##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended June 30, 2007
 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 
incorporation or organization)
    
    (IRS Employer
Identification No.)
 4015 Medina Road, Suite 100, P.O. Box 585, Medina, Ohio 44256
 (330) 764-3131
  þ o
 o þ
  Common Stock, no par value, $1.00 stated value
 575,759 common shares
 o þ




---



##### 



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
Quarter ended June 30, 2007
 PagePART IFinancial InformationITEM 1
    
    FINANCIAL STATEMENTSConsolidated Balance Sheets as of June 30, 2007 and December 31, 2006
    
    3Consolidated Statements of Income for the three and six months ended June 30, 2007 and 2006
    
    4Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2007 and 2006
    
    5Consolidated Statements of Cash Flows for the six months ended June 30, 2007 and 2006
    
    6Notes to Consolidated Financial Statements
    
    7ITEM 2
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION  AND RESULTS OF OPERATIONS
    
    14ITEM 3
    
    CONTROLS AND PROCEDURES
    
    29PART IIOther Information
    
    30SIGNATURES
    
    34EX-3.1EX-4EX-10.14EX-10.15EX-31.1EX-31.2EX-32.1EX-32.2
  Page 2




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(Unaudited)June 30,
    
    
    Dec. 31,2007
    
    
    2006AssetsCash and due from financial institutions
    
    $
    3,435,976
    
    
    $
    2,923,863Federal funds sold and other short-term funds
    
    
    19,350,795
    
    
    
    15,172,614Cash and cash equivalents
    
    
    22,786,771
    
    
    
    18,096,477Interest-bearing deposits in other banks
    
    
    
    
    
    
    2,200,000Securities available for sale
    
    
    10,128,647
    
    
    
    10,964,783Restricted stock
    
    
    593,400
    
    
    
    568,800Loans
    
    
    117,172,625
    
    
    
    110,149,244Allowance for loan losses
    
    
    (1,663,031
    )
    
    
    (1,588,217
    )Loans, net
    
    
    115,509,594
    
    
    
    108,561,027Premises and equipment, net
    
    
    1,260,563
    
    
    
    1,237,761Bank owned life insurance
    
    
    1,116,780
    
    
    
    1,092,473Foreclosed assets
    
    
    
    
    
    
    265,000Accrued interest receivable and other assets
    
    
    1,300,591
    
    
    
    1,129,092Total Assets
    
    $
    152,696,346
    
    
    $
    144,115,413Liabilities and Shareholders EquityDepositsNoninterest-bearing
    
    $
    14,597,631
    
    
    $
    16,115,340Interest-bearing
    
    
    121,019,128
    
    
    
    111,143,783Total deposits
    
    
    135,616,759
    
    
    
    127,259,123Federal Home Loan Bank advances
    
    
    3,500,000
    
    
    
    3,500,000Accrued interest payable and other liabilities
    
    
    339,685
    
    
    
    424,897Total Liabilities
    
    
    139,456,444
    
    
    
    131,184,020Shareholders EquityCommon stock, without par value, $1 stated value:1,500,000 shares authorized; 575,759 and
573,277 shares issued and outstanding as of
June 30, 2007 and December 31, 2006
    
    
    575,759
    
    
    
    573,277Additional paid-in capital
    
    
    9,633,907
    
    
    
    9,572,861Retained earnings
    
    
    3,188,943
    
    
    
    2,770,693Accumulated other comprehensive income (loss)
    
    
    (158,707
    )
    
    
    14,562Total Shareholders Equity
    
    
    13,239,902
    
    
    
    12,931,393Total Liabilities and Shareholders Equity
    
    $
    152,696,346
    
    
    $
    144,115,413
  Page 3




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Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Interest and dividend incomeLoans, including fees
    
    $
    2,316,908
    
    
    $
    2,249,593
    
    
    $
    4,542,447
    
    
    $
    4,372,866Securities:Taxable
    
    
    79,753
    
    
    
    67,058
    
    
    
    162,345
    
    
    
    137,272Tax exempt
    
    
    43,085
    
    
    
    6,405
    
    
    
    86,116
    
    
    
    11,642Dividends on restricted stock
    
    
    8,925
    
    
    
    7,714
    
    
    
    17,315
    
    
    
    15,425Federal funds sold and other
short-term funds
    
    
    245,230
    
    
    
    91,012
    
    
    
    439,406
    
    
    
    150,3612,693,901
    
    
    
    2,421,782
    
    
    
    5,247,629
    
    
    
    4,687,566Interest expenseDeposits
    
    
    1,298,480
    
    
    
    985,841
    
    
    
    2,501,621
    
    
    
    1,870,644Borrowings
    
    
    31,650
    
    
    
    31,650
    
    
    
    62,953
    
    
    
    62,9531,330,130
    
    
    
    1,017,491
    
    
    
    2,564,574
    
    
    
    1,933,597Net interest income
    
    
    1,363,771
    
    
    
    1,404,291
    
    
    
    2,683,055
    
    
    
    2,753,969Provision (credit) for loan losses
    
    
    2,000
    
    
    
    69,820
    
    
    
    (2,600
    )
    
    
    (60,780
    )Net interest income after
provision (credit) for loan losses
    
    
    1,361,771
    
    
    
    1,334,471
    
    
    
    2,685,655
    
    
    
    2,814,749Noninterest incomeService charges on deposit accounts
    
    
    38,611
    
    
    
    45,956
    
    
    
    73,765
    
    
    
    88,186Net gains on sales of loans
    
    
    4,882
    
    
    
    0
    
    
    
    18,335
    
    
    
    0Other
    
    
    73,883
    
    
    
    57,074
    
    
    
    110,573
    
    
    
    96,293117,376
    
    
    
    103,030
    
    
    
    202,673
    
    
    
    184,479Noninterest expenseSalaries and employee benefits
    
    
    536,171
    
    
    
    522,233
    
    
    
    1,068,516
    
    
    
    1,058,447Premises and equipment, net
    
    
    218,536
    
    
    
    206,660
    
    
    
    433,560
    
    
    
    406,817Data processing
    
    
    84,495
    
    
    
    82,102
    
    
    
    170,988
    
    
    
    165,030Directors fees
    
    
    66,475
    
    
    
    31,000
    
    
    
    108,675
    
    
    
    61,450Professional fees
    
    
    51,359
    
    
    
    35,612
    
    
    
    96,118
    
    
    
    78,217Marketing and advertising
    
    
    39,482
    
    
    
    32,566
    
    
    
    67,120
    
    
    
    53,571FDIC insurance
    
    
    34,686
    
    
    
    3,515
    
    
    
    48,210
    
    
    
    7,113Taxes other than income and payroll
    
    
    34,088
    
    
    
    29,924
    
    
    
    70,216
    
    
    
    62,370Community and shareholder relations
and contributions
    
    
    35,058
    
    
    
    26,793
    
    
    
    57,472
    
    
    
    53,595Supplies, printing and postage
    
    
    17,517
    
    
    
    18,697
    
    
    
    36,325
    
    
    
    37,209Other
    
    
    82,169
    
    
    
    77,934
    
    
    
    141,796
    
    
    
    132,8051,200,036
    
    
    
    1,067,036
    
    
    
    2,298,996
    
    
    
    2,116,624Income before income taxes
    
    
    279,111
    
    
    
    370,465
    
    
    
    589,332
    
    
    
    882,604Income tax expense
    
    
    80,815
    
    
    
    123,091
    
    
    
    171,082
    
    
    
    295,692Net income
    
    $
    198,296
    
    
    $
    247,374
    
    
    $
    418,250
    
    
    $
    586,912Average shares outstanding (basic)
    
    
    575,242
    
    
    
    571,899
    
    
    
    574,266
    
    
    
    571,784Average shares outstanding (diluted)
    
    
    604,222
    
    
    
    594,319
    
    
    
    603,219
    
    
    
    593,423Basic earnings per share
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.73
    
    
    $
    1.03Diluted earnings per share
    
    $
    0.33
    
    
    $
    0.42
    
    
    $
    0.69
    
    
    $
    0.99
  Page 4




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Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Net income
    
    $
    198,296
    
    
    $
    247,374
    
    
    $
    418,250
    
    
    $
    586,912Other comprehensive income (loss), net of tax:Unrealized gains/(losses) on securities
arising during the
period
    
    
    (161,333
    )
    
    
    (11,297
    )
    
    
    (173,269
    )
    
    
    (19,870
    )Comprehensive income
    
    $
    36,963
    
    
    $
    236,077
    
    
    $
    244,981
    
    
    $
    567,042
  Page 5




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Six months ended June 30,2007
    
    
    2006Cash flows from operating activitiesNet income
    
    $
    418,250
    
    
    $
    586,912Adjustments to reconcile net income
to net cash from operating activities:Provision (credit) for loan losses
    
    
    (2,600
    )
    
    
    (60,780
    )Depreciation
    
    
    94,466
    
    
    
    85,050Net amortization (accretion) of securities
    
    
    (8,779
    )
    
    
    (101,091
    )Stock-based compensation
    
    
    16,478
    
    
    
    1,466Loans originated for sale
    
    
    (690,000
    )
    
    
    Proceeds from sales of loan originations
    
    
    708,335
    
    
    
    Gains on sales of loans
    
    
    (18,335
    )
    
    
    Gain on sale of other real estate owned
    
    
    (2,285
    )
    
    
    Federal Home Loan Bank stock dividends
    
    
    
    
    
    
    (8,500
    )Increase in cash surrender value of life insurance
    
    
    (24,307
    )
    
    
    (9,956
    )Net change in other assets and other liabilities
    
    
    (167,451
    )
    
    
    (186,559
    )Net cash from operating activities
    
    
    323,772
    
    
    
    306,542Cash flows from investing activitiesAvailable for sale securities:Purchases
    
    
    
    
    
    
    (2,001,256
    )Maturities, repayments and calls
    
    
    582,386
    
    
    
    5,341,763Purchase of Federal Home Loan Bank stock
    
    
    (24,600
    )
    
    
    (13,800
    )Net decrease in interest-bearing deposits in other banks
    
    
    2,200,000
    
    
    
    Net (increase) in loans
    
    
    (6,945,967
    )
    
    
    (2,080,477
    )Purchases of premises and equipment
    
    
    (117,268
    )
    
    
    (8,849
    )Proceeds from sale of other real estate owned
    
    
    267,285Net cash from investing activities
    
    
    (4,038,164
    )
    
    
    1,237,381Cash flows from financing activitiesNet increase in deposits
    
    
    8,357,636
    
    
    
    7,450,709Proceeds from issuance of common stock
under Employee Stock Purchase Plan
    
    
    10,924
    
    
    
    10,038Proceeds and income tax benefit from exercise of stock options
    
    
    36,126Net cash from financing activities
    
    
    8,404,686
    
    
    
    7,460,747Change in cash and cash equivalents
    
    
    4,690,294
    
    
    
    9,004,670Cash and cash equivalents at beginning of period
    
    
    18,096,477
    
    
    
    7,343,006Cash and cash equivalents at end of period
    
    $
    22,786,771
    
    
    $
    16,347,676Supplemental cash flow information:Interest paid
    
    $
    2,592,176
    
    
    $
    1,977,793Income taxes paid
    
    
    205,000
    
    
    
    425,000Supplemental disclosure of noncash investing activities:Non cash transfer from loans to loans originated for sale
    
    $
    
    
    
    $
    306,012Non cash transfer from loans to other real estate owned
    
    
    
    
    
    
    130,000Acquisition of real estate via account payable
    
    
    
    
    
    
    135,000
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WESTERN RESERVE BANCORP, INC.  NOTES TO FINANCIAL STATEMENTS
 June 30, 2007
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
        Page 7




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Numerator:Net income
    
    $
    198,296
    
    
    $
    247,374
    
    
    $
    418,250
    
    
    $
    586,912Denominator:Denominator for basic
earnings per share
weighted average shares
    
    
    575,242
    
    
    
    571,899
    
    
    
    574,266
    
    
    
    571,784Effect of dilutive securities:Nonqualified stock options
    
    
    28,980
    
    
    
    22,420
    
    
    
    28,953
    
    
    
    21,639Denominator for diluted
earnings per share
    
    
    604,222
    
    
    
    594,319
    
    
    
    603,219
    
    
    
    593,423Basic earnings per share
    
    $
    0.34
    
    
    $
    0.43
    
    
    $
    0.73
    
    
    $
    1.03Diluted earnings per share
    
    $
    0.33
    
    
    $
    0.42
    
    
    $
    0.69
    
    
    $
    0.99
  Page 8




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Accounting
for Uncertainty in Income Taxes
 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.
 Page 9




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
  The Fair Value Option for Financial Assets and
Financial Liabilities.
 NOTE 2  LOANS
  June 30,
    
    
    December 31,2007
    
    
    2006Commercial real estate
    
    $
    68,894,139
    
    
    $
    66,570,136Commercial business
    
    
    34,076,731
    
    
    
    28,987,234Commercial construction
    
    
    2,052,089
    
    
    
    2,214,763Home equity lines of credit
    
    
    6,801,031
    
    
    
    7,860,647Residential mortgage
and construction
    
    
    964,739
    
    
    
    1,226,016Consumer installment
    
    
    4,352,885
    
    
    
    3,261,615Other
    
    
    31,011
    
    
    
    28,833$
    117,172,625
    
    
    $
    110,149,244
 Page 10




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
 NOTE 2  LOANS
  Three months ended June 30,
    
    
    Six months ended June 30,2007
    
    
    2006
    
    
    2007
    
    
    2006Beginning balance
    
    $
    1,626,316
    
    
    $
    1,606,054
    
    
    $
    1,588,217
    
    
    $
    1,541,654Loans charged off
    
    
    
    
    
    
    (82,225
    )
    
    
    
    
    
    
    (82,225
    )Recoveries
    
    
    34,715
    
    
    
    10,000
    
    
    
    77,414
    
    
    
    205,000Provision
(credit) for loan
losses
    
    
    2,000
    
    
    
    69,820
    
    
    
    (2,600
    )
    
    
    (60,780
    )Ending balance
    
    $
    1,663,031
    
    
    $
    1,603,649
    
    
    $
    1,663,031
    
    
    $
    1,603,649
  NOTE 3  DEPOSITS
  June 30,
    
    
    December 31,2007
    
    
    2006Noninterest-bearing demand
    
    $
    14,597,631
    
    
    $
    16,115,340Interest-bearing demand
    
    
    6,829,626
    
    
    
    7,859,550Market Rate Savings
    
    
    72,752,315
    
    
    
    58,528,182Time under $100,000
    
    
    24,445,459
    
    
    
    26,049,710Time $100,000 and over
    
    
    16,991,727
    
    
    
    18,706,341$
    135,616,758
    
    
    $
    127,259,123
  Page 11




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
 NOTE 4FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
  June 30,
    
    
    December 31,2007
    
    
    2006Maturing March 2009, fixed rate advance at 3.25%
    
    $
    2,500,000
    
    
    $
    2,500,000Maturing April 2010, fixed rate advance at 4.57%
    
    
    1,000,000
    
    
    
    1,000,000$
    3,500,000
    
    
    $
    3,500,000
     Page 12




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 2007
 NOTE 5  STOCK COMPENSATION PLAN
  Six months ended
    
    Six months endedJune 30, 2007
    
    June 30, 2006Weighted Average
    
    
    
    
    
    Weighted AverageShares
    
    Exercise Price
    
    Shares
    
    Exercise PriceOptions outstanding, beginning of
period
    
    
    113,136
    
    
    $
    18.53
    
    
    
    114,140
    
    
    $
    18.52Forfeited
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Exercised
    
    
    (1,625
    )
    
    
    17.48
    
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    111,511
    
    
    $
    18.54
    
    
    
    114,140
    
    
    $
    18.52Options exercisable, end of period
    
    
    110,730
    
    
    $
    18.50
    
    
    
    112,967
    
    
    $
    18.47
   Page 13




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##### Table of Contents



WESTERN
RESERVE BANCORP, INC.  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 OVERVIEW
   FINANCIAL CONDITION
 Assets
    Page 14




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WESTERN RESERVE BANCORP, INC  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 FINANCIAL CONDITION
      Page 15




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 FINANCIAL CONDITION
  Liabilities
     Page 16




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 FINANCIAL CONDITION
 Shareholders Equity
  RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
 Overview
  Net Interest Income
   Page 17




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
  Six months ended June 30,2007
    
    
    2006Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/($ in thousands)
    
    Balance
    
    
    Expense
    
    
    Cost
    
    
    Balance
    
    
    Expense
    
    
    CostLoans
    
    $
    114,455
    
    
    $
    4,542
    
    
    
    8.00
    %
    
    $
    112,627
    
    
    $
    4,373
    
    
    
    7.83
    %Investment securities-taxable
    
    
    6,277
    
    
    
    162
    
    
    
    5.22
    %
    
    
    6,484
    
    
    
    137
    
    
    
    4.27
    %Investment securities-tax exempt
    
    
    4,460
    
    
    
    115
    
    
    
    5.19
    %
    
    
    691
    
    
    
    16
    
    
    
    4.54
    %Restricted stock
    
    
    580
    
    
    
    17
    
    
    
    6.02
    %
    
    
    545
    
    
    
    16
    
    
    
    5.70
    %Federal funds sold and other
short-term funds
    
    
    16,854
    
    
    
    440
    
    
    
    5.26
    %
    
    
    6,443
    
    
    
    150
    
    
    
    4.71
    %Total interest earning assets
    
    
    142,626
    
    
    
    5,276
    
    
    
    7.46
    %
    
    
    126,790
    
    
    
    4,692
    
    
    
    7.46
    %Noninterest earning assets
    
    
    4,588
    
    
    
    
    
    
    
    
    
    
    
    3,716Total Assets
    
    $
    147,214
    
    
    
    
    
    
    
    
    
    
    $
    130,506Interest-bearing transaction accounts
    
    $
    6,756
    
    
    
    34
    
    
    
    1.00
    %
    
    $
    7,237
    
    
    
    36
    
    
    
    1.00
    %Market rate savings
    
    
    66,186
    
    
    
    1,539
    
    
    
    4.69
    %
    
    
    49,099
    
    
    
    970
    
    
    
    3.98
    %Certificate of deposit and IRAs
    
    
    42,242
    
    
    
    928
    
    
    
    4.43
    %
    
    
    45,061
    
    
    
    865
    
    
    
    3.87
    %Borrowings
    
    
    3,500
    
    
    
    63
    
    
    
    3.63
    %
    
    
    3,500
    
    
    
    63
    
    
    
    3.63
    %Total interest bearing liabilities
    
    
    118,684
    
    
    
    2,564
    
    
    
    4.36
    %
    
    
    104,897
    
    
    
    1,934
    
    
    
    3.72
    %Noninterest bearing liabilities
    
    
    15,419
    
    
    
    
    
    
    
    
    
    
    
    13,704Shareholders equity
    
    
    13,111
    
    
    
    
    
    
    
    
    
    
    
    11,905Total Liabilities and Shareholders Equity
    
    $
    147,214
    
    
    
    
    
    
    
    
    
    
    $
    130,506Net interest income
    
    
    
    
    
    
    2,712
    
    
    
    
    
    
    
    
    
    
    
    2,758Tax equivalent adjustment
    
    
    
    
    
    
    (29
    )
    
    
    
    
    
    
    
    
    
    
    (4
    )Net interest income per financial statements
    
    
    
    
    
    $
    2,683
    
    
    
    
    
    
    
    
    
    
    $
    2,754Net yield on average earning assets
    
    
    
    
    
    
    
    
    
    
    3.83
    %
    
    
    
    
    
    
    
    
    
    
    4.39
    %
 Page 18




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
   Six months endedJune 30, 2007 vs. 2006Increase (Decrease) inNet Interest Income Due to($ in thousands)
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans
    
    $
    28
    
    
    $
    141
    
    
    $
    169Investment securities-taxable
    
    
    (5
    )
    
    
    30
    
    
    
    25Investment securities-tax exempt
    
    
    97
    
    
    
    2
    
    
    
    99Restricted stock
    
    
    1
    
    
    
    
    
    
    
    1Federal funds sold and other short-term funds
    
    
    270
    
    
    
    20
    
    
    
    290Total interest-earning assets
    
    
    391
    
    
    
    193
    
    
    
    584Interest expense:Interest-bearing transaction accounts
    
    
    2
    
    
    
    
    
    
    
    2Market rate savings accounts
    
    
    (377
    )
    
    
    (192
    )
    
    
    (569
    )Certificates of deposit and IRAs
    
    
    55
    
    
    
    (118
    )
    
    
    (63
    )Borrowings
    
    
    
    
    
    
    
    
    
    
    Total interest-bearing liabilities
    
    
    (320
    )
    
    
    (310
    )
    
    
    (630
    )Change in net interest income
    
    $
    71
    
    
    $
    (117
    )
    
    $
    (46
    )
 Interest Income
   Page 19




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2007
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
 Interest Expense
   Net Interest Margin
    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
June 30, 2007
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
 Provision for Loan Losses
     Noninterest Income
  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
June 30, 2007
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
    Noninterest Expenses
     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
June 30, 2007
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2007
   Six months endedJune 30,2007
    
    
    2006Loan expenses
    
    $
    73,000
    
    
    $
    33,000Insurance
    
    
    16,000
    
    
    
    18,000Travel and entertainment
    
    
    22,000
    
    
    
    20,000Telephone
    
    
    12,000
    
    
    
    12,000Other
    
    
    19,000
    
    
    
    50,000$
    142,000
    
    
    $
    133,000
   RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2007
  Net Interest Income
  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
June 30, 2006
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2007
   Provision for Loan Losses
  Noninterest Income
  Noninterest Expense
  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
June 30, 2006
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2007
  Three months endedJune 30,2007
    
    
    2006Loan expenses
    
    $
    45,000
    
    
    $
    20,000Insurance
    
    
    9,000
    
    
    
    10,000Travel and entertainment
    
    
    12,000
    
    
    
    10,000Telephone
    
    
    6,000
    
    
    
    8,000Other
    
    
    10,000
    
    
    
    30,000$
    82,000
    
    
    $
    78,000
 LIQUIDITY AND CAPITAL RESOURCES
      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
June 30, 2007
 LIQUIDITY AND CAPITAL RESOURCES
   Minimum
    
    Minimumto be
    
    requiredWestern Reserve Bank
    
    considered
    
    for capitalJune 30,
    
    December 31,
    
    well-
    
    adequacy2007
    
    2006
    
    capitalized
    
    purposesTier 1 core capital to
risk-weighted assets
    
    
    8.9
    %
    
    
    9.0
    %
    
    
    6.0
    %
    
    
    4.0
    %Total capital to
risk-weighted assets
    
    
    10.9
    %
    
    
    11.3
    %
    
    
    10.0
    %
    
    
    8.0
    %Tier 1 leverage ratio
    
    
    7.4
    %
    
    
    7.5
    %
    
    
    5.0
    %
    
    
    4.0
    %
    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
June 30, 2007
 LIQUIDITY AND CAPITAL RESOURCES
     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
June 30, 2007
 INTEREST RATE SENSITIVITY
     CRITICAL ACCOUNTING POLICIES
  Page 28




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
CONTROLS AND PROCEDURES
June 30, 2007
   Page 29




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
June 30, 2007
 
 PART IIOTHER INFORMATION
         For
    
    Withheld
    
    AbstainRoland H. Bauer
    
    
    405,516
    
    
    
    3,828
    
    
    
    0Bijay K. Jayaswal, M.D.
    
    
    404,266
    
    
    
    5,078
    
    
    
    0P.M. Jones
    
    
    405,516
    
    
    
    3,828
    
    
    
    0Ray E. Laribee
    
    
    405,204
    
    
    
    4,140
    
    
    
    0
 Page 30




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
June 30, 2007
 PART IIOTHER INFORMATION
(continued)
   For
    
    Against
    
    Abstain/Broker Non-VotesAmendment to the
Articles of
Incorporation to
increase the number of
authorized common
shares.
    
    
    352,629
    
    
    
    6,315
    
    
    
    4,447/45,953
  Page 31




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
June 30, 2007
 Exhibit No.
    
    Description of Exhibits3.1
    
    Amended and Restated Articles of Incorporation of Western Reserve Bancorp, Inc.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 thereunder10.1
    
    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 32




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
June 30, 2007
 Exhibit 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,
200710.15
    
    Fifth Amendment to the Loan
Agreement and Waiver by and
between Western Reserve Bancorp,
Inc. and TCF National Bank, dated
June 21, 200711
    
    Statement re: Computation of Per
Share Earnings (incorporated by
reference to Note 1 of this Form
10-QSB)
    
    *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 33




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
Quarter ended June 30, 2007
 
 SIGNATURES
  Western Reserve Bancorp, Inc.Date: August 14, 2007
    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 34