##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended March 31, 2008
 o
    
    Transition Report Under Section 13 or 15(d) of the Exchange Act
 Commission file number 000-51264
 WESTERN RESERVE BANCORP, INC.
  Ohio
    
    31-1566623(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
 4015 Medina Road, Suite 100, P.O. Box 585, Medina, Ohio 44256
 Issuers
telephone number, including area code
  þ o
  Large accelerated filer o
    
    Accelerated filer
o
    
    Non-accelerated filer o
    
    Smaller reporting company
þ(Do not check if a smaller reporting company)
 o þ




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##### 



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 2008
 PagePART IFinancial InformationITEM 1 FINANCIAL STATEMENTSConsolidated Balance Sheets as of March 31, 2008
and December 31, 2007
    
    
    3Consolidated Statements of Income for the three months
ended March 31, 2008 and 2007
    
    
    4Consolidated Statements of Comprehensive Income for the three
months ended March 31, 2008 and 2007
    
    
    5Consolidated Statements of Cash Flows for the three months ended
March 31, 2008 and 2007
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 3 QUANITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
    
    
    N/AITEM 4 CONTROLS AND PROCEDURES
    
    
    29PART IIOther Information
    
    
    30SIGNATURES
    
    
    33EX-31.1EX-31.2EX-32.1EX-32.2
  Page 2




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(Unaudited)Mar. 31,
    
    
    Dec. 31,2008
    
    
    2007AssetsCash and due from financial institutions
    
    $
    2,932,805
    
    
    $
    2,486,243Federal funds sold and other short-term funds
    
    
    9,838,977
    
    
    
    21,332,285Cash and cash equivalents
    
    
    12,771,782
    
    
    
    23,818,528Interest-bearing deposits in other banks
    
    
    3,000,000
    
    
    
    Securities available for sale
    
    
    11,783,135
    
    
    
    10,982,965Restricted stock
    
    
    629,900
    
    
    
    593,400Loans
    
    
    131,935,131
    
    
    
    121,628,057Allowance for loan losses
    
    
    (1,705,091
    )
    
    
    (1,605,766
    )Loans, net
    
    
    130,230,040
    
    
    
    120,022,291Premises and equipment, net
    
    
    1,171,367
    
    
    
    1,187,302Bank owned life insurance
    
    
    1,155,308
    
    
    
    1,142,580Foreclosed assets
    
    
    371,000
    
    
    
    371,000Accrued interest receivable and other assets
    
    
    1,399,928
    
    
    
    1,241,651Total Assets
    
    $
    162,512,460
    
    
    $
    159,359,717Liabilities and Shareholders EquityDepositsNoninterest-bearing
    
    $
    14,791,080
    
    
    $
    17,080,851Interest-bearing
    
    
    124,441,735
    
    
    
    124,348,417Total deposits
    
    
    139,232,815
    
    
    
    141,429,268Line of credit
    
    
    3,000,000
    
    
    
    Federal Home Loan Bank advances
    
    
    5,500,000
    
    
    
    3,500,000Accrued interest payable and other liabilities
    
    
    577,044
    
    
    
    501,476Total Liabilities
    
    
    148,309,859
    
    
    
    145,430,744Shareholders EquityCommon stock, without par value, $1 stated
value:1,500,000 shares authorized; 582,397 and
579,059 shares issued and outstanding
as of
March 31, 2008 and December 31, 2007
    
    
    582,397
    
    
    
    579,059Additional paid-in capital
    
    
    9,762,374
    
    
    
    9,702,632Retained earnings
    
    
    3,705,469
    
    
    
    3,587,907Accumulated other comprehensive income
    
    
    152,361
    
    
    
    59,375Total Shareholders Equity
    
    
    14,202,601
    
    
    
    13,928,973Total Liabilities and Shareholders
Equity
    
    $
    162,512,460
    
    
    $
    159,359,717
  Page 3




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##### Table of Contents



Three months ended March 31,2008
    
    
    2007Interest and dividend incomeLoans, including fees
    
    $
    2,279,083
    
    
    $
    2,225,539Securities:Taxable
    
    
    80,511
    
    
    
    82,592Tax exempt
    
    
    43,450
    
    
    
    43,031Dividends on restricted stock
    
    
    7,997
    
    
    
    8,390Federal
funds sold and other short-term funds
    
    
    135,289
    
    
    
    194,1762,546,330
    
    
    
    2,553,728Interest expenseDeposits
    
    
    1,106,768
    
    
    
    1,203,141Borrowings
    
    
    32,703
    
    
    
    31,3031,139,471
    
    
    
    1,234,444Net interest income
    
    
    1,406,859
    
    
    
    1,319,284Provision (credit) for loan losses
    
    
    97,900
    
    
    
    (4,600
    )Net interest income after
provision (credit) for
loan losses
    
    
    1,308,959
    
    
    
    1,323,884Noninterest incomeService charges on deposit accounts
    
    
    40,111
    
    
    
    35,154Net gains on sales of loans
    
    
    
    
    
    
    13,453Other
    
    
    39,030
    
    
    
    36,69079,141
    
    
    
    85,297Noninterest expenseSalaries and employee benefits
    
    
    610,998
    
    
    
    532,345Premises and equipment, net
    
    
    232,320
    
    
    
    215,024Data processing
    
    
    92,573
    
    
    
    86,493Directors fees
    
    
    39,875
    
    
    
    42,200Professional fees
    
    
    53,441
    
    
    
    44,759Marketing and advertising
    
    
    23,099
    
    
    
    27,638FDIC insurance
    
    
    26,886
    
    
    
    13,524Taxes other than income and payroll
    
    
    39,204
    
    
    
    36,128Community and shareholder relations
and contributions
    
    
    24,178
    
    
    
    22,414Supplies, printing and postage
    
    
    18,455
    
    
    
    18,808Other
    
    
    72,251
    
    
    
    59,6271,233,280
    
    
    
    1,098,960Income before income taxes
    
    
    154,820
    
    
    
    310,221Income tax expense
    
    
    37,258
    
    
    
    90,267Net income
    
    $
    117,562
    
    
    $
    219,954Average shares outstanding (basic)
    
    
    580,892
    
    
    
    573,280Average shares outstanding (diluted)
    
    
    597,859
    
    
    
    602,676Basic earnings per share
    
    $
    0.20
    
    
    $
    0.38Diluted earnings per share
    
    $
    0.20
    
    
    $
    0.36
  Page 4




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##### Table of Contents



Three months ended March 31,2008
    
    
    2007Net income
    
    $
    117,562
    
    
    $
    219,954Other comprehensive income (loss), net of tax:Unrealized gains/(losses) on securities
arising during the period
    
    
    92,986
    
    
    
    (11,936
    )Comprehensive income
    
    $
    210,548
    
    
    $
    208,018
  Page 5




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##### Table of Contents



Three months ended March 31,2008
    
    
    2007Cash flows from operating activitiesNet income
    
    $
    117,562
    
    
    $
    219,954Adjustments
to reconcile net income to net cash from operating activities:Provision (credit) for loan losses
    
    
    97,900
    
    
    
    (4,600
    )Depreciation
    
    
    47,530
    
    
    
    46,407Net amortization (accretion) of securities
    
    
    (4,074
    )
    
    
    (3,945
    )Stock-based compensation
    
    
    870
    
    
    
    364Loans originated for sale
    
    
    
    
    
    
    (518,000
    )Proceeds from sales of loan originations
    
    
    
    
    
    
    531,453Gains on sales of loans
    
    
    
    
    
    
    (13,453
    )Federal Home Loan Bank stock dividends
    
    
    (4,600
    )
    
    
    Increase in cash surrender value of life insurance
    
    
    (12,728
    )
    
    
    (11,805
    )Net change in other assets and other liabilities
    
    
    (130,611
    )
    
    
    (173,890
    )Net cash from operating activities
    
    
    111,849
    
    
    
    72,485Cash flows from investing activitiesAvailable for sale securities:Purchases
    
    
    (2,020,806
    )
    
    
    Maturities, repayments and calls
    
    
    1,365,598
    
    
    
    125,369Purchase of Federal Reserve Bank stock
    
    
    (9,000
    )
    
    
    Purchase of Federal Home Loan Bank stock
    
    
    (22,900
    )
    
    
    Net (increase) decrease in interest-bearing deposits in other banks
    
    
    (3,000,000
    )
    
    
    2,200,000Net (increase) in loans
    
    
    (5,612,019
    )
    
    
    (5,602,526
    )Purchase of auto loan portfolio
    
    
    (4,693,630
    )
    
    
    Purchases of premises and equipment
    
    
    (31,595
    )
    
    
    (108,526
    )Net cash from investing activities
    
    
    (14,024,352
    )
    
    
    (3,385,683
    )Cash flows from financing activitiesNet increase (decrease) in deposits
    
    
    (2,196,453
    )
    
    
    2,328,033Proceeds from Federal Home Loan Bank advances
    
    
    2,000,000
    
    
    
    Proceeds from borrowing on line of credit
    
    
    3,000,000
    
    
    
    Proceeds from issuance of common stock
under Employee Stock Purchase Plan
    
    
    4,792
    
    
    
    7,082Proceeds and income tax benefit from exercise of stock options
    
    
    57,418
    
    
    
    Net cash from financing activities
    
    
    2,865,757
    
    
    
    2,335,115Change in cash and cash equivalents
    
    
    (11,046,746
    )
    
    
    (978,083
    )Cash and cash equivalents at beginning of period
    
    
    23,818,528
    
    
    
    18,096,477Cash and cash equivalents at end of period
    
    $
    12,771,782
    
    
    $
    17,118,394Supplemental cash flow information:Interest paid
    
    $
    1,163,753
    
    
    $
    1,273,819Income taxes paid
    
    
    
    
    
    
    50,000
  Page 6




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WESTERN
RESERVE BANCORP, INC.
 
 NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       Page 7




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Three months ended Mar. 31,2008
    
    
    2007Numerator:Net income
    
    $
    117,562
    
    
    $
    219,954Denominator:Denominator for basic
earnings per share
weighted average shares
    
    
    580,892
    
    
    
    573,280Effect of dilutive securities:Nonqualified stock options
    
    
    16,967
    
    
    
    29,396Denominator for diluted
earnings per share
    
    
    597,859
    
    
    
    602,676Basic earnings per share
    
    $
    0.20
    
    
    $
    0.38Diluted earnings per share
    
    $
    0.20
    
    
    $
    0.36
  Page 8




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Accounting for Deferred Compensation and
Postretirement Benefit Aspects of Endorsement Split-Dollar Life Insurance Arrangement. Employers Accounting for Postretirement Benefits Other
Than Pensions.
 Fair Value Measurements
 The Fair Value Option for Financial Assets and
Financial Liabilities
 Page 9




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Written Loan Commitments
Recorded at Fair Value through Earnings Application of Accounting
Principles to Loan Commitments
 NOTE 2  LOANS
  March 31,
    
    
    December 31,2008
    
    
    2007Commercial real estate
    
    $
    79,116,079
    
    
    $
    73,122,859Commercial business
    
    
    35,395,918
    
    
    
    35,391,508Commercial construction
    
    
    1,476,081
    
    
    
    1,919,310Home equity lines of credit
    
    
    6,803,700
    
    
    
    6,663,412Residential mortgage
and construction
    
    
    1,618,029
    
    
    
    1,513,902Consumer installment
    
    
    7,499,200
    
    
    
    2,985,560Other
    
    
    26,124
    
    
    
    31,506$
    131,935,131
    
    
    $
    121,628,057
 Page 10




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 2  LOANS
  Three months ended March 31,2008
    
    
    2007Beginning balance
    
    $
    1,605,766
    
    
    $
    1,588,217Loans charged off
    
    
    (781
    )
    
    
    Recoveries
    
    
    2,206
    
    
    
    42,699Provision (credit) for loan losses
    
    
    97,900
    
    
    
    (4,600
    )Ending balance
    
    $
    1,705,091
    
    
    $
    1,626,316
   NOTE 3  DEPOSITS
  March 31,
    
    
    December 31,2008
    
    
    2007Noninterest-bearing demand
    
    $
    14,791,080
    
    
    $
    17,080,851Interest-bearing demand
    
    
    6,389,216
    
    
    
    6,662,678Market Rate Savings
    
    
    81,861,107
    
    
    
    79,987,868Time under $100,000
    
    
    21,064,613
    
    
    
    22,604,561Time $100,000 and over
    
    
    15,126,799
    
    
    
    15,093,310$
    139,232,815
    
    
    $
    141,429,268
  Page 11




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 4  FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
  March 31,
    
    
    December 31,2008
    
    
    2007Maturing March 2009, fixed rate advances at rates from
2.39% to 3.25%, averaging 3.08%
    
    $
    3,100,000
    
    
    $
    2,500,000Maturing March 2010, fixed rate advance at 2.70%
    
    
    500,000
    
    
    
    Maturing April 2010, fixed rate advance at 4.57%
    
    
    1,000,000
    
    
    
    1,000,000Maturing March 2011, fixed rate advance at 3.06%
    
    
    400,000
    
    
    
    Maturing March 2012, fixed rate advance at 3.50%
    
    
    300,000
    
    
    
    Maturing March 2013, fixed rate advance at 3.75%
    
    
    200,000
    
    
    
    $
    5,500,000
    
    
    $
    3,500,000
     Page 12




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 5  STOCK COMPENSATION PLAN
  Three months endedMarch 31, 2008WeightedAverageExerciseShares
    
    
    PriceOptions outstanding, beginning of period
    
    
    109,886
    
    
    $
    18.71Forfeited
    
    
    
    
    
    
    Exercised
    
    
    (3,125
    )
    
    
    17.54Granted
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    106,761
    
    
    $
    18.74Options exercisable, end of period
    
    
    104,480
    
    
    $
    18.56
    Three months endedMarch 31, 2008Proceeds of options exercised
    
    $
    54,800Related tax benefit recognized
    
    
    2,618Intrinsic value of options exercised
    
    
    7,700
 Page 13




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2008
 NOTE 6  FAIR VALUE
        QuotedPrices inActive
    
    
    SignificantMarkets for
    
    
    Other
    
    
    SignificantIdentical
    
    
    Observable
    
    
    UnobservableMarch 31,
    
    
    Assets
    
    
    Inputs
    
    
    Inputs2008
    
    
    (Level 1)
    
    
    (Level 2)
    
    
    (Level 3)Assets:Securities available for
sale
    
    $
    11,783,135
    
    
    
    
    
    
    $
    11,783,135
    
    
    
    
  Page 14




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WESTERN
RESERVE BANCORP, INC.
 
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 OVERVIEW
   FINANCIAL CONDITION
 Assets
    Page 15




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WESTERN RESERVE BANCORP, INC  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 FINANCIAL CONDITION
      Page 16




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 FINANCIAL CONDITION
  Liabilities
     Page 17




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 FINANCIAL CONDITION
 Shareholders Equity
  RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
 Overview
  Net Interest Income
   Page 18




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
  Three months ended March 31,2008
    
    
    
    
    
    
    2007Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/($ in thousands)
    
    Balance
    
    
    Expense
    
    
    Cost
    
    
    Balance
    
    
    Expense
    
    
    CostLoans
    
    $
    126,796
    
    
    $
    2,279
    
    
    
    7.21
    %
    
    $
    112,694
    
    
    $
    2,225
    
    
    
    8.01
    %Investment securities-taxable
    
    
    6,360
    
    
    
    81
    
    
    
    5.08
    %
    
    
    6,428
    
    
    
    83
    
    
    
    5.21
    %Investment securities-tax exempt
    
    
    4,572
    
    
    
    59
    
    
    
    5.20
    %
    
    
    4,460
    
    
    
    60
    
    
    
    5.45
    %Restricted stock
    
    
    605
    
    
    
    8
    
    
    
    5.31
    %
    
    
    569
    
    
    
    8
    
    
    
    5.98
    %Federal funds sold and other
short-term funds
    
    
    15,183
    
    
    
    135
    
    
    
    3.57
    %
    
    
    14,968
    
    
    
    194
    
    
    
    5.27
    %Total interest earning assets
    
    
    153,516
    
    
    
    2,562
    
    
    
    6.70
    %
    
    
    139,119
    
    
    
    2,570
    
    
    
    7.49
    %Noninterest earning assets
    
    
    4,755
    
    
    
    
    
    
    
    
    
    
    
    4,581Total Assets
    
    $
    158,271
    
    
    
    
    
    
    
    
    
    
    $
    143,700Interest-bearing transaction accounts
    
    $
    6,344
    
    
    
    16
    
    
    
    1.00
    %
    
    $
    6,573
    
    
    
    16
    
    
    
    1.00
    %Market rate savings
    
    
    81,050
    
    
    
    689
    
    
    
    3.41
    %
    
    
    62,988
    
    
    
    725
    
    
    
    4.67
    %Certificate of deposit and IRAs
    
    
    37,482
    
    
    
    401
    
    
    
    4.30
    %
    
    
    42,445
    
    
    
    462
    
    
    
    4.41
    %Borrowings
    
    
    3,640
    
    
    
    33
    
    
    
    3.60
    %
    
    
    3,500
    
    
    
    31
    
    
    
    3.63
    %Total interest bearing liabilities
    
    
    128,516
    
    
    
    1,139
    
    
    
    3.56
    %
    
    
    115,506
    
    
    
    1,234
    
    
    
    4.33
    %Noninterest bearing liabilities
    
    
    15,681
    
    
    
    
    
    
    
    
    
    
    
    15,202Shareholders equity
    
    
    14,074
    
    
    
    
    
    
    
    
    
    
    
    12,992Total
Liabilities and Shareholders Equity
    
    $
    158,271
    
    
    
    
    
    
    
    
    
    
    $
    143,700Net interest income
    
    
    
    
    
    
    1,423
    
    
    
    
    
    
    
    
    
    
    
    1,336Tax equivalent adjustment
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    (17
    )Net interest
income per financial statements
    
    
    
    
    
    $
    1,407
    
    
    
    
    
    
    
    
    
    
    $
    1,319Net yield on average earning assets
    
    
    
    
    
    
    
    
    
    
    3.72
    %
    
    
    
    
    
    
    
    
    
    
    3.90
    %
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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
   Three months endedMarch 31, 2008 vs. 2007Increase (Decrease) inNet Interest Income Due to($ in thousands)
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans
    
    $
    242
    
    
    $
    (188
    )
    
    $
    54Investment securities-taxable
    
    
    (1
    )
    
    
    (1
    )
    
    
    (2
    )Investment securities-tax exempt
    
    
    
    
    
    
    (1
    )
    
    
    (1
    )Restricted stock
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other short-term funds
    
    
    
    
    
    
    (59
    )
    
    
    (59
    )Total interest-earning assets
    
    
    241
    
    
    
    (249
    )
    
    
    (8
    )Interest expense:Interest-bearing transaction accounts
    
    
    
    
    
    
    
    
    
    
    Market rate savings accounts
    
    
    (179
    )
    
    
    215
    
    
    
    36Certificates of deposit and IRAs
    
    
    55
    
    
    
    6
    
    
    
    61Borrowings
    
    
    (2
    )
    
    
    
    
    
    
    (2
    )Total interest-bearing liabilities
    
    
    (126
    )
    
    
    221
    
    
    
    95Change in net interest income
    
    $
    115
    
    
    $
    (28
    )
    
    $
    87
 Interest Income
   Page 20




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
 Interest Expense
  Net Interest Margin
     Page 21




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
 Provision for Loan Losses
     Page 22




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
 Noninterest Income
    Noninterest Expenses
   Three months endedMarch 31,2008
    
    
    2007Collection and other real
estate owned expenses
    
    $
    31,000
    
    
    $
    16,000Loan expense
    
    
    8,000
    
    
    
    12,000Travel and entertainment
    
    
    11,000
    
    
    
    10,000Telephone
    
    
    7,000
    
    
    
    6,000Other
    
    
    15,000
    
    
    
    16,000$
    72,000
    
    
    $
    60,000
 Page 23




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2008
  LIQUIDITY AND CAPITAL RESOURCES
     Page 24




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 LIQUIDITY AND CAPITAL RESOURCES
  Minimum
    
    Minimumto be
    
    required forWestern Reserve Bank
    
    considered
    
    capitalMarch 31,
    
    December 31,
    
    well-
    
    Adequacy2008
    
    2007
    
    capitalized
    
    purposesTier 1 core
capital to
risk-weighted assets
    
    
    8.6
    %
    
    
    9.0
    %
    
    
    6.0
    %
    
    
    4.0
    %Total capital to
risk-weighted assets
    
    
    10.2
    %
    
    
    10.9
    %
    
    
    10.0
    %
    
    
    8.0
    %Tier 1 leverage ratio
    
    
    7.6
    %
    
    
    7.3
    %
    
    
    5.0
    %
    
    
    4.0
    %
   Page 25




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 LIQUIDITY AND CAPITAL RESOURCES
    Page 26




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 INTEREST RATE RISK
       Page 27




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2008
 CRITICAL ACCOUNTING POLICIES
  Page 28




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
 
 CONTROLS AND PROCEDURES
March 31, 2008
   Page 29




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
March 31, 2008
 
 PART IIOTHER INFORMATION
 Item 1.
    
    Legal Proceedings
    
    NoneItem 1a.
    
    Risk Factors
    
    Not applicableItem 2.
    
    Unregulated Sales of Equity Securities and Use of Proceeds
    
    NoneItem 3.
    
    Defaults Upon Senior Securities
    
    NoneItem 4.
    
    Submission of Matters to a Vote of Security Holders
    
    NoneItem 5.
    
    Other Information
    
    None
 Page 30




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
March 31, 2008
 ExhibitNo.
    
    Description of Exhibits3.1
    
    
    Amended and Restated
Articles of Incorporation of
Western Reserve Bancorp,
Inc. (incorporated by
reference to the Companys
Report on Form 10-QSB filed
with the Commission on
August 14, 2007)
    
    *3.2
    
    
    Code of Regulations of
Western Reserve Bancorp,
Inc. (incorporated by
reference to the Companys
Report on Form SB-2 filed
with the Commission on
December 29, 1997)
    
    *4
    
    
    Legend Placed on
Certificates Representing
Shares Issued pursuant to an
exemption from registration
under Section 3(a)(11) of
the Securities Act and Rule
147 thereunder (incorporated
by reference to the
Companys Report on Form
10-KSB filed with the
Commission on March 28,
2007)
    
    *10.1
    
    
    Employment Agreement of
Edward J. McKeon, Dated
December 15, 2005.
(incorporated by reference
to the Companys Report on
Form 8-K filed with the
Commission on December 19,
2005)
    
    *10.2
    
    
    Lease Agreement by and
between Michael Rose DBA
Washington Properties and
Western Reserve Bancorp,
Inc. (incorporated by
reference to the Companys
Report on Form 10-KSB filed
with the Commission on March
31, 1999)
    
    *10.3
    
    
    Western Reserve Bancorp,
Inc. 1998 Stock Option Plan,
Amended and Restated as of
June 21, 2007 (incorporated
by reference to the
Companys Report on Form 8-K
filed with the Commission on
June 26, 2007)
    
    *10.4
    
    
    Agreement by and between
Western Reserve Bancorp,
Inc. and Brian K. Harr,
dated June 18, 2001, as
amended February 20, 2002
(incorporated by reference
to the Companys Report on
Form 10-KSB filed with the
Commission on March 28,
2003)
    
    *10.5
    
    
    Agreement by and between
Western Reserve Bancorp,
Inc. and Cynthia A. Mahl,
dated June 18, 2001, as
amended February 20, 2002
(incorporated by reference
to the Companys Report on
Form 10-KSB filed with the
Commission on March 28,
2003)
    
    *10.6
    
    
    Loan Agreement between
Western Reserve Bancorp,
Inc. and TCF National Bank,
dated May 5, 2003
(incorporated by reference
to the Companys Report on
Form 10-QSB filed with the
Commission on August 14,
2003)
    
    *10.7
    
    
    Western Reserve Bank
Supplemental Executive
Retirement Plan, dated May
15, 2003 (incorporated by
reference to the Companys
Report on Form 10-QSB filed
with the Commission on
August 14, 2003)
    
    *10.8
    
    
    Western Reserve Bancorp,
Inc. Employee Stock Purchase
Plan (incorporated by
reference to the Companys
Report on Form 10-QSB filed
with the Commission on
November 14, 2003)
    
    *10.9
    
    
    Lease Agreement by and
between Western Reserve of
Brecksville, LLC and Western
Reserve Bank (incorporated
by reference to the
Companys Report on Form
10-KSB filed with the
Commission on March 30,
2005)
    
    *
 
 *
    
    Previously filed and incorporated herein by reference. Page 31




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
March 31, 2008
 Exhibit No.No.
    
    Description of Exhibits10.10
    
    
    First amendment to the Loan
Agreement by and between
Western Reserve Bancorp,
Inc. and TCF National Bank,
dated March 31, 2005
(incorporated by reference
to the Companys Report on
Form 10-QSB filed with the
Commission on May 16, 2005)
    
    *10.11
    
    
    Second amendment to the Loan
Agreement by and between
Western Reserve Bancorp,
Inc. and TCF National Bank,
dated June 30, 2005
(incorporated by reference
to the Companys Report on
Form 10-QSB filed with the
Commission on August 15,
2005)
    
    *10.12
    
    
    Western Reserve Bancorp,
Inc. and Western Reserve
Bank Incentive Compensation
Plan, Amended and Restated
as of January 18, 2007
(incorporated by reference
to the Companys Report on
Form 10-KSB filed with the
Commission on March 29,
2007)
    
    *10.13
    
    
    Third amendment to the Loan
Agreement by and between
Western Reserve Bancorp,
Inc. and TCF National Bank,
dated July 20, 2006
(incorporated by reference
to the Companys Report on
Form 10-QSB filed with the
Commission on November 14,
2006)
    
    *10.14
    
    
    Fourth Amendment to the Loan
Agreement by and between
Western Reserve Bancorp,
Inc. and TCF National Bank,
dated February 6, 2007
(incorporated by reference
to the Companys Report on
Form 10-QSB filed with the
Commission on August 14,
2007)
    
    *10.15
    
    
    Fifth Amendment to the Loan
Agreement and Waiver by and
between Western Reserve
Bancorp, Inc. and TCF
National Bank, dated June
21, 2007 (incorporated by
reference to the Companys
Report on Form 10-QSB filed
with the Commission on
August 14, 2007)
    
    *10.16
    
    
    Sixth Amendment to the Loan
Agreement by and between
Western Reserve Bancorp,
Inc. and TCF National Bank,
dated September 28, 2007
(incorporated by reference
to the Companys Report on
Form 10-QSB filed with the
Commission on November 14,
2007)
    
    *11
    
    
    Statement re: Computation of
Per Share Earnings
(incorporated by reference
to Note 1 of this Form 10-Q)
    
    *14
    
    
    Western Reserve Bancorp,
Inc. Code of Ethics and
Business Conduct
(incorporated by reference
to the Companys Report on
Form 10-KSB filed with the
Commission on March 30,
2004)
    
    *31.1
    
    
    Certification under Section
302 of the Sarbanes-Oxley
Act by Edward J. McKeon,
President and Chief
Executive Officer31.2
    
    
    Certification under Section
302 of the Sarbanes-Oxley
Act by Cynthia A. Mahl,
Senior Vice President and
Chief Financial Officer32.1
    
    
    Certification under Section
906 of the Sarbanes-Oxley
Act by Edward J. McKeon,
President and Chief
Executive Officer32.2
    
    
    Certification under Section
906 of the Sarbanes-Oxley
Act by Cynthia A. Mahl,
Senior Vice President and
Chief Financial Officer
 
 *
    
    Previously filed and incorporated herein by reference. Page 32




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 2008
 
 SIGNATURES
  Western Reserve Bancorp, Inc.Date: May 15, 2008
    By:
    /s/ Edward J. McKeonEdward J. McKeonPresident and Chief Executive Officer
(Principal Executive Officer)/s/ Cynthia A. MahlCynthia A. MahlSenior Vice President/Chief Financial Officer
(Principal Financial Officer) Page 33