##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended March 31, 2009
 o
    
    Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
 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
   Registrants telephone number, including area code
 þ o
 Yes þ No o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ




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##### 



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 2009
 PagePART IFinancial InformationITEM 1 FINANCIAL STATEMENTSConsolidated Balance Sheets as of March 31, 2009
and December 31, 2008
    
    
    3Consolidated Statements of Income for the three months
ended March 31, 2009 and 2008
    
    
    4Consolidated Statements of Comprehensive Income for the three
months ended March 31, 2009 and 2008
    
    
    5Consolidated Statements of Cash Flows for the three months ended
March 31, 2009 and 2008
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    15ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
    
    
    N/AITEM 4T CONTROLS AND PROCEDURES
    
    
    28PART IIOther Information
    
    
    29SIGNATURES
    
    
    32Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




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WESTERN RESERVE BANCORP, INC.
 
 CONSOLIDATED BALANCE SHEETS
 March 31,
    
    
    Dec. 31,2009
    
    
    2008(Unaudited)ASSETSCash and due from financial institutions
    
    $
    2,808,162
    
    
    $
    2,302,786Interest-bearing deposits in other financial institutions
    
    
    12,489,487
    
    
    
    18,908,677Federal funds sold and other short-term funds
    
    
    180,000
    
    
    
    91,000Cash and cash equivalents
    
    
    15,477,649
    
    
    
    21,302,463Interest-bearing deposits in other banks
    
    
    3,000,000
    
    
    
    Securities available for sale
    
    
    10,059,423
    
    
    
    10,214,322Restricted stock
    
    
    781,900
    
    
    
    728,400Loans
    
    
    150,945,083
    
    
    
    143,625,431Allowance for loan losses
    
    
    (1,824,551
    )
    
    
    (1,743,470
    )Loans, net
    
    
    149,120,532
    
    
    
    141,881,961Premises and equipment, net
    
    
    1,016,244
    
    
    
    1,006,081Bank owned life insurance
    
    
    2,257,646
    
    
    
    2,231,665Other real estate owned
    
    
    290,000
    
    
    
    290,000Accrued interest receivable and other assets
    
    
    1,607,617
    
    
    
    1,457,347$
    183,611,011
    
    
    $
    179,112,239LIABILITIES AND SHAREHOLDERS EQUITYDepositsNoninterest-bearing
    
    $
    19,167,645
    
    
    $
    16,942,194Interest-bearing
    
    
    145,050,969
    
    
    
    139,775,662Total deposits
    
    
    164,218,614
    
    
    
    156,717,856Other borrowings
    
    
    500,000
    
    
    
    500,000Federal Home Loan Bank advances
    
    
    3,400,000
    
    
    
    6,500,000Accrued interest payable and other liabilities
    
    
    690,139
    
    
    
    683,663Total Liabilities
    
    
    168,808,753
    
    
    
    164,401,519Shareholders EquityCommon stock, no par value, $1 stated value
1,500,000 shares authorized, 583,947 and
583,330 shares issued and outstanding
as of
March 31, 2009 and December 31, 2008
    
    
    583,947
    
    
    
    583,330Additional paid-in capital
    
    
    9,921,531
    
    
    
    9,912,293Retained earnings
    
    
    4,071,878
    
    
    
    4,041,215Accumulated other comprehensive income
    
    
    224,902
    
    
    
    173,882Total Shareholders Equity
    
    
    14,802,258
    
    
    
    14,710,720$
    183,611,011
    
    
    $
    179,112,239
   3




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF INCOME
  Three Months Ended March 31,2009
    
    
    2008Interest and dividend incomeLoans, including fees
    
    $
    1,941,754
    
    
    $
    2,279,083Securities:Taxable
    
    
    70,737
    
    
    
    80,511Tax exempt
    
    
    41,545
    
    
    
    43,450Dividends on restricted stock
    
    
    9,127
    
    
    
    7,997Federal funds sold and other
short-term funds
    
    
    19,311
    
    
    
    135,2892,082,474
    
    
    
    2,546,330Interest expenseDeposits
    
    
    718,159
    
    
    
    1,106,768Borrowings
    
    
    55,167
    
    
    
    32,703773,326
    
    
    
    1,139,471Net interest income
    
    
    1,309,148
    
    
    
    1,406,859Provision for loan losses
    
    
    138,000
    
    
    
    97,900Net interest income after provision for loan losses
    
    
    1,171,148
    
    
    
    1,308,959Noninterest incomeService charges on deposit accounts
    
    
    49,081
    
    
    
    40,111Net gains on sales of loans
    
    
    9,043
    
    
    
    Other
    
    
    58,326
    
    
    
    39,030116,450
    
    
    
    79,141Noninterest expenseSalaries and employee benefits
    
    
    616,671
    
    
    
    610,998Premises and equipment, net
    
    
    224,464
    
    
    
    232,320Data processing
    
    
    93,907
    
    
    
    92,573Professional fees
    
    
    56,656
    
    
    
    55,841Taxes other than income and payroll
    
    
    48,494
    
    
    
    39,204Directors fees
    
    
    33,800
    
    
    
    37,475FDIC insurance
    
    
    58,934
    
    
    
    26,886Marketing and advertising
    
    
    27,637
    
    
    
    23,099Community relations and contributions
    
    
    12,538
    
    
    
    24,178Supplies, printing and postage
    
    
    20,970
    
    
    
    18,455Other
    
    
    78,506
    
    
    
    72,2511,272,577
    
    
    
    1,233,280Income before income taxes
    
    
    15,021
    
    
    
    154,820Income tax (benefit) expense
    
    
    (15,642
    )
    
    
    37,258Net income
    
    $
    30,663
    
    
    $
    117,562Earnings per share:Basic
    
    $
    0.05
    
    
    $
    0.20Diluted
    
    $
    0.05
    
    
    $
    0.20Average shares outstanding (basic)
    
    
    583,337
    
    
    
    580,892Average shares outstanding (diluted)
    
    
    583,337
    
    
    
    597,859
   4




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WESTERN
RESERVE BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
 Three Months Ended March 31,2009
    
    
    2008Net income
    
    $
    30,663
    
    
    $
    117,562Other comprehensive income, net of tax:Unrealized gains on securities
arising during the
period
    
    
    51,020
    
    
    
    92,986Comprehensive income
    
    $
    81,683
    
    
    $
    210,548
   5




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
 
 CONSOLIDATED STATEMENTS OF CASH FLOWS
  Three Months Ended March 31,2009
    
    
    2008Cash flows from operating activitiesNet income
    
    $
    30,663
    
    
    $
    117,562Adjustments to reconcile net income to net cash
from operating activities:Provision for loan losses
    
    
    138,000
    
    
    
    97,900Depreciation
    
    
    46,312
    
    
    
    47,530Net amortization (accretion) of securities
    
    
    (3,463
    )
    
    
    (4,074
    )Stock-based compensation
    
    
    600
    
    
    
    870Loans originated for sale
    
    
    (489,800
    )
    
    
    Proceeds from sales of loan originations
    
    
    498,843
    
    
    
    Gains on sales of loans
    
    
    (9,043
    )
    
    
    Federal Home Loan Bank stock dividends
    
    
    
    
    
    
    (4,600
    )Increase in cash surrender value of bank owned life insurance
    
    
    (25,981
    )
    
    
    (12,728
    )Net change in other assets and other liabilities
    
    
    (170,076
    )
    
    
    (130,611
    )Net cash from operating activities
    
    
    16,055
    
    
    
    111,849Cash flows from investing activitiesAvailable for sale securities:Purchases
    
    
    
    
    
    
    (2,020,806
    )Maturities, repayments and calls
    
    
    235,664
    
    
    
    1,365,598Purchase of restricted stock
    
    
    (53,500
    )
    
    
    (31,900
    )Net (increase) decrease in interest-bearing deposits in other banks
    
    
    (3,000,000
    )
    
    
    (3,000,000
    )Net (increase) decrease in loans
    
    
    (7,376,571
    )
    
    
    (5,612,019
    )Purchase of auto loan portfolio
    
    
    
    
    
    
    (4,693,630
    )Purchases of premises and equipment
    
    
    (56,475
    )
    
    
    (31,595
    )Net cash from investing activities
    
    
    (10,250,882
    )
    
    
    (14,024,352
    )Cash flows from financing activitiesNet increase in deposits
    
    
    7,500,758
    
    
    
    (2,196,453
    )Net borrowings on line of credit
    
    
    
    
    
    
    3,000,000Proceeds from FHLB advances
    
    
    
    
    
    
    2,000,000Repayments of FHLB advances
    
    
    (3,100,000
    )
    
    
    Proceeds from issuance of common stock under ESPP
    
    
    9,255
    
    
    
    4,792Proceeds and income tax benefit from exercise of stock options
    
    
    
    
    
    
    57,418Net cash from financing activities
    
    
    4,410,013
    
    
    
    2,865,757Change in cash and cash equivalents
    
    
    (5,824,814
    )
    
    
    (11,046,746
    )Cash and cash equivalents at beginning of period
    
    
    21,302,463
    
    
    
    23,818,528Cash and cash equivalents at end of period
    
    $
    15,477,649
    
    
    $
    12,771,782Supplemental cash flow information:Interest paid
    
    $
    783,509
    
    
    $
    1,163,753Income taxes paid
    
    
    
    
    
    
    Supplemental disclosure of noncash investing activities:Non cash transfer from loans to other real estate owned
    
    $
    
    
    
    $
    Non cash transfer from other real estate owned to other liabilities
    
    
    
    
    
    
    
   6




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WESTERN RESERVE BANCORP, INC.
 
 NOTES TO FINANCIAL STATEMENTS
 March 31, 2009
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Organization :
  Nature of Business :
 Principles of Consolidation :
 Use of Estimates :
 Basis of Presentation :
  7




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 Earnings per Common Share :
 Three Months Ended March 31,2009
    
    
    2008Numerator:Net income
    
    $
    30,663
    
    
    $
    117,562Denominator:Denominator for basic earnings per
shareweighted-average shares
    
    
    583,337
    
    
    
    580,892Effect of dilutive securities:Nonqualified stock options
    
    
    
    
    
    
    16,967Denominator for diluted earnings
per share
    
    
    583,337
    
    
    
    597,859Basic earnings per share
    
    $
    0.05
    
    
    $
    0.20Diluted earnings per share
    
    $
    0.05
    
    
    $
    0.20
  Income Taxes :
 Reclassifications :
 Adoption of New Accounting Standards :
  8




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
   Recently Issued but not yet effective Accounting Pronouncements
  9




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
  FAS 124-2.
 NOTE 2  LOANS
  Three Months Ended March 31,2009
    
    
    2008Beginning balance
    
    $
    1,743,470
    
    
    $
    1,605,766Loans charged off
    
    
    (57,939
    )
    
    
    (781
    )Recoveries
    
    
    1,020
    
    
    
    2,206Provision for loan losses
    
    
    138,000
    
    
    
    97,900$
    1,824,551
    
    
    $
    1,705,091
   10




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
  March 31,
    
    
    December 31,2009
    
    
    2008Loans with no allocated allowance
for loan losses
    
    $
    1,396,535
    
    
    $
    1,108,795Loans with allocated allowance
for loan losses
    
    
    731,555
    
    
    
    393,835$
    2,128,090
    
    
    $
    1,502,630Amount of the allowance for
loan losses allocated
    
    $
    90,000
    
    
    $
    69,766
 NOTE 3  DEPOSITS
  NOTE
4  FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
    11




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
 NOTE
5  STOCK COMPENSATION PLAN
  Three Months EndedMarch 31, 2009Weighted AverageShares
    
    
    Exercise PriceOptions outstanding, beginning of period
    
    
    106,136
    
    
    $
    18.70Forfeited
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Granted
    
    
    
    
    
    
    Options outstanding, end of period
    
    
    106,136
    
    
    $
    18.70Options exercisable, end of period
    
    
    104,511
    
    
    $
    18.57
  NOTE
6  FAIR VALUE
       12




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
 NOTE
6  FAIR VALUE
   Fair Value Measurements UsingQuoted Prices in
    
    
    SignificantActive Markets
    
    
    Other
    
    
    Significantfor Identical
    
    
    Observable
    
    
    UnobservableAssets
    
    
    Inputs
    
    
    Inputs(Level One)
    
    
    (Level Two)
    
    
    (Level Three)March 31, 2009Assets and liabilities measured at fair value
on a recurring basis:Available for sale securities
    
    $
    
    
    
    $
    10,059,423
    
    
    $
    Assets and liabilities measured at fair value
on a nonrecurring basis:Impaired loans
    
    
    
    
    
    
    
    
    
    
    641,555December 31, 2008Assets and liabilities measured at fair value
on a recurring basis:Available for sale securities
    
    
    
    
    
    
    10,214,322
    
    
    
    Assets and liabilities measured at fair value
on a nonrecurring basis:Impaired loans
    
    
    
    
    
    
    
    
    
    
    324,069
   13




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
March 31, 2009
 NOTE
7  PARTICIPATION IN THE TREASURY CAPITAL PURCHASE PROGRAM
  NOTE
8  FEDERAL DEPOSIT INSURANCE
     14




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WESTERN RESERVE BANCORP, INC.
 
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
 AND RESULTS OF OPERATIONS
 March 31, 2009
 OVERVIEW
    FINANCIAL CONDITION
 Assets
     15




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WESTERN RESERVE BANCORP, INC  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2009
 FINANCIAL CONDITION
       Type of deposit
    
    Balance
    
    
    % TotalNoninterest-bearing demand
    
    $
    19,168,000
    
    
    
    11.7
    %Interest-bearing NOW
    
    
    8,478,000
    
    
    
    5.2
    %Variable rate savings/money market (Market Rate
Savings Accounts)
    
    
    71,006,000
    
    
    
    43.2
    %Time deposits
    
    
    65,567,000
    
    
    
    39.9
    %Total
    
    $
    164,219,000
    
    
    
    100.0
    %
  16




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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, 2009
 FINANCIAL CONDITION
 Liabilities
     Shareholders Equity
   17




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2009
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2009
 Overview
  Net Interest Income
   18




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2009
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2009
  Three Months Ended
    
    
    Three Months EndedMarch 31, 2009
    
    
    March 31, 2008Average
    
    
    
    
    
    
    Average
    
    
    Average
    
    
    
    
    
    
    Average($ in thousands)
    
    Balance
    
    
    Interest
    
    
    Rate
    
    
    Balance
    
    
    Interest
    
    
    RateInterest-earning assets:Federal funds sold and
other short-term funds
    
    $
    15,519
    
    
    $
    19
    
    
    
    0.50
    %
    
    $
    15,183
    
    
    $
    135
    
    
    
    3.57
    %Securities  taxable
    
    
    5,800
    
    
    
    71
    
    
    
    5.12
    %
    
    
    6,360
    
    
    
    81
    
    
    
    5.08
    %Securities  tax exempt
    
    
    4,404
    
    
    
    59
    
    
    
    5.64
    %
    
    
    4,572
    
    
    
    59
    
    
    
    5.20
    %Restricted stock
    
    
    740
    
    
    
    9
    
    
    
    5.00
    %
    
    
    605
    
    
    
    8
    
    
    
    5.31
    %Loans
    
    
    147,558
    
    
    
    1,942
    
    
    
    5.34
    %
    
    
    126,796
    
    
    
    2,279
    
    
    
    7.21
    %Total interest-earning assets
    
    
    174,021
    
    
    
    2,100
    
    
    
    4.89
    %
    
    
    153,516
    
    
    
    2,562
    
    
    
    6.70
    %Noninterest-earning assets
    
    
    5,722
    
    
    
    
    
    
    
    
    
    
    
    4,755Total assets
    
    $
    179,743
    
    
    
    
    
    
    
    
    
    
    $
    158,271Interest-bearing liabilities:Transaction accounts
    
    $
    7,498
    
    
    
    12
    
    
    
    0.65
    %
    
    $
    6,344
    
    
    
    16
    
    
    
    1.00
    %Market rate savings accounts
    
    
    67,658
    
    
    
    183
    
    
    
    1.10
    %
    
    
    81,050
    
    
    
    689
    
    
    
    3.41
    %Time deposits
    
    
    66,245
    
    
    
    523
    
    
    
    3.20
    %
    
    
    37,482
    
    
    
    401
    
    
    
    4.30
    %Federal Home Loan Bank
advances and other borrowings
    
    
    6,377
    
    
    
    55
    
    
    
    3.51
    %
    
    
    3,640
    
    
    
    33
    
    
    
    3.60
    %Total interest-bearing liabilities
    
    
    147,778
    
    
    
    773
    
    
    
    2.12
    %
    
    
    128,516
    
    
    
    1,139
    
    
    
    3.56
    %Noninterest-bearing liabilities
    
    
    17,209
    
    
    
    
    
    
    
    
    
    
    
    15,681Shareholders equity
    
    
    14,756
    
    
    
    
    
    
    
    
    
    
    
    14,074Total liabilities and
shareholders equity
    
    $
    179,743
    
    
    
    
    
    
    
    
    
    
    $
    158,271Net interest income
    
    
    
    
    
    
    1,327
    
    
    
    
    
    
    
    
    
    
    
    1,423Tax equivalent adjustment
    
    
    
    
    
    
    (18
    )
    
    
    
    
    
    
    
    
    
    
    (16
    )Net interest income per
financial statements
    
    
    
    
    
    $
    1,309
    
    
    
    
    
    
    
    
    
    
    $
    1,407Net interest margin (Net yield on
average interest-earning assets)
    
    
    
    
    
    
    
    
    
    
    3.09
    %
    
    
    
    
    
    
    
    
    
    
    3.72
    %
    19




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
March 31, 2009
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2009
 Three Months EndedMarch 31, 2009 vs. 2008Summary of Changes inNet Interest IncomeIncrease (Decrease) Due to($ in thousands)
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Federal funds sold and
other short-term funds
    
    $
    8
    
    
    $
    (124
    )
    
    $
    (116
    )Securities  taxable
    
    
    (10
    )
    
    
    
    
    
    
    (10
    )Securities  tax exempt
    
    
    (4
    )
    
    
    4
    
    
    
    Restricted stock
    
    
    2
    
    
    
    (1
    )
    
    
    1Loans
    
    
    336
    
    
    
    (673
    )
    
    
    (337
    )Total interest-earning assets
    
    
    332
    
    
    
    (794
    )
    
    
    (462
    )Interest expense:Transaction accounts
    
    
    (2
    )
    
    
    6
    
    
    
    4Market rate savings accounts
    
    
    99
    
    
    
    407
    
    
    
    506Time deposits
    
    
    (245
    )
    
    
    123
    
    
    
    (122
    )Federal Home Loan Bank
advances and other borrowings
    
    
    (24
    )
    
    
    2
    
    
    
    (22
    )Total interest-bearing liabilities
    
    
    (172
    )
    
    
    538
    
    
    
    366Change in net interest income
    
    $
    160
    
    
    $
    (256
    )
    
    $
    (96
    )
 Interest Income
   Interest Expense
   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, 2009
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2009
 Net Interest Margin
    Provision for Loan Losses
   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, 2009
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2009
  Noninterest Income
    Noninterest Expenses
   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, 2009
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED MARCH 31, 2009
  Three months endedMarch 31,2009
    
    
    2008Collection and other real estate
owned expenses
    
    $
    33,000
    
    
    $
    31,000Loan expenses
    
    
    9,000
    
    
    
    8,000Travel and entertainment
    
    
    7,000
    
    
    
    11,000Insurance
    
    
    7,000
    
    
    
    4,000Telephone
    
    
    7,000
    
    
    
    7,000Dues and subscriptions
    
    
    6,000
    
    
    
    6,000Other
    
    
    10,000
    
    
    
    5,000$
    79,000
    
    
    $
    72,000
   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, 2009
 LIQUIDITY AND CAPITAL RESOURCES
      Minimum to be
    
    
    Minimum requiredWestern Reserve Bank
    
    
    considered
    
    
    for capitalMarch 31,
    
    
    December 31,
    
    
    well-
    
    
    Adequacy2009
    
    
    2008
    
    
    capitalized
    
    
    purposesTier 1 core capital to
risk-weighted assets
    
    
    9.5
    %
    
    
    9.9
    %
    
    
    6.0
    %
    
    
    4.0
    %Total capital to
risk-weighted assets
    
    
    10.6
    %
    
    
    11.0
    %
    
    
    10.0
    %
    
    
    8.0
    %Tier 1 leverage ratio
    
    
    8.3
    %
    
    
    8.5
    %
    
    
    5.0
    %
    
    
    4.0
    %
  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, 2009
 LIQUIDITY AND CAPITAL RESOURCES
      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, 2009
 INTEREST RATE RISK
       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, 2009
 CRITICAL ACCOUNTING POLICIES
   27




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
 
 CONTROLS AND PROCEDURES
 March 31, 2009
    28




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
March 31, 2009
 
 PART
IIOTHER INFORMATION
 Item 1. Legal Proceedings
    
    NoneItem 1a. Risk Factors
    
    Not applicableItem 2. Unregistered 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
  29




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
March 31, 2009
 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, 2008)
    
    *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,
2008)
    
    *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
August 21, 2008
(incorporated by reference
to the Companys Report on
Form 8-K filed with the
Commission on August 26,
2008)
    
    *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.  30




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
March 31, 2009
 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 May 1, 2008
(incorporated by reference
to the Companys Report on
Form 8-K filed with the
Commission on May 7, 2008)
    
    *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)
    
    *10.17
    
    
    Seventh Amendment to the
Loan Agreement by and
between Western Reserve
Bancorp, Inc. and TCF
National Bank, dated July 1,
2008 (incorporated by
reference to the Companys
Report on Form 10-Q filed
with the Commission on
November 14, 2008)
    
    *10.18
    
    
    Form of Amendment to the
Western Reserve Bancorp,
Inc. Stock Option Grant
Agreement as of October 16,
2008 (incorporated by
reference to the Companys
Report on Form 8-K filed
with the Commission on
October 2, 2008)
    
    *11
    
    
    Statement re: Computation of
Per Share Earnings
(incorporated by reference
to the Companys Report on
Form 10-Q filed with the
Commission on May 14, 2008)
    
    *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,
Executive 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,
Executive Vice President and
Chief Financial Officer
 *
    
    Previously filed and incorporated herein by reference.  31




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 2009
 
 SIGNATURES
  Western Reserve Bancorp, Inc.Date: May 15, 2009
    
    By:
    
    /s/ Edward J. McKeon

Edward J. McKeonPresident and Chief Executive Officer(Principal Executive Officer)/s/ Cynthia A. Mahl

Cynthia A. MahlExecutive Vice President/Chief Financial Officer(Principal Financial Officer)
  32




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##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    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, Executive 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, Executive Vice President and Chief Financial Officer