 146,010 |            |   | $   | 8          |  |   | $          | (3,965 | ) |   | $       | 142,053 | 
|                               | State and political subdivisions                      |                        |         | 9,231   |            |   |     | 249        |  |   |            | (24    | ) |   |         | 9,456   | 
|                               | Equity securities                                     |                        |         | 52      |            |   |     | 68         |  |   |            |       |   |   |         | 120     | 
|                               | Federal Home Loan Bank and Federal Reserve Bank stock |                        |         | 3,645   |            |   |     |           |  |   |            |       |   |   |         | 3,645   | 
|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |       
|Total Securities               |                                                       | $                      | 158,938 |         |            | $ | 325 |            |  | $ | (3,989     | )      |   | $ | 155,274 |        
|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |       

|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |        |   |   |         |         | 
|------------------------------ | ----------------------------------------------------- | ---------------------- | ------- | ------- | ---------- | - | --- | ---------- |  | - | ---------- | ------ | - | - | ------- | ------- | 
|                               |                                                       | At December 31, 2004   |        
|                               |                                                       |                        |        
|                               |                                                       | Amortized              |         |         | Unrealized |   |     | Unrealized |  |   |           
|                               |                                                       | Cost                   |         |         | Gains      |   |     | Losses     |  |   | Fair Value |       
|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |       
|                               |                                                       | (Dollars in thousands) |        
|Securities available for sale: |                                                       |                        |         |         |            |   |     |            |  |   |            |        |   |   |         |        
|                               | U.S. Government agencies and corporations             |                        | $       | 131,789 |            |   | $   | 168        |  |   | $          | (2,080 | ) |   | $       | 129,877 | 
|                               | State and political subdivisions                      |                        |         | 11,148  |            |   |     | 349        |  |   |            | (8     | ) |   |         | 11,489  | 
|                               | Equity securities                                     |                        |         | 3,938   |            |   |     | 284        |  |   |            |       |   |   |         | 4,222   | 
|                               | Federal Home Loan Bank and Federal Reserve Bank stock |                        |         | 4,033   |            |   |     |           |  |   |            |       |   |   |         | 4,033   | 
|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |       
|Total Securities               |                                                       | $                      | 150,908 |         |            | $ | 801 |            |  | $ | (2,088     | )      |   | $ | 149,621 |        
|                               |                                                       |                        |         |         |            |   |     |            |  |   |            |       



|                                                      |  |                        |        |          |         |   |        |          |  |   |          |  |  |       |       |         |       |   |         |  |  |  |      |  
|----------------------------------------------------- |  | ---------------------- | ------ | -------- | ------- | - | ------ | -------- |  | - | -------- |  |  | ----- | ----- | ------- | ----- | - | ------- |  |  |  | ---- | -
|                                                      |  | At December 31, 2005   |       
|                                                      |  |                        |       
|                                                      |  |                        |        | Weighted |        
|                                                      |  | Within                 |        |          | 1 to    |   |        | 5 to     |  |   | After    |  |  |       |       | Average |      
|                                                      |  | 1 Year                 |        |          | 5 Years |   |        | 10 Years |  |   | 10 Years |  |  | Total |       |         | Yield |  
|                                                      |  |                        |        |          |         |   |        |          |  |   |          |  |  |       |       |         |       |  
|                                                      |  | (Dollars in thousands) |       
|U.S. Government agencies and corporations             |  | $                      | 17,501 |          |         | $ | 88,315 |          |  | $ | 35,416   |  |  | $     | 4,778 |         |       | $ | 146,010 |  |  |  | 3.59 | %
|State and political subdivisions                      |  |                        | 358    |          |         |   | 1,554  |          |  |   | 2,688    |  |  |       | 4,631 |         |       |   | 9,231   |  |  |  | 5.88 |  
|Equity securities                                     |  |                        | 52     |          |         |   |       |          |  |   |         |  |  |       |      |         |       |   | 52      |  |  |  | 6.00 |  
|Federal Home Loan Bank and Federal Reserve Bank stock |  |                        | 3,645  |          |         |   |       |          |  |   |         |  |  |       |      |         |       |   | 3,645   |  |  |  | 5.77 |  
|                                                      |  |                        |        |          |         |   |        |          |  |   |          |  |  |       |       |         |       |  
|Amortized cost                                        |  | $                      | 21,556 |          |         | $ | 89,869 |          |  | $ | 38,104   |  |  | $     | 9,409 |         |       | $ | 158,938 |  |  |  | 3.78 | %
|                                                      |  |                        |        |          |         |   |        |          |  |   |          |  |  |       |       |         |       |  
|Fair Value                                            |  | $                      | 21,390 |          |         | $ | 87,357 |          |  | $ | 37,497   |  |  | $     | 9,030 |         |       | $ | 155,274 |  |  |  | 3.87 | %
|                                                      |  |                        |        |          |         |   |        |          |  |   |          |  |  |       |       |         |       |  

47



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                        |  |                        |        |   |      |   |        |      |  |   |        | 
|------------------------------------------------------- |  | ---------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | 
|                                                        |  | 2005                   |        |   | 2004 |   |        | 2003 | 
|                                                        |  |                        |        |   |      |   |        |      | 
|                                                        |  | (Dollars in thousands) |       
|Gross realized gains                                    |  | $                      | 202    |   |      | $ | 395    |      |  | $ | 449    | 
|Gross realized losses                                   |  |                        | (29    | ) |      |   | (14    | )    |  |   |       | 
|Other than temporary impairment losses                  |  |                        |       |   |      |   | (1,158 | )    |  |   |       | 
|                                                        |  |                        |        |   |      |   |        |      | 
|Net Securities Gains (Losses)                           |  | $                      | 173    |   |      | $ | (777   | )    |  | $ | 449    | 
|                                                        |  |                        |        |   |      |   |        |      | 
|Proceeds from the sale of available for sale securities |  | $                      | 26,343 |   |      | $ | 34,941 |      |  | $ | 28,488 | 
|                                                        |  |                        |        |   |      |   |        |      | 







|                                          |  |                        |        |  |                     |   |      |       |  |   |            |  |  |            |        |            |        |   |         |  |  |   |        |  
|----------------------------------------- |  | ---------------------- | ------ |  | ------------------- | - | ---- | ----- |  | - | ---------- |  |  | ---------- | ------ | ---------- | ------ | - | ------- |  |  | - | ------ | -
|                                          |  | Less than 12 months    |        |  | 12 months or longer |   |      | Total | 
|                                          |  |                        |        |  |                     |   |      |       | 
|                                          |  | Fair                   |        |  | Unrealized          |   |      | Fair  |  |   | Unrealized |  |  |            |        | Unrealized |       
|                                          |  | Value                  |        |  | Losses              |   |      | Value |  |   | Losses     |  |  | Fair Value |        |            | Losses |  
|                                          |  |                        |        |  |                     |   |      |       |  |   |            |  |  |            |        |            |        |  
|                                          |  | (Dollars in thousands) |       
|U.S. Government agencies and corporations |  | $                      | 29,873 |  |                     | $ | (451 | )     |  | $ | 107,153    |  |  | $          | (3,514 | )          |        | $ | 137,026 |  |  | $ | (3,965 | )
|State and political subdivisions          |  |                        |       |  |                     |   |     |       |  |   | 1,170      |  |  |            | (24    | )          |        |   | 1,170   |  |  |   | (24    | )
|                                          |  |                        |        |  |                     |   |      |       |  |   |            |  |  |            |        |            |        |  
|Total                                     |  | $                      | 29,873 |  |                     | $ | (451 | )     |  | $ | 108,323    |  |  | $          | (3,538 | )          |        | $ | 138,196 |  |  | $ | (3,989 | )
|                                          |  |                        |        |  |                     |   |      |       |  |   |            |  |  |            |        |            |        |  

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##### Table of Contents



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |                                  
|--- | ---------------------------------
|(6) | Transactions with Related Parties



|                            |                                                            |                        |        |        |      |   |        |        |   |   |        |         |  
|--------------------------- | ---------------------------------------------------------- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------- | -
|                            |                                                            | At December 31,        |       
|                            |                                                            |                        |       
|                            |                                                            | 2005                   |        |        | 2004 |   |        | 2003   |  
|                            |                                                            |                        |        |        |      |   |        |        |  
|                            |                                                            | (Dollars in thousands) |       
|Amount at beginning of year |                                                            | $                      | 22,399 |        |      | $ | 23,283 |        |   | $ | 24,608 |        
|Additions (deductions)      |                                                            |                        |        |        |      |   |        |        |   |   |        |        
|                            | New Loans                                                  |                        |        | 4,616  |      |   |        | 9,021  |   |   |        | 12,145  |  
|                            | Repayments                                                 |                        |        | (4,361 | )    |   |        | (9,464 | ) |   |        | (12,915 | )
|                            | Changes in directors and officers and/or affiliations, net |                        |        | 2,147  |      |   |        | (441   | ) |   |        | (555    | )
|                            |                                                            |                        |        |        |      |   |        |        |  
|Amount at end of year       |                                                            | $                      | 24,801 |        |      | $ | 22,399 |        |   | $ | 23,283 |        
|                            |                                                            |                        |        |        |      |   |        |        |  



|    |                                    
|--- | -----------------------------------
|(7) | Loans and Allowance for Loan Losses



|                                                                              |                                      |                        |         |         |      |   |         |         |  
|----------------------------------------------------------------------------- | ------------------------------------ | ---------------------- | ------- | ------- | ---- | - | ------- | ------- | -
|                                                                              |                                      | At December 31,        |        
|                                                                              |                                      |                        |        
|                                                                              |                                      | 2005                   |         |         | 2004 |  
|                                                                              |                                      |                        |         |         |      |  
|                                                                              |                                      | (Dollars in thousands) |        
|Real estate loans (includes loans secured primarily by real
    estate only): |                                      |                        |         |         |      |   |         |        
|                                                                              | Construction and land development    |                        | $       | 169,007 |      |   | $       | 137,830 |  
|                                                                              | One to four family residential       |                        |         | 164,671 |      |   |         | 170,582 |  
|                                                                              | Multi-family residential             |                        |         | 4,676   |      |   |         | 4,348   |  
|                                                                              | Non-farm non-residential properties  |                        |         | 117,090 |      |   |         | 135,528 |  
|Commercial and industrial loans                                               |                                      |                        | 63,834  |         |      |   | 64,740  |        
|Personal loans to individuals:                                                |                                      |                        |         |         |      |   |         |        
|                                                                              | Auto, single payment and installment |                        |         | 71,132  |      |   |         | 60,855  |  
|All other loans                                                               |                                      |                        | 601     |         |      |   | 1,341   |        
|                                                                              |                                      |                        |         |         |      |  
|Total loans                                                                   |                                      |                        | 591,011 |         |      |   | 575,224 |        
|                                                                              | Allowance for loan losses            |                        |         | (6,622  | )    |   |         | (7,386  | )
|                                                                              |                                      |                        |         |         |      |  
|Net loans                                                                     |                                      | $                      | 584,389 |         |      | $ | 567,838 |        
|                                                                              |                                      |                        |         |         |      |  



|                                           |  |                         |        |   |      |   |        |      |  |   |        |  
|------------------------------------------ |  | ----------------------- | ------ | - | ---- | - | ------ | ---- |  | - | ------ | -
|                                           |  | Year Ended December 31, |       
|                                           |  |                         |       
|                                           |  | 2005                    |        |   | 2004 |   |        | 2003 | 
|                                           |  |                         |        |   |      |   |        |      | 
|                                           |  | (Dollars in thousands)  |       
|Balance at the beginning of year           |  | $                       | 7,386  |   |      | $ | 7,730  |      |  | $ | 6,653  |  
|Provision for loan losses                  |  |                         | 1,248  |   |      |   | 1,748  |      |  |   | 2,695  |  
|Loans charged-off                          |  |                         | (2,256 | ) |      |   | (2,340 | )    |  |   | (1,958 | )
|Recoveries on loans previously charged-off |  |                         | 244    |   |      |   | 248    |      |  |   | 340    |  
|                                           |  |                         |        |   |      |   |        |      | 
|Balance at the end of year                 |  | $                       | 6,622  |   |      | $ | 7,386  |      |  | $ | 7,730  |  
|                                           |  |                         |        |   |      |   |        |      | 



49



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                                  |  |                        |       |  |      |   |       |      |  |   |        | 
|--------------------------------------------------------------------------------- |  | ---------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ------ | 
|                                                                                  |  | At December 31,        |      
|                                                                                  |  |                        |      
|                                                                                  |  | 2005                   |       |  | 2004 |   |       | 2003 | 
|                                                                                  |  |                        |       |  |      |   |       |      | 
|                                                                                  |  | (Dollars in thousands) |      
|Year-end impaired loans with allowance for loan losses
    specifically allocated |  | $                      | 6,494 |  |      | $ | 6,030 |      |  | $ | 16,329 | 
|Amount of allowance specifically allocated to impaired loans                      |  |                        | 356   |  |      |   | 1,865 |      |  |   | 2,272  | 
|Average of impaired loans during the year                                         |  |                        | 9,961 |  |      |   | 7,077 |      |  |   | 21,742 | 
|Interest income recognized during impairment                                      |  |                        | 174   |  |      |   | 300   |      |  |   | 258    | 
|Nonaccrual loans at year end                                                      |  |                        | 6,494 |  |      |   | 4,921 |      |  |   | 5,154  | 



|    |                                    
|--- | -----------------------------------
|(8) | Bank Premises, Equipment and Leases



|                                                |  |                 |        |  |      |   |        | 
|----------------------------------------------- |  | --------------- | ------ |  | ---- | - | ------ | 
|                                                |  | At December 31, |       
|                                                |  |                 |       
|(Dollars in thousands)                          |  | 2005            |        |  | 2004 |  
|                                                |  |                 |        |  |      |  
|Land                                            |  | $               | 2,322  |  |      | $ | 2,322  | 
|Buildings                                       |  |                 | 10,848 |  |      |   | 10,503 | 
|Equipment                                       |  |                 | 11,656 |  |      |   | 12,741 | 
|Purchased software                              |  |                 | 2,938  |  |      |   | 2,648  | 
|Leasehold improvements                          |  |                 | 865    |  |      |   | 850    | 
|                                                |  |                 |        |  |      |  
|Total cost                                      |  |                 | 28,629 |  |      |   | 29,064 | 
|Less: accumulated depreciation and amortization |  |                 | 17,796 |  |      |   | 17,571 | 
|                                                |  |                 |        |  |      |  
|Net bank premises and equipment                 |  | $               | 10,833 |  |      | $ | 11,493 | 
|                                                |  |                 |        |  |      |  





|                    |  |             |       | 
|------------------- |  | ----------- | ----- | 
|                    |  | Amount      |      
|                    |  |             |      
|                    |  | (Dollars in |      
|                    |  | thousands)  |      
|2006                |  | $           | 764   | 
|2007                |  |             | 740   | 
|2008                |  |             | 668   | 
|2009                |  |             | 449   | 
|2010                |  |             | 259   | 
|2011 and thereafter |  |             | 810   | 
|                    |  |             |      
|Total               |  | $           | 3,690 | 
|                    |  |             |      



50



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|    |         
|--- | --------
|(9) | Deposits



|                                  |  |                        |         |  |      |   |         | 
|--------------------------------- |  | ---------------------- | ------- |  | ---- | - | ------- | 
|                                  |  | At December 31,        |        
|                                  |  |                        |        
|                                  |  | 2005                   |         |  | 2004 |  
|                                  |  |                        |         |  |      |  
|                                  |  | (Dollars in thousands) |        
|Demand and other interest-bearing |  | $                      | 87,597  |  |      | $ | 96,280  | 
|Interest checking                 |  |                        | 171,925 |  |      |   | 176,314 | 
|Savings                           |  |                        | 93,906  |  |      |   | 103,855 | 
|Consumer time deposits            |  |                        | 199,190 |  |      |   | 167,192 | 
|Public time deposits              |  |                        | 32,332  |  |      |   | 39,078  | 
|Brokered time deposits            |  |                        | 55,266  |  |      |   | 22,824  | 
|                                  |  |                        |         |  |      |  
|Total deposits                    |  | $                      | 640,216 |  |      | $ | 605,543 | 
|                                  |  |                        |         |  |      |  





|                       |  |                        |         |  |                     |   |        |                     |  |   |         |  |  |       |    |  |  |   |         | 
|---------------------- |  | ---------------------- | ------- |  | ------------------- | - | ------ | ------------------- |  | - | ------- |  |  | ----- | -- |  |  | - | ------- | 
|                       |  | Within 12              |         |  | After 12 months but |   |        | After 36 months but |  |   | After   |  |  |      
|                       |  | months                 |         |  | within 36 months    |   |        | within 60 months    |  |   | 5 years |  |  | Total |   
|                       |  |                        |         |  |                     |   |        |                     |  |   |         |  |  |       |   
|                       |  | (Dollars in thousands) |        
|Consumer time deposits |  | $                      | 134,801 |  |                     | $ | 50,715 |                     |  | $ | 13,646  |  |  | $     | 28 |  |  | $ | 199,190 | 
|Public time deposits   |  |                        | 32,332  |  |                     |   |       |                     |  |   |        |  |  |       |   |  |  |   | 32,332  | 
|Brokered time deposits |  |                        | 38,526  |  |                     |   | 16,740 |                     |  |   |        |  |  |       |   |  |  |   | 55,266  | 
|                       |  |                        |         |  |                     |   |        |                     |  |   |         |  |  |       |   
|Total time deposits    |  | $                      | 205,659 |  |                     | $ | 67,455 |                     |  | $ | 13,646  |  |  | $     | 28 |  |  | $ | 286,788 | 
|                       |  |                        |         |  |                     |   |        |                     |  |   |         |  |  |       |   



|     |                      
|---- | ---------------------
|(10) | Short-Term Borrowings



51



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                            |               |                         |        |        |        |   |        |        |        |   |        |       |        |  
|------------------------------------------- | ------------- | ----------------------- | ------ | ------ | ------ | - | ------ | ------ | ------ | - | ------ | ----- | ------ | -
|                                            |               | Year Ended December 31, |       
|                                            |               |                         |       
|                                            |               | 2005                    |        |        | 2004   |   |        | 2003   |       
|                                            |               |                         |        |        |        |   |        |        |       
|                                            |               | (Dollars in thousands)  |       
|Securities sold under repurchase agreements |               |                         |        |        |        |   |        |        |        |   |        |      
|Period End:                                 |               |                         |        |        |        |   |        |        |        |   |        |      
|                                            |               | Outstanding             |        | $      | 16,116 |   |        | $      | 11,619 |   |        | $     | 15,023 |  
|                                            |               | Interest rate           |        |        | 3.90   | % |        |        | 2.23   | % |        |       | 0.89   | %
|Average:                                    |               |                         |        |        |        |   |        |        |        |   |        |      
|                                            |               | Outstanding             |        | $      | 13,960 |   |        | $      | 14,749 |   |        | $     | 16,815 |  
|                                            |               | Interest rate           |        |        | 2.81   | % |        |        | 1.39   | % |        |       | 0.99   | %
|Maximum month-end balance                   |               | $                       | 19,198 |        |        | $ | 18,997 |        |        | $ | 26,309 |      
|                                            |               |                         |        |        |        |   |        |        |       
|Federal funds purchased                     |               |                         |        |        |        |   |        |        |        |   |        |      
|Period End:                                 |               |                         |        |        |        |   |        |        |        |   |        |      
|                                            | Outstanding   |                         | $      | 16,500 |        |   | $      | 20,000 |        |   | $      |      |       
|                                            | Interest rate |                         |        | 4.45   | %      |   |        | 2.44   | %      |   |        | 0.00  | %     
|Average:                                    |               |                         |        |        |        |   |        |        |        |   |        |      
|                                            | Outstanding   |                         | $      | 5,921  |        |   | $      | 3,264  |        |   | $      | 1,370 |       
|                                            | Interest rate |                         |        | 3.81   | %      |   |        | 1.48   | %      |   |        | 1.35  | %     
|Maximum month-end balance                   |               | $                       | 30,000 |        |        | $ | 20,000 |        |        | $ | 7,000  |      
|                                            |               |                         |        |        |        |   |        |        |       



|     |                                
|---- | -------------------------------
|(11) | Federal Home Loan Bank Advances



|                                                                          |               |                         |   |        |      |  |   |        |   |  |   |        |  
|------------------------------------------------------------------------- | ------------- | ----------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                          |               | Year Ended December 31, |  
|                                                                          |               |                         |  
|                                                                          |               | 2005                    |   |        | 2004 |  |   | 2003   |  
|                                                                          |               |                         |   |        |      |  |   |        |  
|                                                                          |               | (Dollars in thousands)  |  
|Cash management advances (CMA) from the Federal
    Home Loan Bank (FHLB) |               |                         |   |        |      |  |   |        |   |  |   |       
|Period End:                                                               |               |                         |   |        |      |  |   |        |   |  |   |       
|                                                                          | Outstanding   |                         | $ |       |      |  | $ |       |   |  | $ | 15,000 |  
|                                                                          | Interest rate |                         |   | 0.00   | %    |  |   | 0.00   | % |  |   | 1.09   | %
|Average:                                                                  |               |                         |   |        |      |  |   |        |   |  |   |       
|                                                                          | Outstanding   |                         | $ | 12,125 |      |  | $ | 10,961 |   |  | $ | 16,600 |  
|                                                                          | Interest rate |                         |   | 2.93   | %    |  |   | 1.16   | % |  |   | 1.28   | %

52



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                            |                     |                        |        |        |      |   |        |        | 
|------------------------------------------- | ------------------- | ---------------------- | ------ | ------ | ---- | - | ------ | ------ | 
|                                            |                     | 2005                   |        |        | 2004 |  
|                                            |                     |                        |        |        |      |  
|                                            |                     | (Dollars in thousands) |       
|FHLB advance  4.61%, repaid in 2005        |                     | $                      |       |        |      | $ | 2,230  |       
|FHLB advance  4.40%, repaid in 2005        |                     |                        |       |        |      |   | 1,500  |       
|FHLB advance  4.36%, repaid in 2005        |                     |                        |       |        |      |   | 2,100  |       
|FHLB advance  4.44%, repaid in 2005        |                     |                        |       |        |      |   | 1,000  |       
|FHLB advance  2.06%, repaid in 2005        |                     |                        |       |        |      |   | 16,000 |       
|FHLB advance  2.21%, repaid in 2005        |                     |                        |       |        |      |   | 360    |       
|FHLB advance  2.87%, repaid in 2005        |                     |                        |       |        |      |   | 5,000  |       
|FHLB advance  4.27%, due January 13, 2006  |                     |                        | 12,801 |        |      |   |       |       
|FHLB advance  4.92%, due April 28, 2006    |                     |                        | 1,000  |        |      |   | 1,000  |       
|FHLB advance  2.70%, due June 19, 2006     |                     |                        | 10,000 |        |      |   | 10,000 |       
|FHLB advance  2.95%, due January 30, 2007  |                     |                        | 10,000 |        |      |   | 10,000 |       
|FHLB advance  3.55%, due November 21, 2007 |                     |                        | 5,000  |        |      |   | 5,000  |       
|FHLB advance  3.33%, due February 8, 2008  |                     |                        | 5,000  |        |      |   | 5,000  |       
|FHLB advance  3.36%, due March 27, 2009    |                     |                        | 10,000 |        |      |   | 10,000 |       
|FHLB advance  3.55%, due January 1, 2014   |                     |                        | 95     |        |      |   | 106    |       
|                                            |                     |                        |        |        |      |  
|                                            | Total FHLB advances |                        | $      | 53,896 |      |   | $      | 69,296 | 
|                                            |                     |                        |        |        |      |  



|     |             
|---- | ------------
|(12) | Income Taxes



|                   |                                    |                         |       |       |      |   |       |       |  |   |       |       |  
|------------------ | ---------------------------------- | ----------------------- | ----- | ----- | ---- | - | ----- | ----- |  | - | ----- | ----- | -
|                   |                                    | Year Ended December 31, |      
|                   |                                    |                         |      
|                   |                                    | 2005                    |       |       | 2004 |   |       | 2003  | 
|                   |                                    |                         |       |       |      |   |       |       | 
|                   |                                    | (Dollars in thousands)  |      
|Income Taxes:      |                                    |                         |       |       |      |   |       |       |  |   |       |      
|                   | Federal current expense            |                         | $     | 2,188 |      |   | $     | 2,868 |  |   | $     | 3,661 |  
|                   | Federal deferred expense (benefit) |                         |       | 291   |      |   |       | 183   |  |   |       | (254  | )
|                   | State and city expense             |                         |       |      |      |   |       |      |  |   |       | 4     |  
|                   |                                    |                         |       |       |      |   |       |       | 
|Total Income Taxes |                                    | $                       | 2,479 |       |      | $ | 3,051 |       |  | $ | 3,411 |      
|                   |                                    |                         |       |       |      |   |       |       | 



|                                |                                                      |                                                                            |       |  |      |   |       |      |      |   |       |  |      |  
|------------------------------- | ---------------------------------------------------- | -------------------------------------------------------------------------- | ----- |  | ---- | - | ----- | ---- | ---- | - | ----- |  | ---- | -
|                                |                                                      | Year Ended December 31,                                                    |      
|                                |                                                      |                                                                            |      
|                                |                                                      | 2005                                                                       |       |  | 2004 |   |       | 2003 |     
|                                |                                                      |                                                                            |       |  |      |   |       |      |     
|                                |                                                      | (Dollars in thousands)                                                     |      
|Computed expected tax expense |                                                      | $                                                                          | 3,023 |  |      | $ | 3,685 |      |      | $ | 3,896 | 
|                                | Increase (reduction) in income taxes resulting from: |                                                                            |       |  |      |   |       |      |      |   |       |  |     
|                                |                                                      | Tax exempt interest on obligations of state and political
    subdivisions |       |  | (136 | ) |       |      | (152 | ) |       |  | (201 | )
|                                |                                                      | Tax exempt interest on bank owned life insurance                           |       |  | (204 | ) |       |      | (215 | ) |       |  | (270 | )
|                                |                                                      | New markets tax credit                                                     |       |  | (276 | ) |       |      | (225 | ) |       |  |     |  
|                                |                                                      | Other, net                                                                 |       |  | 72   |   |       |      | (42  | ) |       |  | (14  | )
|                                |                                                      |                                                                            |       |  |      |   |       |      |     
|Total Income Taxes              |                                                      | $                                                                          | 2,479 |  |      | $ | 3,051 |      |      | $ | 3,411 | 
|                                |                                                      |                                                                            |       |  |      |   |       |      |     

53



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##### Table of Contents



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                       |                                                  |                        |        |       |      |   |        |       |  
|-------------------------------------- | ------------------------------------------------ | ---------------------- | ------ | ----- | ---- | - | ------ | ----- | -
|                                       |                                                  | At December 31,        |       
|                                       |                                                  |                        |       
|                                       |                                                  | 2005                   |        |       | 2004 |  
|                                       |                                                  |                        |        |       |      |  
|                                       |                                                  | (Dollars in thousands) |       
|Deferred Federal tax assets:           |                                                  |                        |        |       |      |   |        |      
|                                       | Allowance for loan losses                        |                        | $      | 2,251 |      |   | $      | 2,511 |  
|                                       | Deferred compensation                            |                        |        | 544   |      |   |        | 681   |  
|                                       | Minimum pension liability                        |                        |        | 297   |      |   |        | 231   |  
|                                       | Securities writedown                             |                        |        |      |      |   |        | 394   |  
|                                       | Unrealized loss on securities available for sale |                        |        | 1,246 |      |   |        | 438   |  
|                                       | Other, net                                       |                        |        | 9     |      |   |        | 25    |  
|                                       |                                                  |                        |        |       |      |  
|Total deferred Federal tax assets      |                                                  | $                      | 4,347  |       |      | $ | 4,280  |      
|                                       |                                                  |                        |        |       |      |  
|Deferred Federal tax liabilities:      |                                                  |                        |        |       |      |   |        |      
|                                       | Bank premises and equipment depreciation         |                        | $      | (320  | )    |   | $      | (488  | )
|                                       | FHLB stock dividends                             |                        |        | (440  | )    |   |        | (450  | )
|                                       | Intangible asset amortization                    |                        |        | (125  | )    |   |        | (157  | )
|                                       | Accrued loan fees and costs                      |                        |        | (181  | )    |   |        | (386  | )
|                                       | Deferred charges                                 |                        |        | (93   | )    |   |        | (184  | )
|                                       | Prepaid pension                                  |                        |        | (136  | )    |   |        | (147  | )
|                                       |                                                  |                        |        |       |      |  
|Total deferred Federal tax liabilities |                                                  |                        | (1,295 | )     |      |   | (1,812 | )    
|                                       |                                                  |                        |        |       |      |  
|Net deferred Federal tax assets        |                                                  | $                      | 3,052  |       |      | $ | 2,468  |      
|                                       |                                                  |                        |        |       |      |  



|     |                     
|---- | --------------------
|(13) | Shareholders Equity

Preferred Stock






| |             
| | ------------
| | Common Stock





| |                                                
| | -----------------------------------------------
| | Common Stock Repurchase Plan and Treasury Stock



54



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##### Table of Contents



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |                        
| | -----------------------
| | Shareholder Rights Plan







| |                                                          
| | ---------------------------------------------------------
| | LNBB Direct Stock Purchase and Dividend Reinvestment Plan





| |                      
| | ---------------------
| | Dividend Restrictions





|     |                   
|---- | ------------------
|(14) | Regulatory Capital



55



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)












|                                |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |       |  
|------------------------------- | ------------ | ---------------------- | - | ------ | ----------------- |  |  | ------ | - |  | ----- | ------ |  |  |  | ----- | -
|                                |              | December 31, 2005      |   |        | December 31, 2004 | 
|                                |              |                        |   |        |                   | 
|                                |              | Amount                 |   |        | Ratio             |  |  | Amount |   |  | Ratio |       
|                                |              |                        |   |        |                   |  |  |        |   |  |       |       
|                                |              | (Dollars in thousands) |  
|Total capital (risk weighted)   |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        | $ | 74,975 |                   |  |  | 11.39  | % |  | $     | 75,814 |  |  |  | 11.72 | %
|                                | Bank         |                        |   | 74,259 |                   |  |  | 11.28  |   |  |       | 71,931 |  |  |  | 11.13 |  
|Tier 1 capital (risk weighted)  |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        |   | 68,383 |                   |  |  | 10.38  |   |  |       | 68,428 |  |  |  | 10.58 |  
|                                | Bank         |                        |   | 63,637 |                   |  |  | 9.67   |   |  |       | 60,461 |  |  |  | 9.36  |  
|Tier 1 capital (average assets) |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        |   | 68,383 |                   |  |  | 8.57   |   |  |       | 68,428 |  |  |  | 9.05  |  
|                                | Bank         |                        |   | 63,637 |                   |  |  | 7.84   |   |  |       | 60,461 |  |  |  | 7.86  |  
|                               

56



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                                |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |       |  
|------------------------------- | ------------ | ---------------------- | - | ------ | ----------------- |  |  | ------ | - |  | ----- | ------ |  |  |  | ----- | -
|                                |              | December 31, 2005      |   |        | December 31, 2004 | 
|                                |              |                        |   |        |                   | 
|                                |              | Amount                 |   |        | Ratio             |  |  | Amount |   |  | Ratio |       
|                                |              |                        |   |        |                   |  |  |        |   |  |       |       
|                                |              | (Dollars in thousands) |  
|Well Capitalized:               |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|Total capital (risk weighted)   |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        | $ | 65,830 |                   |  |  | 10.00  | % |  | $     | 64,688 |  |  |  | 10.00 | %
|                                | Bank         |                        |   | 65,828 |                   |  |  | 10.00  |   |  |       | 64,428 |  |  |  | 10.00 |  
|Tier 1 capital (risk weighted)  |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        |   | 39,498 |                   |  |  | 6.00   |   |  |       | 38,806 |  |  |  | 6.00  |  
|                                | Bank         |                        |   | 39,497 |                   |  |  | 6.00   |   |  |       | 38,757 |  |  |  | 6.00  |  
|Tier 1 capital (average assets) |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        |   | 39,900 |                   |  |  | 5.00   |   |  |       | 37,806 |  |  |  | 5.00  |  
|                                | Bank         |                        |   | 40,582 |                   |  |  | 5.00   |   |  |       | 38,461 |  |  |  | 5.00  |  
|                               
|Minimum Required:               |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|Total capital (risk weighted)   |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        | $ | 52,664 |                   |  |  | 8.00   | % |  | $     | 51,750 |  |  |  | 8.00  | %
|                                | Bank         |                        |   | 52,662 |                   |  |  | 8.00   |   |  |       | 51,702 |  |  |  | 8.00  |  
|Tier 1 capital (risk weighted)  |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        |   | 26,332 |                   |  |  | 4.00   |   |  |       | 25,871 |  |  |  | 4.00  |  
|                                | Bank         |                        |   | 26,331 |                   |  |  | 4.00   |   |  |       | 25,838 |  |  |  | 4.00  |  
|Tier 1 capital (average assets) |              |                        |   |        |                   |  |  |        |   |  |       |        |  |  |  |      
|                                | Consolidated |                        |   | 31,920 |                   |  |  | 4.00   |   |  |       | 30,244 |  |  |  | 4.00  |  
|                                | Bank         |                        |   | 32,465 |                   |  |  | 4.00   |   |  |       | 30,769 |  |  |  | 4.00  |  
|                               



|     |                                     
|---- | ------------------------------------
|(15) | Parent Company Financial Information



|                                           |  |                        |        |  |      |   |        | 
|------------------------------------------ |  | ---------------------- | ------ |  | ---- | - | ------ | 
|                                           |  | At December 31,        |       
|                                           |  |                        |       
|Condensed Balance Sheets                   |  | 2005                   |        |  | 2004 |  
|                                           |  |                        |        |  |      |  
|                                           |  | (Dollars in thousands) |       
|Assets:                                    |  |                        |        |  |      |   |        | 
|Cash                                       |  | $                      | 568    |  |      | $ | 207    | 
|Short-term investments                     |  |                        |       |  |      |   | 3,674  | 
|Investment in The Lorain National Bank     |  |                        | 63,690 |  |      |   | 62,489 | 
|Investment in Charleston Insurance, Inc.   |  |                        | 127    |  |      |   | 91     | 
|Other investments                          |  |                        | 7      |  |      |   | 116    | 
|Note receivable  The Lorain National Bank |  |                        | 4,000  |  |      |   | 4,000  | 
|Other assets                               |  |                        | 34     |  |      |   | 34     | 
|                                           |  |                        |        |  |      |  
|Total Assets                               |  | $                      | 68,426 |  |      | $ | 70,611 | 
|                                           |  |                        |        |  |      |  
|                                          
|Liabilities and Shareholders Equity      
|Other liabilities                          |  | $                      | 21     |  |      | $ | 37     | 
|Shareholders equity                       |  |                        | 68,405 |  |      |   | 70,574 | 
|                                           |  |                        |        |  |      |  
|Total Liabilities and Shareholders Equity |  | $                      | 68,426 |  |      | $ | 70,611 | 
|                                           |  |                        |        |  |      |  

57



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                                                                                      |  |                         |       |  |      |   |       |      |  |   |       |  
|------------------------------------------------------------------------------------- |  | ----------------------- | ----- |  | ---- | - | ----- | ---- |  | - | ----- | -
|                                                                                      |  | Year Ended December 31, |      
|                                                                                      |  |                         |      
|Condensed Statements of Income                                                        |  | 2005                    |       |  | 2004 |   |       | 2003 | 
|                                                                                      |  |                         |       |  |      |   |       |      | 
|                                                                                      |  | (Dollars in thousands)  |      
|Income                                                                                |  |                         |       |  |      |   |       |      |  |   |       |  
|Interest income                                                                       |  | $                       | 321   |  |      | $ | 324   |      |  | $ | 312   |  
|Cash dividends from The Lorain National Bank                                          |  |                         | 3,575 |  |      |   | 4,777 |      |  |   | 4,626 |  
|Other income                                                                          |  |                         | 72    |  |      |   | 45    |      |  |   | 171   |  
|Gain on sale of available for sale securities                                         |  |                         | 73    |  |      |   |      |      |  |   |      |  
|                                                                                      |  |                         |       |  |      |   |       |      | 
|Total Income                                                                          |  |                         | 4,041 |  |      |   | 5,146 |      |  |   | 5,109 |  
|                                                                                      |  |                         |       |  |      |   |       |      | 
|Expenses                                                                              |  |                         |       |  |      |   |       |      |  |   |       |  
|Other expenses                                                                        |  |                         | 341   |  |      |   | 397   |      |  |   | 563   |  
|                                                                                      |  |                         |       |  |      |   |       |      | 
|Income before income taxes and equity in undistributed net
    income of subsidiaries |  |                         | 3,700 |  |      |   | 4,749 |      |  |   | 4,546 |  
|Income tax (benefit) expense                                                          |  |                         | 35    |  |      |   | 7     |      |  |   | (27   | )
|                                                                                      |  |                         |       |  |      |   |       |      | 
|Equity in undistributed net income of subsidiary                                      |  |                         | 2,748 |  |      |   | 2,733 |      |  |   | 3,142 |  
|                                                                                      |  |                         |       |  |      |   |       |      | 
|Net Income                                                                            |  | $                       | 6,413 |  |      | $ | 7,475 |      |  | $ | 7,715 |  
|                                                                                      |  |                         |       |  |      |   |       |      | 

|                                                                                                |                                                                |                         |       |        |      |   |       |        |   |   |       |        |  
|----------------------------------------------------------------------------------------------- | -------------------------------------------------------------- | ----------------------- | ----- | ------ | ---- | - | ----- | ------ | - | - | ----- | ------ | -
|                                                                                                |                                                                | Year Ended December 31, |      
|                                                                                                |                                                                |                         |      
|Condensed Statements of Cash Flows                                                              |                                                                | 2005                    |       |        | 2004 |   |       | 2003   |  
|                                                                                                |                                                                |                         |       |        |      |   |       |        |  
|                                                                                                |                                                                | (Dollars in thousands)  |      
|Net Income                                                                                      |                                                                | $                       | 6,413 |        |      | $ | 7,475 |        |   | $ | 7,715 |       
|Adjustments to reconcile net income to net cash provided by
    (used in) operating activities: |                                                                |                         |       |        |      |   |       |        |   |   |       |       
|                                                                                                | Equity in undistributed net income of The Lorain National Bank |                         |       | (2,748 | )    |   |       | (2,733 | ) |   |       | (3,142 | )
|                                                                                                | Gain on sale of available for sale securities                  |                         |       | (73    | )    |   |       |       |   |   |       |       |  
|                                                                                                | Issuance of common stock under employment agreements           |                         |       | 97     |      |   |       |       |   |   |       |       |  
|                                                                                                | Equity in undistributed net income of non-bank subsidiaries    |                         |       | 36     |      |   |       | 35     |   |   |       | 53     |  
|                                                                                                | Net change in other assets and liabilities                     |                         |       | (132   | )    |   |       | (1,235 | ) |   |       | 126    |  
|                                                                                                |                                                                |                         |       |        |      |   |       |        |  
|                                                                                                | Net cash provided by operating activities                      |                         |       | 3,593  |      |   |       | 3,542  |   |   |       | 4,752  |  
|                                                                                                |                                                                |                         |       |        |      |   |       |        |  
|Cash Flows from Investing Activities:                                                           |                                                                |                         |       |        |      |   |       |        |   |   |       |       
|                                                                                                | Proceeds from sales of available for sale securities           |                         |       | 73     |      |   |       |       |   |   |       |       |  
|                                                                                                |                                                                |                         |       |        |      |   |       |        |  
|                                                                                                | Net cash provided by investing activities                      |                         |       | 73     |      |   |       |       |   |   |       |       |  
|                                                                                                |                                                                |                         |       |        |      |   |       |        |  

58



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##### Table of Contents



NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)


|                                                 |                                                                                                                               |                         |        |        |      |   |       |        |   |   |       |        |  
|------------------------------------------------ | ----------------------------------------------------------------------------------------------------------------------------- | ----------------------- | ------ | ------ | ---- | - | ----- | ------ | - | - | ----- | ------ | -
|                                                 |                                                                                                                               | Year Ended December 31, |       
|                                                 |                                                                                                                               |                         |       
|Condensed Statements of Cash Flows  (continued) |                                                                                                                               | 2005                    |        |        | 2004 |   |       | 2003   |  
|                                                 |                                                                                                                               |                         |        |        |      |   |       |        |  
|                                                 |                                                                                                                               | (Dollars in thousands)  |       
|Cash Flows from Financing Activities:            |                                                                                                                               |                         |        |        |      |   |       |        |   |   |       |       
|                                                 | Cash paid in lieu of fractional shares related to stock
    dividends and stock splits                                        |                         |        |       |      |   |       |       |   |   |       | (14    | )
|                                                 | Proceeds from exercise of stock options and shares issued under
    LNBB Direct Stock Purchase and Dividend Reinvestment Plan |                         |        |       |      |   |       | 1      |   |   |       | 190    |  
|                                                 | Purchase of treasury stock                                                                                                    |                         |        | (2,219 | )    |   |       |       |   |   |       |       |  
|                                                 | Issuance of treasury stock for stock options                                                                                  |                         |        |       |      |   |       | 333    |   |   |       | 15     |  
|                                                 | Dividends paid                                                                                                                |                         |        | (4,760 | )    |   |       | (4,777 | ) |   |       | (4,626 | )
|                                                 |                                                                                                                               |                         |        |        |      |   |       |        |  
|                                                 | Net cash used in financing activities                                                                                         |                         |        | (6,979 | )    |   |       | (4,443 | ) |   |       | (4,435 | )
|                                                 |                                                                                                                               |                         |        |        |      |   |       |        |  
|Net increase (decrease) in cash equivalents      |                                                                                                                               |                         | (3,313 | )      |      |   | (901  | )      |   |   | 317   |       
|Cash and cash equivalents at beginning of year   |                                                                                                                               |                         | 3,881  |        |      |   | 4,782 |        |   |   | 4,465 |       
|                                                 |                                                                                                                               |                         |        |        |      |   |       |        |  
|Cash and cash equivalents at end of year         |                                                                                                                               | $                       | 568    |        |      | $ | 3,881 |        |   | $ | 4,782 |       
|                                                 |                                                                                                                               |                         |        |        |      |   |       |        |  



|     |                        
|---- | -----------------------
|(16) | Retirement Pension Plan





59



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                  |                                                |                         |        |        |      |   |        |        |   |   |        |        |  
|------------------------------------------------- | ---------------------------------------------- | ----------------------- | ------ | ------ | ---- | - | ------ | ------ | - | - | ------ | ------ | -
|                                                  |                                                | Year Ended December 31, |       
|                                                  |                                                |                         |       
|                                                  |                                                | 2005                    |        |        | 2004 |   |        | 2003   |  
|                                                  |                                                |                         |        |        |      |   |        |        |  
|                                                  |                                                | (Dollars in thousands)  |       
|Change in projected benefit obligation            |                                                |                         |        |        |      |   |        |        |   |   |        |       
|Projected benefit obligation at beginning of year |                                                | $                       | (7,390 | )      |      | $ | (7,943 | )      |   | $ | (8,415 | )     
|                                                  | Interest cost                                  |                         |        | (398   | )    |   |        | (450   | ) |   |        | (477   | )
|                                                  | Actuarial gain (loss)                          |                         |        | 111    |      |   |        | 108    |   |   |        | (283   | )
|                                                  | Settlement loss                                |                         |        | (210   | )    |   |        | (159   | ) |   |        | (157   | )
|                                                  | Benefits paid                                  |                         |        | 1,546  |      |   |        | 1,054  |   |   |        | 1,389  |  
|                                                  |                                                |                         |        |        |      |   |        |        |  
|Projected benefit obligation at the end of year   |                                                | $                       | (6,341 | )      |      | $ | (7,390 | )      |   | $ | (7,943 | )     
|                                                  |                                                |                         |        |        |      |   |        |        |  
|Change in plan assets                             |                                                |                         |        |        |      |   |        |        |   |   |        |       
|Fair value of plan assets at beginning of year    |                                                | $                       | 6,895  |        |      | $ | 7,227  |        |   | $ | 7,741  |       
|                                                  | Actual gain on plan assets                     |                         |        | 269    |      |   |        | 222    |   |   |        | 223    |  
|                                                  | Employer contributions                         |                         |        | 250    |      |   |        | 500    |   |   |        | 652    |  
|                                                  | Benefits paid                                  |                         |        | (1,546 | )    |   |        | (1,054 | ) |   |        | (1,389 | )
|                                                  |                                                |                         |        |        |      |   |        |        |  
|Fair value of plan assets at end of year          |                                                | $                       | 5,868  |        |      | $ | 6,895  |        |   | $ | 7,227  |       
|                                                  |                                                |                         |        |        |      |   |        |        |  
|Funded Status                                     |                                                |                         |        |        |      |   |        |        |   |   |        |       
|                                                  | Unrecognized net gain subsequent to transition |                         | $      | (473   | )    |   | $      | (495   | ) |   | $      | (716   | )
|                                                  | Unrecognized actuarial loss                    |                         |        | 874    |      |   |        | 678    |   |   |        |       |  
|                                                  | Unrecognized prior service cost                |                         |        |       |      |   |        |       |   |   |        | 578    |  
|                                                  |                                                |                         |        |        |      |   |        |        |  
|Prepaid Asset (Accrued Liability)                 |                                                | $                       | 401    |        |      | $ | 183    |        |   | $ | (138   | )     
|                                                  |                                                |                         |        |        |      |   |        |        |  

|                                                                                                                                  |  |                         |      |   |      |   |      |      |  |   |      |  
|--------------------------------------------------------------------------------------------------------------------------------- |  | ----------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                                                                                                                                  |  | Year Ended December 31, |     
|                                                                                                                                  |  |                         |     
|                                                                                                                                  |  | 2005                    |      |   | 2004 |   |      | 2003 | 
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|                                                                                                                                  |  | (Dollars in thousands)  |     
|Net Periodic Pension Cost (Benefit)                                                                                               |  |                         |      |   |      |   |      |      |  |   |      |  
|Interest cost on projected benefit obligation                                                                                     |  | $                       | 398  |   |      | $ | 450  |      |  | $ | 477  |  
|Expected return on plan benefits                                                                                                  |  |                         | (501 | ) |      |   | (376 | )    |  |   | (381 | )
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|Net periodic pension cost (benefit)                                                                                               |  |                         | (103 | ) |      |   | 74   |      |  |   | 96   |  
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|Loss recognized due to settlement                                                                                                 |  |                         | 135  |   |      |   | 105  |      |  |   | 20   |  
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|Total pension costs                                                                                                               |  | $                       | 32   |   |      | $ | 179  |      |  | $ | 116  |  
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|                                                                                                                                 
|Weighted-average assumptions used to determine net periodic
    benefit cost for years ended December 31, 2005, 2004 and
    2003 |  |                         |      |   |      |   |      |      |  |   |      |  
|                                                                                                                                 
|Weighted average discount rate                                                                                                    |  |                         | 5.75 | % |      |   | 5.75 | %    |  |   | 5.75 | %
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|Expected long-term rate of return on plan assets                                                                                  |  |                         | 7.50 | % |      |   | 5.00 | %    |  |   | 5.00 | %
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 
|Assumed rate of future compensation increases                                                                                     |  |                         | 0.00 | % |      |   | 0.00 | %    |  |   | 0.00 | %
|                                                                                                                                  |  |                         |      |   |      |   |      |      | 

60



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                          |  |                        |      |   |      |   |      |      |  |   |      |  
|------------------------- |  | ---------------------- | ---- | - | ---- | - | ---- | ---- |  | - | ---- | -
|                          |  | At December 31,        |     
|                          |  |                        |     
|                          |  | 2005                   |      |   | 2004 |   |      | 2003 | 
|                          |  |                        |      |   |      |   |      |      | 
|                          |  | (Dollars in thousands) |     
|Accrued benefit cost      |  | $                      | (473 | ) |      | $ | (495 | )    |  | $ | (716 | )
|Minimum pension liability |  |                        | 874  |   |      |   | 678  |      |  |   | 578  |  
|                          |  |                        |      |   |      |   |      |      | 
|Net amount recognized     |  | $                      | 401  |   |      | $ | 183  |      |  | $ | (138 | )
|                          |  |                        |      |   |      |   |      |      | 

|                                                                         |  |                        |     |  |      |   |    |      |  |   |     | 
|------------------------------------------------------------------------ |  | ---------------------- | --- |  | ---- | - | -- | ---- |  | - | --- | 
|                                                                         |  | Year Ended             |    
|                                                                         |  | December 31,           |    
|                                                                         |  |                        |    
|                                                                         |  | 2005                   |     |  | 2004 |   |    | 2003 | 
|                                                                         |  |                        |     |  |      |   |    |      | 
|                                                                         |  | (Dollars in thousands) |    
|Increase in minimum liability included in other comprehensive
    income |  | $                      | 129 |  |      | $ | 67 |      |  | $ | 381 | 
|                                                                         |  |                        |     |  |      |   |    |      | 





| |            
| | -----------
| | Plan Assets



|                                                    |  |                             |       |   |      |  |       |      |  |  |       |  
|--------------------------------------------------- |  | --------------------------- | ----- | - | ---- |  | ----- | ---- |  |  | ----- | -
|                                                    |  | Plan Assets at December 31, |      
|                                                    |  |                             |      
|                                                    |  | 2005                        |       |   | 2004 |  |       | 2003 | 
|                                                    |  |                             |       |   |      |  |       |      | 
|Asset Category:                                     |  |                             |       |   |      |  |       |      |  |  |       |  
|Equity securities                                   |  |                             | 61.0  | % |      |  | 41.0  | %    |  |  | 18.0  | %
|Debt securities                                     |  |                             | 38.8  |   |      |  | 58.0  |      |  |  | 82.0  |  
|Cash and cash equivalents                           |  |                             | 0.2   |   |      |  | 1.0   |      |  |  | 0.0   |  
|                                                    |  |                             |       |   |      |  |       |      | 
|Total                                               |  |                             | 100.0 | % |      |  | 100.0 | %    |  |  | 100.0 | %
|                                                    |  |                             |       |   |      |  |       |      | 
|LNB Bancorp, Inc. common stock to total plan assets |  |                             | 9.7   | % |      |  | 9.2   | %    |  |  | 8.9   | %
|                                                    |  |                             |       |   |      |  |       |      | 





61



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|            |  |                        |       | 
|----------- |  | ---------------------- | ----- | 
|            |  | Amount                 |      
|            |  |                        |      
|            |  | (Dollars in thousands) |      
|2006        |  | $                      | 720   | 
|2007        |  |                        | 312   | 
|2008        |  |                        | 311   | 
|2009        |  |                        | 563   | 
|2010        |  |                        | 333   | 
|2011  2015 |  |                        | 2,942 | 



|     |              
|---- | -------------
|(17) | Stock Options







|                                 |  |         |         |          |       |   |       |         |          |  |         |   |  |          |       |  |       |  |         |   |  |   |       | 
|-------------------------------- |  | ------- | ------- | -------- | ----- | - | ----- | ------- | -------- |  | ------- | - |  | -------- | ----- |  | ----- |  | ------- | - |  | - | ----- | 
|                                 |  | 2005    |         |          | 2004  |   |       | 2003    |         
|                                 |  |         |         |          |       |   |       |         |         
|                                 |  |         |         | Weighted |       |   |       |         | Weighted |  |         |   |  | Weighted |      
|                                 |  |         |         | Average  |       |   |       |         | Average  |  |         |   |  | Average  |      
|                                 |  |         |         | Exercise |       |   |       |         | Exercise |  |         |   |  | Exercise |      
|                                 |  | Options |         |          | Price |   |       | Options |          |  | Price   |   |  | Options  |       |  | Price | 
|                                 |  |         |         |          |       |   |       |         |          |  |         |   |  |          |       |  |       | 
|Outstanding at beginning of year |  |         | 21,939  |          |       | $ | 19.39 |         |          |  | 50,960  |   |  | $        | 16.69 |  |       |  | 46,318  |   |  | $ | 23.29 | 
|Granted                          |  |         | 32,500  |          |       |   | 18.96 |         |          |  | 10,000  |   |  |          | 19.60 |  |       |  |        |   |  |   |      | 
|Forfeited                        |  |         | (21,939 | )        |       |   | 19.39 |         |          |  | (15,918 | ) |  |          | 14.09 |  |       |  | (3,092  | ) |  |   | 12.31 | 
|Exercised                        |  |         |        |          |       |   |      |         |          |  | (23,103 | ) |  |          | 14.09 |  |       |  | (15,425 | ) |  |   | 12.31 | 
|Stock dividend or split          |  |         |        |          |       |   |       |         |          |  |        |   |  |          |       |  |       |  | 23,159  |   |  |   | 15.52 | 
|                                 |  |         |         |          |       |   |       |         |          |  |         |   |  |          |       |  |       | 
|Outstanding at end of year       |  |         | 32,500  |          |       | $ | 18.96 |         |          |  | 21,939  |   |  | $        | 19.39 |  |       |  | 50,960  |   |  | $ | 16.69 | 
|                                 |  |         |         |          |       |   |       |         |          |  |         |   |  |          |       |  |       | 
|Exercisable at end of year       |  |         |        |          |       | $ |      |         |          |  | 21,939  |   |  | $        | 19.39 |  |       |  | 50,960  |   |  | $ | 16.69 | 
|                                 |  |         |         |          |       |   |       |         |          |  |         |   |  |          |       |  |       | 



62



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                        |  |      |       |   |      |  |       |  
|----------------------- |  | ---- | ----- | - | ---- |  | ----- | -
|                        |  | 2005 |       |   | 2004 | 
|                        |  |      |       |   |      | 
|Risk free interest rate |  |      | 4.23  | % |      |  | 4.35  | %
|Dividend yield          |  |      | 5.00  |   |      |  | 3.67  |  
|Volatility              |  |      | 32.57 |   |      |  | 14.61 |  



|                                                                                                                                                  |                       |                              |       |      |      |   |       |      |  |   |       |      | 
|------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------- | ---------------------------- | ----- | ---- | ---- | - | ----- | ---- |  | - | ----- | ---- | 
|                                                                                                                                                  |                       | Year Ended December 31,      |      
|                                                                                                                                                  |                       |                              |      
|                                                                                                                                                  |                       | 2005                         |       |      | 2004 |   |       | 2003 | 
|                                                                                                                                                  |                       |                              |       |      |      |   |       |      | 
|                                                                                                                                                  |                       | (Dollars in thousands except |      
|                                                                                                                                                  |                       | per share amounts)           |      
|Net Income as reported                                                                                                                            |                       | $                            | 6,413 |      |      | $ | 7,475 |      |  | $ | 7,715 |     
|Add: 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 |                       |                              | (123  | )    |      |   | (23   | )    |  |   |      |     
|                                                                                                                                                  |                       |                              |       |      |      |   |       |      | 
|Pro forma net income                                                                                                                              |                       | $                            | 6,352 |      |      | $ | 7,452 |      |  | $ | 7,715 |     
|                                                                                                                                                  |                       |                              |       |      |      |   |       |      | 
|Pro forma net income per share:                                                                                                                   |                       |                              |       |      |      |   |       |      |  |   |       |     
|                                                                                                                                                  | Basic  as reported   |                              | $     | 0.97 |      |   | $     | 1.13 |  |   | $     | 1.17 | 
|                                                                                                                                                  | Basic  pro forma     |                              |       | 0.96 |      |   |       | 1.12 |  |   |       | 1.17 | 
|                                                                                                                                                  | Diluted  as reported |                              |       | 0.97 |      |   |       | 1.13 |  |   |       | 1.17 | 
|                                                                                                                                                  | Diluted  pro forma   |                              |       | 0.96 |      |   |       | 1.12 |  |   |       | 1.17 | 



|     |                              
|---- | -----------------------------
|(18) | Employee Stock Ownership Plan





|     |            
|---- | -----------
|(19) | 401(k) Plan







63



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|     |                                            
|---- | -------------------------------------------
|(20) | Commitments, Credit Risk, and Contingencies









|                             |       |            |        |         | 
|---------------------------- | ----- | ---------- | ------ | ------- | 
|                             |       | Amount     |       
|                             |       |            |       
|                             |       | (Dollars   |       
|                             |       | in         |       
|                             |       | thousands) |       
|Commitments to extend credit |       | $          | 78,514 |        
|Home equity lines of credit  |       |            | 52,913 |        
|Standby letters of credit    |       |            | 4,384  |        
|                             |       |            |       
|                             | Total |            | $      | 135,811 | 
|                             |       |            |       







|     |                                              
|---- | ---------------------------------------------
|(21) | Estimated Fair Value of Financial Instruments



64



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)






| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The carrying value of Cash and due from banks, Federal funds
    sold, short-term investments and accrued interest receivable and
    other financial assets is a reasonable estimate of fair value
    due to the short-term nature of the asset.                                                                                                                                                                                                                                                                                               
|
| |  | The fair value of investment securities is based on quoted
    market prices, where available. If quoted market prices are not
    available, fair value is estimated using the quoted market
    prices of comparable instruments.                                                                                                                                                                                                                                                                                                              
|
| |  | For variable rate loans with interest rates that may be adjusted
    on a quarterly, or more frequent basis, the carrying amount is a
    reasonable estimate of fair value. The fair value of other types
    of loans is estimated by discounting future cash flows using the
    current rates at which similar loans would be made to borrowers
    with similar credit ratings and for the same remaining
    maturities.                                                                                                                   
|
| |  | The carrying value approximates the fair value for bank owned
    life insurance.                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|
| |  | The fair value of deposits with no stated maturity, such as
    noninterest-bearing demand deposits, savings, money market,
    checking and interest-bearing checking, is equal to the amount
    payable on demand as of December 31, for each year
    presented. The fair value of fixed-maturity certificates of
    deposit is estimated using the rates currently offered for
    deposits of similar remaining maturities. For variable rate
    certificates of deposit, the carrying amount is a reasonable
    estimate of fair value.
|
| |  | Securities sold under repurchase agreements, other short-term
    borrowings, accrued interest payable and other financial
    liabilities approximate fair value due to the short-term nature
    of the liability.                                                                                                                                                                                                                                                                                                                             
|
| |  | The fair value of Federal Home Loan Bank advances is
    estimated by discounting future cash flows using current FHLB
    rates for the remaining term to maturity.                                                                                                                                                                                                                                                                                                                                                                             
|
| |  | The fair value of commitments to extend credit approximates the
    fees charged to make these commitments; since rates and fees of
    the commitment contracts approximates those currently charged to
    originate similar commitments. The carrying amount and fair
    value of off-balance sheet instruments is not significant as of
    December 31, 2005 and 2004.                                                                                                                                                                     

Limitations






65



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|                                                                           |                                  |                        |         |         |            |   |         |          |         |   |            |         |         |   |         |         |         | 
|-------------------------------------------------------------------------- | -------------------------------- | ---------------------- | ------- | ------- | ---------- | - | ------- | -------- | ------- | - | ---------- | ------- | ------- | - | ------- | ------- | ------- | 
|                                                                           |                                  | At December 31,        |        
|                                                                           |                                  |                        |        
|                                                                           |                                  | 2005                   |         |         | 2004       |  
|                                                                           |                                  |                        |         |         |            |  
|                                                                           |                                  | Carrying               |         |         | Estimated  |   |         | Carrying |         |   | Estimated  |        
|                                                                           |                                  | Value                  |         |         | Fair Value |   |         | Value    |         |   | Fair Value |        
|                                                                           |                                  |                        |         |         |            |   |         |          |         |   |            |        
|                                                                           |                                  | (Dollars in thousands) |        
|Financial assets                                                           |                                  |                        |         |         |            |   |         |          |         |   |            |         |         |   |         |        
|Cash and due from banks, Federal funds sold and short-term
    investments |                                  | $                      | 23,923  |         |            | $ | 23,923  |          |         | $ | 26,818     |         |         | $ | 26,818  |        
|Securities                                                                 |                                  |                        | 155,274 |         |            |   | 155,274 |          |         |   | 149,621    |         |         |   | 149,621 |        
|Portfolio loans, net                                                       |                                  |                        | 581,803 |         |            |   | 578,773 |          |         |   | 564,771    |         |         |   | 574,662 |        
|Loans held for sale                                                        |                                  |                        | 2,586   |         |            |   | 2,586   |          |         |   | 3,067      |         |         |   | 3,067   |        
|Bank owned life insurance                                                  |                                  |                        | 13,935  |         |            |   | 13,935  |          |         |   | 13,335     |         |         |   | 13,335  |        
|Accrued interest receivable                                                |                                  |                        | 3,053   |         |            |   | 3,053   |          |         |   | 2,594      |         |         |   | 2,594   |        
|Financial liabilities                                                      |                                  |                        |         |         |            |   |         |          |         |   |            |         |         |   |         |        
|Deposits:                                                                  |                                  |                        |         |         |            |   |         |          |         |   |            |         |         |   |         |        
|                                                                           | Demand, savings and money market |                        |         | 353,428 |            |   |         | 353,428  |         |   |            | 376,449 |         |   |         | 376,449 |        
|                                                                           | Certificates of deposit          |                        |         | 286,788 |            |   |         | 286,788  |         |   |            | 229,094 |         |   |         | 229,094 |        
|                                                                           |                                  |                        |         |         |            |   |         |          |         |   |            |        
|                                                                           |                                  | Total deposits         |         |         | 640,216    |   |         |          | 640,216 |   |            |         | 605,543 |   |         |         | 605,543 | 
|                                                                           |                                  |                        |         |         |            |   |         |          |         |   |            |        
|Short-term borrowings                                                      |                                  |                        | 32,616  |         |            |   | 32,616  |          |         |   | 31,619     |         |         |   | 31,619  |        
|Federal Home Loan Bank advances                                            |                                  |                        | 53,896  |         |            |   | 52,945  |          |         |   | 69,296     |         |         |   | 68,757  |        
|Accrued interest payable                                                   |                                  |                        | 2,126   |         |            |   | 2,126   |          |         |   | 1,172      |         |         |   | 1,172   |        

66



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NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS  (Continued)




|     |                                     
|---- | ------------------------------------
|(22) | Quarterly Financial Data (Unaudited)

|                                                    |  |                                                  |        |  |        |   |        |       |  |   |        |  |  |           |        |  |  |   |        | 
|--------------------------------------------------- |  | ------------------------------------------------ | ------ |  | ------ | - | ------ | ----- |  | - | ------ |  |  | --------- | ------ |  |  | - | ------ | 
|                                                    |  | First                                            |        |  | Second |   |        | Third |  |   | Fourth |  |  | Full Year |       
|                                                    |  |                                                  |        |  |        |   |        |       |  |   |        |  |  |           |       
|                                                    |  | (Dollars in thousands, except per share amounts) |       
|2005                                                |  |                                                  |        |  |        |   |        |       |  |   |        |  |  |           |        |  |  |   |        | 
|Total interest income                               |  | $                                                | 10,052 |  |        | $ | 10,555 |       |  | $ | 11,095 |  |  | $         | 11,730 |  |  | $ | 43,432 | 
|Total interest expense                              |  |                                                  | 2,720  |  |        |   | 2,998  |       |  |   | 3,625  |  |  |           | 4,059  |  |  |   | 13,402 | 
|Net interest income                                 |  |                                                  | 7,332  |  |        |   | 7,557  |       |  |   | 7,470  |  |  |           | 7,671  |  |  |   | 30,030 | 
|Provision for loan losses                           |  |                                                  | 399    |  |        |   | 399    |       |  |   | 300    |  |  |           | 150    |  |  |   | 1,248  | 
|Net interest income after provision for loan losses |  |                                                  | 6,933  |  |        |   | 7,158  |       |  |   | 7,170  |  |  |           | 7,521  |  |  |   | 28,782 | 
|Noninterest income                                  |  |                                                  | 2,927  |  |        |   | 2,639  |       |  |   | 2,608  |  |  |           | 2,203  |  |  |   | 10,377 | 
|Noninterest expense                                 |  |                                                  | 7,671  |  |        |   | 8,472  |       |  |   | 6,764  |  |  |           | 7,360  |  |  |   | 30,267 | 
|Income tax                                          |  |                                                  | 618    |  |        |   | 473    |       |  |   | 857    |  |  |           | 531    |  |  |   | 2,479  | 
|Net income                                          |  |                                                  | 1,571  |  |        |   | 852    |       |  |   | 2,157  |  |  |           | 1,833  |  |  |   | 6,413  | 
|Basic earnings per share                            |  |                                                  | 0.24   |  |        |   | 0.13   |       |  |   | 0.33   |  |  |           | 0.27   |  |  |   | 0.97   | 
|Diluted earnings per share                          |  |                                                  | 0.24   |  |        |   | 0.13   |       |  |   | 0.33   |  |  |           | 0.27   |  |  |   | 0.97   | 
|Dividends declared per share                        |  |                                                  | 0.18   |  |        |   | 0.18   |       |  |   | 0.18   |  |  |           | 0.18   |  |  |   | 0.72   | 
|                                                   

|                                                    |  |                                                  |       |  |        |   |       |       |  |   |        |  |  |           |       |  |  |   |        | 
|--------------------------------------------------- |  | ------------------------------------------------ | ----- |  | ------ | - | ----- | ----- |  | - | ------ |  |  | --------- | ----- |  |  | - | ------ | 
|                                                    |  | First                                            |       |  | Second |   |       | Third |  |   | Fourth |  |  | Full Year |      
|                                                    |  |                                                  |       |  |        |   |       |       |  |   |        |  |  |           |      
|                                                    |  | (Dollars in thousands, except per share amounts) |      
|2004                                                |  |                                                  |       |  |        |   |       |       |  |   |        |  |  |           |       |  |  |   |        | 
|Total interest income                               |  | $                                                | 8,952 |  |        | $ | 9,036 |       |  | $ | 9,451  |  |  | $         | 9,785 |  |  | $ | 37,224 | 
|Total interest expense                              |  |                                                  | 2,106 |  |        |   | 2,185 |       |  |   | 2,310  |  |  |           | 2,501 |  |  |   | 9,102  | 
|Net interest income                                 |  |                                                  | 6,846 |  |        |   | 6,851 |       |  |   | 7,141  |  |  |           | 7,284 |  |  |   | 28,122 | 
|Provision for loan losses                           |  |                                                  | 525   |  |        |   | 425   |       |  |   | 399    |  |  |           | 399   |  |  |   | 1,748  | 
|Net interest income after provision for loan losses |  |                                                  | 6,321 |  |        |   | 6,426 |       |  |   | 6,742  |  |  |           | 6,885 |  |  |   | 26,374 | 
|Noninterest income                                  |  |                                                  | 2,879 |  |        |   | 2,612 |       |  |   | 3,003  |  |  |           | 1,948 |  |  |   | 10,442 | 
|Noninterest expense                                 |  |                                                  | 5,975 |  |        |   | 6,263 |       |  |   | 6,760  |  |  |           | 7,292 |  |  |   | 26,290 | 
|Income tax                                          |  |                                                  | 969   |  |        |   | 795   |       |  |   | 911    |  |  |           | 376   |  |  |   | 3,051  | 
|Net income                                          |  |                                                  | 2,256 |  |        |   | 1,980 |       |  |   | 2,074  |  |  |           | 1,165 |  |  |   | 7,475  | 
|Basic earnings per share                            |  |                                                  | 0.34  |  |        |   | 0.30  |       |  |   | 0.31   |  |  |           | 0.18  |  |  |   | 1.13   | 
|Diluted earnings per share                          |  |                                                  | 0.34  |  |        |   | 0.30  |       |  |   | 0.31   |  |  |           | 0.18  |  |  |   | 1.13   | 
|Dividends declared per share                        |  |                                                  | 0.18  |  |        |   | 0.18  |       |  |   | 0.18   |  |  |           | 0.18  |  |  |   | 0.72   | 
|                                                   



67



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM




















68



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|        |                                                                                          
|------- | -----------------------------------------------------------------------------------------
|Item 9. | Changes in and Disagreements With Accountants on Accounting
    and Financial Disclosures








|         |                        
|-------- | -----------------------
|Item 9a. | Controls and Procedures



|   |                                   
|-- | ----------------------------------
|1. | Disclosure Controls and Procedures

13a-15(e) 15d-15(e) 13a-15




|   |                                          
|-- | -----------------------------------------
|2. | Internal Control over Financial Reporting

Managements Report on Internal Control Over Financial
Reporting






|                                      |  |                        
|------------------------------------- |  | -----------------------
|DANIEL E. KLIMAS SIG                  |  | TERRY M. WHITE SIG     
|Daniel E. Klimas                      |  | Terry M. White         
|President and Chief Executive Officer |  | Chief Financial Officer

69



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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

























70



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##### Table of Contents



Changes in Internal Control Over Financial Reporting









|         |                  
|-------- | -----------------
|Item 9B. | Other Information






PART III





Item 10.     Directors,
Executive Officers, Promoters and Control Persons of the
Registrant


10-K.


www.4lnb.com





Item 11.     Executive
Compensation







Item 12.     Security Ownership
of Certain Beneficial Owners and Management




71



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##### Table of Contents





Equity Compensation Plan Table


|                                                              |  |                        |        |  |                      |                      |                                |                                 |  |  |        | 
|------------------------------------------------------------- |  | ---------------------- | ------ |  | -------------------- | -------------------- | ------------------------------ | ------------------------------- |  |  | ------ | 
|                                                              |  |                        |        |  |                      | Number of securities |                               
|                                                              |  | Number of securities   |        |  |                      |                      | remaining available for future |                                
|                                                              |  | to be issued upon      |        |  | Weighted-average     |                      |                                | issuance under equity           | 
|                                                              |  | exercise of            |        |  | exercise price of    |                      |                                | compensation plans              | 
|                                                              |  | outstanding options,   |        |  | outstanding options, |                      |                                | (excluding securities reflected | 
|Plan Category                                                 |  | warrants and rights(1) |        |  | warrants and rights  |                      |                                | in column(a))                   | 
|                                                              |  |                        |        |  |                      |                      |                                |                                 | 
|                                                              |  | (a)                    |        |  | (b)                  |                      |                                | (c)                             | 
|Equity compensation plans approved by security holders        |  |                        | 0      |  |                      | $                    |                               |                                 |  |  | 0      | 
|Equity compensation plans not approved by security holders(2) |  |                        | 32,500 |  |                      | $                    | 18.96                          |                                 |  |  | 60,000 | 
|                                                              |  |                        |        |  |                      |                      |                                |                                 | 
|Total                                                         |  |                        | 32,500 |  |                      | $                    | 18.96                          |                                 |  |  | 60,000 | 
|                                                              |  |                        |        |  |                      |                      |                                |                                 | 






|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Consists of common shares of the Corporation covered by
    outstanding options.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|   
|(2) | All common shares included in equity compensation plans not
    approved by shareholders are covered by outstanding options
    awarded to two current officers under agreements having the same
    material terms. Each of these options is a nonqualified option,
    meaning a stock option that does not qualify under
    Section 422 of the Internal Revenue Code for the special
    tax treatment available for qualified, or incentive,
    stock options. Mr. Klimas has an option to purchase
    30,000 shares which vest in 10,000 increments on the first,
    second and third anniversaries of the date of grant.
    Mr. Klimas employment agreement also contemplates
    that he will be issued options to purchase 30,000 shares on
    each of the first and second anniversaries of the commencement
    of his employment. Mr. Soltis has an option to purchase
    2,500 shares which vest on the first year anniversary of
    the date of grant. Each option may be exercised for a term of
    10 years from the date the option vests, subject to earlier
    termination in the event of death, disability or other
    termination of the employment of the option holder. The option
    holder has up to 12 months following termination of
    employment due to death or disability to exercise the options.
    The options terminate three months after termination of
    employment for reasons other than death, disability or
    termination for cause, and immediately upon termination of
    employment if for cause. The exercise price and number of shares
    covered by the option are to be adjusted to reflect any share
    dividend, share split, merger or other recapitalization of the
    common shares of the Corporation. The options are not
    transferable other than by will or state inheritance laws.
    Exercise prices for these options are at fair market value at
    the date of grant. The 30,000 shares awarded to
    Mr. Klimas have an exercise price of $19.17, and the
    2,500 shares awarded Mr. Soltis have an exercise price
    of $16.50. The remaining contractual terms of the options are
    10 years from the date of vesting.




Item 13.     Certain Relationships
and Related Transactions







Item 14.     Principal Accounting
Fees and Services




72



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PART IV







|         |                                        
|-------- | ---------------------------------------
|Item 15. | Exhibits, Financial Statement Schedules

10-K:




| |                         
| | ------------------------
| | (1) Financial Statements

























| |                                  
| | ---------------------------------
| | (2) Financial Statement Schedules



| |                                                                                                                                                                                                                
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Financial statement schedules are omitted as they are not
    required or are not applicable or because the required
    information is included in the consolidated financial statements
    or notes thereto.



| |                                                     
| | ----------------------------------------------------
| | (3) Exhibits required by Item 601
    Regulation S-K

10-K.


S-K


10-K


73



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Exhibit Index


|          |    |         |  |                                                                                                                                                                                                                                                                                                                              
|--------- | -- | ------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|S-K       |    |        
|Reference |    |        
|Number    |    | Exhibit
|          |    |        
|          | 3  | (a)     |  | LNB Bancorp, Inc. Second Amended Articles of Incorporation.                                                                                                                                                                                                                                                                  
|          | 3  | (b)     |  | LNB Bancorp, Inc. Amended Code of Regulations.                                                                                                                                                                                                                                                                               
|          | 10 | (a)*    |  | Form of Stock Appreciation Right Agreement. Incorporated by
    reference herein from Exhibit 10.1 to the
    Corporations Form 8-K filed January 25, 2006.                                                                                                                                                                 
|          | 10 | (b)*    |  | LNB Bancorp, Inc. 2005 Management Incentive Plan. Incorporated
    by reference herein from Exhibit 10.1 of the
    Corporations Form 8-K filed December 22, 2005.                                                                                                                                                          
|          | 10 | (c)*    |  | LNB Bancorp, Inc. 2006 Management Incentive Plan for Key
    Executives. Incorporated by reference herein from
    Exhibit 10.2 of the Corporations Form 8-K filed
    December 22, 2005.                                                                                                                                   
|          | 10 | (d)*    |  | LNB Bancorp, Inc. Stock Appreciation Rights Plan. Incorporated
    by reference from Exhibit 10.3 of the Corporations
    Form 8-K filed December 22, 2005.                                                                                                                                                                 
|          | 10 | (e)*    |  | Employment Agreement, dated June 20, 2005, between LNB
    Bancorp, Inc. and Richard E. Lucas. Incorporated by reference
    herein from Exhibit 10.1 to the Corporations
    quarterly report on Form 10-Q for the quarter ended
    September 30, 2005.                                                                   
|          | 10 | (f)*    |  | Stock Option Agreement, effective as of June 27, 2005,
    between the Corporation and Frank A. Soltis. Incorporated by
    reference herein from Exhibit 10.2 to the
    Corporations quarterly report on Form 10-Q for the
    quarter ended September 30, 2005.                                                          
|          | 10 | (g)*    |  | Employment Agreement by and between Daniel E. Klimas and LNB
    Bancorp, Inc. dated January 28, 2005. Incorporated by
    reference herein from Exhibit 10(a) to the
    Corporations annual report Form 10-K for the fiscal
    year ended December 31, 2004.                                                             
|          | 10 | (h)     |  | Asset Purchase Agreement by and between LNB Mortgage, LLC., The
    Lorain National Bank and Mortgage One Services, Inc. dated
    July 1, 2004. Incorporated by reference herein from
    Exhibit 2 to the Corporations quarterly report on
    Form 10-Q for the quarter ended June 30, 2004.                             
|          | 10 | (i)     |  | Amendment to Supplemental Retirement Benefits Agreement by and
    between Gary C. Smith and LNB Bancorp, Inc., and The Lorain
    National Bank dated October 6, 2003. Incorporated by
    reference herein from Exhibit (10a) to the
    Corporations annual report on Form 10-K for the year
    ended December 31, 2003.
|          | 10 | (j)*    |  | The Lorain National Bank Retirement Pension Plan amended and
    restated effective December 31, 2002, dated
    November 19, 2002. Incorporated by reference herein from
    Exhibit 10 to the Corporations annual report on
    Form 10-K for the year ended December 31, 2002.                                           
|          | 10 | (k)*    |  | Employment Agreement by and between Terry M. White and LNB
    Bancorp, Inc, and The Lorain National Bank dated
    January 23, 2002. Incorporated by reference herein from
    Exhibit (10a) to the Corporations quarterly report on
    Form 10-Q for the quarter ended March 31, 2002.                                   
|          | 10 | (l)     |  | Lorain National Bank Group Term Carve Out Plan dated
    August 7, 2002. Incorporated by reference herein from
    Exhibit (10a) to the Corporations quarterly report on
    Form 10-Q for the quarter ended September 30, 2002.                                                                                            
|          | 10 | (m)     |  | Restated and Amended Employment Agreement by and between Gary C.
    Smith and LNB Bancorp, Inc, and The Lorain National Bank dated
    December 22, 2000. Incorporated by reference herein from
    Exhibit (10a) to the Corporations annual report on
    Form 10-K for the year ended December 31, 2001.                 
|          | 10 | (n)     |  | Supplemental Retirement Benefits Agreement by and between Gary
    C. Smith and LNB Bancorp, Inc, and The Lorain National Bank
    dated December 22, 2000.                                                                                                                                                                  
|          | 10 | (o)     |  | Amended Supplemental Retirement Agreement by and between Thomas
    P. Ryan and LNB Bancorp, Inc. and The Lorain National Bank dated
    December 23, 2000.                                                                                                                                                                  
|          | 10 | (p)     |  | Amended Supplemental Retirement Agreement by and between Gregory
    D. Friedman and LNB Bancorp, Inc. and The Lorain National Bank
    dated December 23, 2000.                                                                                                                                                             
|          | 10 | (q)*    |  | Amended Supplemental Retirement Agreement by and between James
    F. Kidd and The Lorain National Bank dated June 15, 1999.                                                                                                                                                                                                 

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##### Table of Contents



|          |      |         |  |                                                                                                                                                                                              
|--------- | ---- | ------- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|S-K       |      |        
|Reference |      |        
|Number    |      | Exhibit
|          |      |        
|          | 10   | (r)     |  | Rights Agreement between LNB Bancorp, Inc. and Registrar and
    Transfer Corporation dated October 24, 2000.                                                                                
|          | 10   | (s)     |  | Branch Purchase and Assumption Agreement by and between KeyBank
    National Association and the Lorain National Bank dated
    April 10, 1997.                                              
|          | 10   | (t)*    |  | Supplemental Retirement Agreement by and between James F. Kidd
    and The Lorain National Bank dated July 30, 1996.                                                                         
|          | 10   | (u)     |  | Supplemental Retirement Agreement by and between Thomas P. Ryan
    and The Lorain National Bank dated July 30, 1996.                                                                        
|          | 10   | (v)     |  | Supplemental Retirement Agreement by and between Gregory D.
    Friedman and The Lorain National Bank dated July 30, 1996.                                                                   
|          | 10   | (w)     |  | Agreement To Join In The Filing of Consolidated Federal Income
    Tax Returns between LNB Bancorp, Inc. and The Lorain National
    Bank dated February 27, 2004.                           
|          | 21.1 |         |  | Subsidiaries of LNB Bancorp, Inc.                                                                                                                                                            
|          | 23.1 |         |  | Consent of KPMG, LLP.                                                                                                                                                                        
|          | 31.1 |         |  | Rule 13a-14(a)/15-d-14(a) Certification of Chief Executive
    Officer, dated March 13, 2006 for LNB Bancorp, Inc.s
    annual report on Form 10-K for the year ended
    December 31, 2005.
|          | 31.2 |         |  | Rule 13a-14(a)/15-d-14(a) Certification of Chief Financial
    Officer, dated March 13, 2006 for LNB Bancorp, Inc.s
    annual report on Form 10-K for the year ended
    December 31, 2005.
|          | 32.1 |         |  | Section 1350 Certification of Chief Executive Officer,
    dated March 13, 2006 for LNB Bancorp, Inc.s annual
    report on Form 10-K for the year ended December 31,
    2005.             
|          | 32.2 |         |  | Section 1350 Certification of Chief Financial Officer,
    dated March 13, 2006 for LNB Bancorp, Inc.s annual
    report on Form 10-K for the year ended December 31,
    2005.             






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##### Table of Contents






SIGNATURES






| |                  
| | -----------------
| | LNB Bancorp, Inc.
| | (Registrant)     



| |     |                   
| | --- | ------------------
| | By: | /s/ Terry M. White

| |                        
| | -----------------------
| |                        
| | Terry M. White         
| | Chief Financial Officer



|                                         |  |                            |  |                |  | 
|---------------------------------------- |  | -------------------------- |  | -------------- |  | 
|                                        
|Daniel P. Batista                        |  | Director                   |  | March 13, 2006
|                                        
|/s/ Robert M. CampanaRobert M. Campana   |  | Director                   |  | March 13, 2006
|                                        
|/s/ Terry D. GoodeTerry D. Goode         |  | Director                   |  | March 13, 2006
|                                        
|/s/ James F. KiddJames F. Kidd           |  | Vice Chairman and Director |  | March 13, 2006
|                                        
|/s/ David M. KoetheDavid M. Koethe       |  | Director                   |  | March 13, 2006
|                                        
|/s/ Kevin C. MartinKevin C. Martin       |  | Director                   |  | March 13, 2006
|                                        
|/s/ Benjamin G. NortonBenjamin G. Norton |  | Director                   |  | March 13, 2006
|                                        
|/s/ Jeffrey F. RiddellJeffrey F. Riddell |  | Director                   |  | March 13, 2006
|                                        
|John W. Schaeffer, M.D.                  |  | Director                   |  | March 13, 2006
|                                        
|Eugene M. Sofranko                       |  | Director                   |  | March 13, 2006
|                                        
|Stanley G. Pijor                         |  | Director                   |  | March 13, 2006
|                                        
|/s/ Lee C. HowleyLee C. Howley           |  | Director                   |  | March 13, 2006
|                                        
|/s/ Donald F. ZwillingDonald F. Zwilling |  | Director                   |  | March 13, 2006

76



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##### Table of Contents



|                                     |  |                                      |  |                |  | 
|------------------------------------ |  | ------------------------------------ |  | -------------- |  | 
|                                    
|/s/ James R. HerrickJames R. Herrick |  | Director                             |  | March 13, 2006
|                                    
|/s/ Daniel E. KlimasDaniel E. Klimas |  | Director and Chief Executive Officer |  | March 13, 2006
|                                    
|/s/ Terry M. WhiteTerry M. White     |  | Chief Financial Officer              |  | March 13, 2006

77