<PAGE>

                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-QSB

[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934

                    FOR THE QUARTER ENDED SEPTEMBER 30, 2004

[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT

Commission file number 333-43361

                          WESTERN RESERVE BANCORP, INC.
                          -----------------------------
        (Exact name of small business issuer as specified in its charter)

              Ohio                                        31-1566623
              ----                                        ----------
(State or other jurisdiction of                         (IRS Employer
 incorporation or organization)                        Identification No.)

          4015 Medina Road, Suite 100, P.O. Box 585, Medina, Ohio 44256
          -------------------------------------------------------------
                    (Address of principal executive offices)

                                 (330) 764-3131
                                 --------------
                 Issuer's telephone number, including area code

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the registrant was was required to file such reports) and (2) has
been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date.

                 Common Stock, no par value, $1.00 stated value
                 ----------------------------------------------
                                (Class of Stock)

                              427,255 common shares
                              ---------------------
              (number of shares outstanding as of November 8, 2004)

Transitional Small Business Disclosure Format (Check one):  Yes [ ]  No [X]

                                     Page 1
<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                                   FORM 10-QSB
                        QUARTER ENDED SEPTEMBER 30, 2004

<TABLE>
<CAPTION>
                                                                                                              Page
<S>                                                                                                           <C>
PART I--FINANCIAL INFORMATION

ITEM 1           FINANCIAL STATEMENTS

                 Consolidated Balance Sheets as of September 30, 2004
                    and December 31, 2003                                                                       3

                 Consolidated Statements of Income for the three months
                    and nine months ended September 30, 2004 and 2003                                           4

                 Consolidated Statements of Comprehensive Income for the three months
                    and nine months ended September 30, 2004 and 2003                                           5

                 Consolidated Statements of Cash Flows for the nine months
                    ended September 30, 2004 and 2003                                                           6

                 Notes to Consolidated Financial Statements                                                     7

ITEM 2           MANAGEMENT'S DISCUSSION AND ANALYSIS OF
                    FINANCIAL CONDITION AND RESULTS OF OPERATIONS                                              13

ITEM 3           CONTROLS AND PROCEDURES                                                                       28

PART II--OTHER INFORMATION                                                                                     29

SIGNATURES                                                                                                     31
</TABLE>

                                     Page 2

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                                                             (Unaudited)
                                                                            September 30,           December 31,
                                                                                 2004                   2003
                                                                            -------------           -------------
<S>                                                                         <C>                     <C>
Assets
       Cash and due from financial institutions                             $   1,919,187           $   2,186,363
       Federal funds sold and other short-term funds                            3,340,000               4,103,000
                                                                            -------------           -------------
             Cash and cash equivalents                                          5,259,187               6,289,363

       Securities available for sale                                            1,537,561               1,733,762
       Loans held for sale                                                      1,947,506                       -

       Loans                                                                  104,163,486              95,548,286
       Allowance for loan losses                                               (1,783,338)             (1,502,688)
                                                                            -------------           -------------
             Loans, net                                                       102,380,148              94,045,598

       Federal Reserve Bank stock                                                 198,300                 189,300
       Federal Home Loan Bank stock                                               276,000                 195,300
       Premises and equipment, net                                                874,061                 675,404
       Accrued interest receivable and other assets                             1,433,761               1,187,821
                                                                            -------------           -------------
                        Total Assets                                        $ 113,906,524           $ 104,316,548
                                                                            =============           =============

Liabilities and Shareholders' Equity
       Deposits
             Noninterest-bearing                                            $  11,706,016           $   9,559,885
             Interest-bearing                                                  86,996,399              82,220,372
                                                                            -------------           -------------
                  Total deposits                                               98,702,415              91,780,257
       Federal Home Loan Bank advances                                          4,000,000               3,200,000
       Other borrowings                                                           800,000                 500,000
       Accrued interest payable and other liabilities                             127,723                 223,636
                                                                            -------------           -------------
                  Total Liabilities                                           103,630,138              95,703,893

       Shareholders' Equity
             Common stock, without par value, $1 stated value:
                  750,000 shares authorized; 427,255 and
                  388,052 shares issued and outstanding as of
                  September 30, 2004 and December 31, 2003                        427,255                 388,052
             Additional paid-in capital                                         8,662,613               7,557,845
             Common stock subscribed (3,433 shares)                               102,990                       -
             Retained earnings                                                  1,082,082                 654,171
             Accumulated other comprehensive income                                 1,446                  12,587
                                                                            -------------           -------------
                  Total Shareholders' Equity                                   10,276,386               8,612,655
                                                                            -------------           -------------
                        Total Liabilities and Shareholders' Equity          $ 113,906,524           $ 104,316,548
                                                                            =============           =============
</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 3

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                              Three months ended Sept. 30,      Nine months ended Sept. 30,
                                                 2004             2003             2004             2003
                                              ----------       ----------       ----------       ----------
<S>                                           <C>              <C>              <C>              <C>
Interest income
    Loans, including fees                     $1,503,673       $1,299,809       $4,339,751       $3,696,311
    Securities                                    20,393           16,446           62,927           71,518
    Federal funds sold and other
       short-term funds                           16,382            6,451           38,872           33,214
                                              ----------       ----------       ----------       ----------
                                               1,540,448        1,322,706        4,441,550        3,801,043
Interest expense
    Deposits                                     462,736          378,162        1,346,127        1,100,302
    Borrowings                                    43,560           34,159          146,018          101,403
                                              ----------       ----------       ----------       ----------
                                                 506,296          412,321        1,492,145        1,201,705
                                              ----------       ----------       ----------       ----------
       Net interest income                     1,034,152          910,385        2,949,405        2,599,338
Provision for loan losses                        186,800          247,900          280,650          403,100
                                              ----------       ----------       ----------       ----------
       Net interest income after
          provision for loan losses              847,352          662,485        2,668,755        2,196,238
Noninterest income
    Service charges on deposit accounts           30,082           28,526           89,023           80,178
    Net gains on sales of loans                       --           28,854           46,896           90,823
    Other                                         26,108           24,745           93,806           58,578
                                              ----------       ----------       ----------       ----------
                                                  56,190           82,125          229,725          229,579
Noninterest expense
    Salaries and employee benefits               411,512          355,010        1,207,537        1,057,247
    Premises and equipment, net                  129,761           97,587          327,443          291,214
    Data processing                               61,886           55,845          177,619          166,066
    Professional fees                             46,206           41,725          156,144          144,190
    Taxes other than income and payroll           22,048           19,184           69,311           60,293
    Community and shareholder relations
       and contributions                           9,907            9,380           50,966           45,825
    Supplies, printing and postage                18,762           16,260           49,831           48,448
    Other                                         78,119           62,507          213,171          176,357
                                              ----------       ----------       ----------       ----------
                                                 778,201          657,498        2,252,022        1,989,640
                                              ----------       ----------       ----------       ----------
Income before income taxes                       125,341           87,112          646,458          436,177
Income tax expense                                42,616           30,045          218,547          149,532
                                              ----------       ----------       ----------       ----------
Net income                                    $   82,725       $   57,067       $  427,911       $  286,645
                                              ==========       ==========       ==========       ==========

Average shares outstanding (basic)               398,628          388,052          391,604          388,052
                                              ==========       ==========       ==========       ==========
Average shares outstanding (diluted)             413,911          397,343          403,604          397,343
                                              ==========       ==========       ==========       ==========

Basic income per share                        $     0.21       $     0.15       $     1.09       $     0.74
                                              ==========       ==========       ==========       ==========
Diluted income per share                      $     0.20       $     0.14       $     1.06       $     0.72
                                              ==========       ==========       ==========       ==========
</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 4

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                 CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                       Three months ended Sept. 30,       Nine months ended Sept. 30,
                                                         2004             2003              2004              2003
                                                       ---------        ---------         ---------         ---------
<S>                                                    <C>              <C>               <C>               <C>
Net income                                             $  82,725        $  57,067         $ 427,911         $ 286,645
Other comprehensive income, net of tax:
        Unrealized gains/(losses) on securities
               arising during the period                   3,505           (5,377)          (11,141)          (13,270)
                                                       ---------        ---------         ---------         ---------
Comprehensive income                                   $  86,230        $  51,690         $ 416,770         $ 273,375
                                                       =========        =========         =========         =========
</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 5

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (UNAUDITED)

<TABLE>
<CAPTION>
                                                                                          Nine months ended September 30,
                                                                                           2004                 2003
                                                                                        ------------         ------------
<S>                                                                                     <C>                  <C>
Cash flows from operating activities
      Net income                                                                        $    427,911         $    286,645
      Adjustments to reconcile net income to net cash from operating activities:
           Provision for loan losses                                                         280,650              403,100
           Depreciation                                                                       71,985              101,959
           Net amortization of securities                                                     10,122               12,692
           Loans originated for sale                                                      (3,647,942)          (9,374,143)
           Proceeds from sales of loan originations                                        1,747,332            9,702,107
           Gains on sales of loans                                                           (46,896)             (90,823)
           Federal Home Loan Bank stock dividends                                             (7,500)              (5,500)
           Increase in cash surrender value of bank-owned life insurance                     (16,504)             (10,026)
           Net change in:
              Interest receivable                                                            (63,975)                (446)
              Interest payable                                                                (3,771)              20,537
              Other assets                                                                  (165,461)             (56,484)
              Other liabilities                                                              (86,403)             (74,204)
                                                                                        ------------         ------------
              Net cash from operating activities                                          (1,500,452)             915,414

Cash flows from investing activities
      Available for sale securities:
           Maturities, repayments and calls                                                  169,199            1,531,225
      Purchase of Federal Reserve Bank stock                                                  (9,000)              (3,200)
      Purchase of Federal Home Loan Bank stock                                               (73,200)                   -
      Net increase in loans                                                               (8,615,200)         (16,931,824)
      Purchases of premises and equipment                                                   (270,642)             (58,330)
      Purchase of bank-owned life insurance                                                        -             (500,000)
                                                                                        ------------         ------------
           Net cash from investing activities                                             (8,798,843)         (15,962,129)

Cash flows from financing activities
      Net increase in deposits                                                             6,922,158           16,680,890
      Net change in short-term borrowings                                                          -              (59,965)
      Proceeds from Federal Home Loan Bank advances                                        2,500,000                    -
      Repayments of Federal Home Loan Bank advances                                       (1,700,000)                   -
      Proceeds from long-term borrowings                                                     300,000              500,000
      Cash received from common stock issued (net of offering costs)                       1,246,961                    -
                                                                                        ------------         ------------
           Net cash from financing activities                                              9,269,119           17,120,925
                                                                                        ------------         ------------

Change in cash and cash equivalents                                                       (1,030,176)           2,074,210
Cash and cash equivalents at beginning of period                                           6,289,363            3,926,735
                                                                                        ------------         ------------
Cash and cash equivalents at end of period                                              $  5,259,187         $  6,000,945
                                                                                        ============         ============

Supplemental cash flow information:
      Interest paid                                                                     $  1,495,916         $  1,181,168
      Income taxes paid                                                                      446,000              286,000
</TABLE>

See accompanying notes to consolidated financial statements.

                                     Page 6

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization: Western Reserve Bancorp, Inc. (the Company) was incorporated under
the laws of the State of Ohio on February 27, 1997. Until November 6, 1998, the
Company was a development stage company and its efforts had been devoted to the
offering of its common shares to the general public and to obtaining regulatory
approvals, recruiting personnel and financial planning relating to the
organization of Western Reserve Bank (the Bank).

The Bank, which commenced operations on November 6, 1998, is chartered by the
State of Ohio, and is a member of the Federal Reserve System. Customer deposits
are insured up to applicable limits by the Federal Deposit Insurance Corporation
(FDIC). The Company is a bank holding company pursuant to the Bank Holding
Company Act of 1956, as amended.

The Company began an intrastate common stock offering on May 15, 2004, for up to
83,333 shares at $30.00 per share. In conjunction with our expansion to
Brecksville, the offering was limited to residents of Brecksville and
surrounding communities through July 15. After that date, the remaining shares
are being offered to any resident of the State of Ohio. The offering was
expected to close on September 15. However, we have extended the offering until
November 30. Shares of stock purchased in this offering may not be resold
outside of the State of Ohio for a period of nine months after issuance.

On October 4, 2004, we opened our Brecksville office at 8751 Brecksville Road.
In September, we entered into an operating lease for approximately 5,600 square
feet of space for the Brecksville office. The lease is for a term of ten years
beginning October 1, 2004, with two five-year renewal options. The first year's
rent under the lease is $150,924, with provision for annual increases of two
percent.

Nature of Business: The Bank offers a full range of commercial and consumer
banking services primarily in its defined market areas of Medina and Cuyahoga
Counties, Ohio. We consider all of the financial service operations to be
aggregated in one reportable operating segment, commercial banking.

Principles of Consolidation: The consolidated financial statements include the
accounts of Western Reserve Bancorp, Inc. and its wholly-owned subsidiary,
Western Reserve Bank. All material intercompany accounts and transactions have
been eliminated.

Cash Equivalents: For purposes of the Statements of Cash Flows, cash equivalents
include amounts due from banks and federal funds sold. Generally, federal funds
are sold for periods of less than thirty days.

                                     Page 7

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Use of Estimates in Preparation of Financial Statements: In preparing financial
statements in conformity with accounting principles generally accepted in the
United States, we make estimates and assumptions based on available information.
These estimates and assumptions affect the amounts reported in the financial
statements and the disclosures provided, and future results could differ. Areas
involving the use of management's estimates and assumptions include the
allowance for loan losses, the realization of deferred tax assets and the
depreciation of premises and equipment.

Basis of Presentation: The accompanying unaudited consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles for interim financial information and with the instructions to Form
10-QSB. Accordingly, they do not include all of the information and footnotes
required by accounting principles generally accepted in the United States for
complete financial statements. It is the opinion of management that all
adjustments necessary for a fair presentation have been made and that all
adjustments were of a normal recurring nature. The Annual Report of the Company
for the year ended December 31, 2003 contains consolidated financial statements
and related notes, which should be read in conjunction with the accompanying
consolidated financial statements.

Stock Compensation: Employee compensation expense under stock options is
reported using the intrinsic value method. No stock-based compensation cost is
reflected in net income, as all options granted had an exercise price equal to
or greater than the market price of the underlying common stock at the date of
grant. The following table illustrates the effect on net income and earnings per
share if expense was measured using the fair value recognition provisions of
FASB Statement No. 123, Accounting for Stock Based Compensation.

<TABLE>
<CAPTION>
                                      Three months ended Sept. 30,        Nine months ended Sept. 30,
                                        2004              2003               2004             2003
                                        ----              ----              ----              ----
<S>                                   <C>               <C>               <C>               <C>
Net income as reported                $  82,725         $  57,067         $ 427,911         $ 286,645
Deduct: stock based
   compensation expense
   determined under fair value
   based method                          (2,115)          (18,605)           (6,346)          (55,814)
                                      ---------         ---------         ---------         ---------
Pro forma net income                  $  80,610         $  38,462         $ 421,565         $ 230,831
                                      =========         =========         =========         =========

Basic earnings per share
   as reported                        $    0.21         $    0.15         $    1.09         $    0.74
Pro forma basic earnings
   per share                          $    0.20         $    0.10         $    1.08         $    0.59
</TABLE>

                                     Page 8

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

<TABLE>
<CAPTION>
                              Three months ended Sept. 30,    Nine months ended Sept. 30,
                              2004                  2003      2004                   2003
                              -----                 -----     ----                   ----
<S>                           <C>                   <C>       <C>                    <C>
Diluted earnings per share
   as reported                $0.20                 $0.14     $1.06                  $0.72
Pro forma diluted earnings
   per share                  $0.19                 $0.10     $1.04                  $0.58
</TABLE>

In future years, the pro forma effect of not applying this standard is expected
to increase as additional options are granted. The pro forma effects are
computed using option-pricing models, using the following weighted-average
assumptions as of grant date:

<TABLE>
<CAPTION>
                                                 2003
                                                 ----
<S>                                              <C>
Risk-free interest rate                          3.18%
Expected option life (years)                        7
Expected stock price volatility                  7.70%
Dividend yield                                   0.00%
</TABLE>

In June 2003, options to purchase a total of 1,000 shares of stock at $26.00 per
share were granted to two non-executive employees. In December 2003, one
non-executive employee was granted an option to purchase 500 shares of stock at
$26.00 per share. No options have been granted in 2004.

In September 2004, one non-executive employee exercised his option to purchase
250 shares of stock at $20.00 per share.

Bank-Owned Life Insurance: The Bank has purchased a life insurance policy on a
key executive. Bank-owned life insurance is recorded at its cash surrender
value, or the amount that can be realized, and is included in other assets on
the consolidated balance sheet.

Earnings per Common Share: Basic earnings per common share equals net income
divided by the weighted average number of common shares outstanding during the
period. Diluted earnings per common share include the dilutive effect of
additional potential common shares issuable under stock options. Stock options
for 9,618 shares of common stock and stock subscriptions for 3,433 common shares
were not considered in computing diluted earnings per common share in either
period because they were antidilutive.

                                     Page 9

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Earnings per share are computed as follows:

<TABLE>
<CAPTION>
                                            Three months ended              Nine months ended
                                                September 30,                  September 30,
                                             -----------------              -----------------
                                           2004            2003            2004            2003
                                           ----            ----            ----            ----
<S>                                      <C>             <C>             <C>             <C>
Numerator:
   Net income                            $ 82,725        $ 57,067        $427,911        $286,645

Denominator:
   Denominator for basic
      earnings per share--
      weighted average shares             398,628         388,052         391,604         388,052
   Effect of dilutive securities:
      Nonqualified stock options           15,284           9,291          12,000           9,291
                                         --------        --------        --------        --------
   Denominator for diluted
      earnings per share                  413,912         397,343         403,604         397,343
                                         ========        ========        ========        ========

Basic earnings per share                 $   0.21        $   0.15        $   1.09        $   0.74
                                         ========        ========        ========        ========
Diluted earnings per share               $   0.20        $   0.14        $   1.06        $   0.72
                                         ========        ========        ========        ========
</TABLE>

Reclassifications: For comparative purposes, certain amounts in the 2003
consolidated financial statements have been reclassified to conform to the 2004
presentation.

                                    Page 10

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 2 - LOANS

Loans at September 30, 2004 and December 31, 2003, were as follows:

<TABLE>
<CAPTION>
                                    Sept. 30,         December 31,
                                      2004                 2003
                                      ----                 ----
<S>                               <C>                 <C>
Commercial real estate            $ 47,996,137        $ 49,695,518
Commercial business                 16,713,218          16,134,023
Commercial lines of credit          19,750,119          13,243,461
Commercial construction              7,059,661           5,126,269
Home equity                          9,835,441           8,415,148
Residential mortgage
   and construction                  1,167,672           1,390,523
Consumer installment                 1,351,770           1,248,743
Credit card and other                  289,468             294,601
                                  ------------        ------------
                                  $104,163,486        $ 95,548,286
                                  ============        ============
</TABLE>

Activity in the Allowance for Loan Losses for the nine months ended September
30, 2004 and 2003, was as follows:

<TABLE>
<CAPTION>
                                  Nine months ended Sept. 30,
                                    2004              2003
                                    ----              ----
<S>                              <C>               <C>
Beginning balance                $1,502,688        $1,042,309
Loans charged off                        --                --
Recoveries                               --            26,651
Provision for loan losses           280,650           403,100
                                 ----------        ----------
Ending balance                   $1,783,338        $1,472,060
                                 ==========        ==========
</TABLE>

At September 30, 2004 and December 31, 2003, loans totaling $1,395,317 and
$1,126,175 were in nonaccrual status. There were no other loans more than 90
days past due. As of September 30, 2004, $796,134 of the nonaccrual loans were
less than 30 days past due. Impaired loans totaled $1,574,398 at September 30,
2004, compared with $1,309,521 at December 31, 2003.

                                    Page 11

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                          NOTES TO FINANCIAL STATEMENTS
                               SEPTEMBER 30, 2004

NOTE 3 - DEPOSITS

Deposits at September 30, 2004 and December 31, 2003, were as follows:

<TABLE>
<CAPTION>
                                   Sept. 30,         December 31,
                                      2004               2003
                                      ----               ----
<S>                               <C>                <C>
Noninterest-bearing demand        $11,706,016        $ 9,559,885
Interest-bearing demand             5,984,704          6,392,660
Market Rate Savings                28,219,505         26,444,694
Time under $100,000                30,687,011         31,349,601
Time $100,000 and over             22,105,179         18,033,417
                                  -----------        -----------
                                  $98,702,415        $91,780,257
                                  ===========        ===========
</TABLE>

At September 30, 2004, the Bank had $22,109,000 in national market certificates
of deposit, primarily in amounts of $99,000. As of December 31, 2003, the Bank
had $23,292,000 in national market CDs.

NOTE 4--FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

At September 30, 2004 and December 31, 2003, advances from the Federal Home Loan
Bank were as follows:

<TABLE>
<CAPTION>
                                                             Sept. 30,         Dec. 31,
                                                               2004              2003
                                                               ----              ----
<S>                                                         <C>               <C>
Matured June 2004, fixed rate advance at 4.28%              $       --        $1,700,000
Maturing  October  2004, fixed rate advance at 4.15%         1,500,000         1,500,000
Maturing March 2009, fixed rate advance at 3.25%             2,500,000                --
                                                            ----------        ----------
                                                            $4,000,000        $3,200,000
                                                            ==========        ==========
</TABLE>

Interest is payable monthly, and the advances are payable at their maturity
dates, with prepayment penalties for early payment. The advances are
collateralized by approximately $5,405,000 of loans secured by first mortgages
on 1-4 family residential properties, multi-family properties and home equity
lines of credit, and $276,000 of FHLB stock under a blanket lien agreement.

In May 2003, the Company entered into a line of credit agreement with another
financial institution to obtain funding to provide capital to the Bank as
needed. The line allows the Company to borrow up to $3,000,000 at 0.75% below
the prime rate. The line matures on March 31, 2005 and is secured by 100% of the
stock of the Bank. There are certain covenants on the line relating to the
Company's and the Bank's operating performance and capital status, and the Bank
and Company have remained in compliance with each of the covenants. As of
September 30, 2004, the Company had borrowed $800,000 against the line of credit
and invested the proceeds in the Bank as additional paid-in capital. As of
December 31, 2003, the balance outstanding on the line of credit was $500,000.

                                    Page 12

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

OVERVIEW

The following discussion compares the financial condition of Western Reserve
Bancorp, Inc. (the Company) and its wholly-owned subsidiary, Western Reserve
Bank (the Bank) at September 30, 2004, to that of December 31, 2003, and the
results of operations for the three months and nine months ended September 30,
2004 and 2003. You should read this discussion in conjunction with the interim
financial statements and footnotes included herein.

Certain statements contained in this report that are not historical facts are
forward looking statements subject to certain risks and uncertainties. When used
herein, the terms "anticipates," "plans," "expects," "believes," and similar
expressions as they relate to the Company or its management are intended to
identify such forward looking statements. Our actual results, performance or
achievements may materially differ from those expressed or implied in the
forward-looking statements. Risks and uncertainties that could cause or
contribute to such material differences include, but are not limited to, general
economic conditions, the interest rate environment, competitive conditions in
the financial services industry, changes in law, governmental policies and
regulations, and rapidly changing technology affecting financial services.

FINANCIAL CONDITION

ASSETS

Our total assets as of September 30, 2004 increased 9.2%, or $9,590,000, to
$113,907,000, compared with $104,317,000 at December 31, 2003.

Cash and cash equivalents decreased $1,030,000 to $5,259,000 at September 30,
2004, from $6,289,000 at December 31, 2003. The decrease is primarily a result
of the growth in loans exceeding the growth in deposits.

As of September 30, 2004, we had $757,000 of U.S. government agency securities
and $780,000 of mortgage-backed securities in the available-for-sale securities
portfolio. There were gross unrealized gains of $5,950 and gross unrealized
losses of $3,759 in the available-for-sale securities portfolio. None of the
losses was judged to be other than temporary. As of September 30, 2004, the
maturity dates of the agency securities ranged from November 2004 to May 2005.

The primary reason for the growth in total assets was an increase in loans.
Total loans at September 30, 2004, were $104,163,000, an increase of $8,615,000,
or 9.0% when compared to $95,548,000 at December 31, 2003. Most of the net loan
growth was in the commercial loan sector. This growth was spread over several
categories, including commercial lines of credit, up

                                    Page 13

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

FINANCIAL CONDITION (CONTINUED)

$6,507,000 or 49.1%, and commercial business loans, up $1,148,000 or 11.6%. The
growth in commercial lines of credit has resulted from our adding several new
customers, as well as expanding our relationships with existing customers. The
majority of the lines of credit are secured by business assets and/or real
estate. As of September 30, 2004, commercial loans totaled $91,519,000, or 87.9%
of total loans.

Home equity lines of credit also increased, by $1,420,000, or 16.9%, to
$9,835,000, primarily due to a promotion of home equity lines during the first
quarter of 2004, as well as our efforts to cross-sell home equity lines when
originating or refinancing first mortgage loans. At September 30, 2004,
residential real estate and home equity loans totaled $11,003,000, or 10.6% of
total loans, and consumer installment and credit card loans were $1,641,000, or
1.6% of the loan portfolio.

As of September 30, 2004, one USDA-guaranteed loan in the amount of $1,948,000
was classified as held for sale. There were no loans held for sale as of
December 31, 2003.

We anticipate that loan demand will remain strong, especially in the commercial
loan segment. The loan-to-deposit ratio as of September 30, 2004, was 105.5%,
compared to 104.1% at December 31, 2003, and the loan-to-assets ratio was 91.4%
at September 30, 2004, compared to 91.6% at December 31, 2003. We expect that
the loan-to-deposit ratio throughout the rest of 2004 and into 2005 will remain
in the range of 100%-105% and the loan-to-assets ratio will be between 90% to
95%.

Of the total loans at September 30, 2004, approximately $95,480,000 or 91.7% are
at a variable rate of interest, and $8,684,000 or 8.3% are fixed rate. Including
scheduled principal repayments, $84,408,000, or 81.0%, of our loans mature or
are scheduled to reprice within twelve months. Only $697,000 of total loan
principal matures or reprices in more than five years.

In the second quarter of 2003, the Bank purchased a $500,000 single-premium
cash-surrender value life insurance policy. The Chief Executive Officer is the
named insured, and the Bank is the owner and sole beneficiary of the policy.
This is a tax-advantaged instrument in that the increases in cash surrender
value and the eventual death benefit under the policy are not taxable income to
the Bank. The income from this policy is intended to help offset the cost of
providing a supplemental retirement plan for the Chief Executive Officer. As of
September 30, 2004, the cash surrender value of the policy was $531,543.

LIABILITIES

Deposits increased to $98,702,000 at September 30, 2004, an increase of
$6,922,000, or 7.5%, over the $91,780,000 at December 31, 2003. Deposits at
September 30, 2004 consisted of

                                    Page 14

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

FINANCIAL CONDITION (CONTINUED)

$11,706,000 or 11.9% in noninterest-bearing demand deposits, $5,985,000 or 6.1%
in interest-bearing NOW accounts, $28,219,000 or 28.6% in variable-rate savings
and money market accounts (known as Market Rate Savings Accounts), $49,178,000
or 49.8% in time deposits, and $3,614,000 or 3.7% in Individual Retirement
Arrangements.

The mix of deposits has been shifting since early 2002. There are two primary
reasons. First, as interest rates declined, depositors moved funds from our
market rate savings product to seek higher yields in certificates of deposit.
The market rate savings product is a liquid savings account that offers tiered
rates which, at balances of $15,000 or more, are indexed to a national money-
market average, plus 5 to 15 basis points. The weighted average cost of all
market rate savings accounts during the first nine months of 2004 was 0.99%.
Market rate savings balances stabilized in the third quarter of 2003. As
interest rates have begun to increase, the cost of our market rate savings
accounts has increased as well, and in the third quarter of 2004, the weighted
average cost was 1.13%.

The second reason for the shift in the deposit mix is that we made the strategic
decision in early 2002 to begin obtaining longer-term CD funding to lock in the
historically low rates and to better match the repricing of our loans with our
deposits. A large portion of our commercial loan portfolio is in real estate
loans, and many loans have terms that fix the interest rate for three-year
intervals. By obtaining three-, four- and five-year CDs, we were better able to
"match" the repricing of our assets (loans) and liabilities (deposits). This was
accomplished in part by obtaining national market CDs, primarily in increments
of $99,000, with terms ranging from two years to five years, and rates ranging
from 1.80% to 5.25%. At September 30, 2004, there were $22,109,000 of national
market CDs, with a weighted average rate of 3.29%, and a weighted average
remaining maturity of 17.6 months. At December 31, 2003, we had $23,292,000 in
national market CDs. As our Brecksville office attracts deposits, we expect to
reduce our reliance on national market CDs.

We have obtained additional funding through the Federal Home Loan Bank. As of
September 30, 2004, these advances totaled $4,000,000, with a weighted average
cost of 3.59%.

In the second quarter of 2003, the Company obtained a $3,000,000 line of credit
from an unaffiliated bank. At the end of the third quarter 2003, the Company
borrowed $500,000 from this line of credit. On March 31, 2004, the Company
borrowed an additional $300,000 on the line. The proceeds were invested in the
Bank in the form of additional paid-in capital. Please refer to Note 4 and the
discussion beginning on page 23 of this report, under the caption "Liquidity and
Capital Resources," for additional information.

                                    Page 15

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

FINANCIAL CONDITION (CONTINUED)

SHAREHOLDERS' EQUITY

Total shareholders' equity increased $1,663,731, to $10,276,386 at September 30,
2004, from $8,612,655 at December 31, 2003.

On May 15, 2004, the Company began an intra-state offering of its common stock.
Please refer to the discussion beginning on page 23 of this report, under the
caption "Liquidity and Capital Resources," for additional information.

RESULTS OF OPERATIONS

OVERVIEW

Net income for the first nine months of 2004 was $427,911, compared to $286,645
in the same period in 2003. This is an increase of $141,266 or 49.3% over the
same period in the prior year. In the third quarter of 2004, net income was
$82,725, compared to $57,067 in the third quarter of 2003. This represents an
increase of $25,658, or 45.0% over the same quarter last year. The primary
reasons for the increases in both the third quarter and year-to-date net income
were an increase in net interest income and a decrease in the provision for loan
losses, offset somewhat by an increase in noninterest expenses. The increases in
noninterest expense were mainly in salaries and employee benefits, which are
discussed in further detail on page 22.

NET INTEREST INCOME

Net interest income before the provision for loan losses improved in both the
first nine months and the third quarter of 2004 over the comparable periods in
2003. In the first nine months of 2004, net interest income before the provision
was $2,949,405, an increase of $350,067 or 13.5% over the $2,599,338 earned in
the same period of 2003. When comparing the third quarters, net interest income
was $1,034,152 in 2004, up 13.6% or $123,767 from the $910,385 recorded in the
third quarter of 2003.

The increase in net interest income is attributable to loan growth and, to a
lesser extent, to lower interest rates paid on deposits. However, the effects of
these positive factors were partially offset by lower yields on loans and other
interest-earning assets, as well as the increase in interest-bearing deposit
balances, particularly certificates of deposit.

                                    Page 16

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

The following table illustrates the average balances and interest rates for the
nine months ended September 30, 2004 and 2003:

<TABLE>
<CAPTION>
                                                      2004                                2003
                                        --------------------------------------------------------------------
                                         Average    Income/       Yield/    Average      Income/      Yield/
($ in thousands)                         Balance    Expense        Cost     Balance      Expense       Cost
                                         -------    -------        ----     -------      -------       ----
<S>                                     <C>         <C>           <C>      <C>          <C>           <C>
Loans                                   $  101,870  $  4,340        5.67%  $ 81,396     $  3,696       6.05%

Investment securities                        1,633        45        3.80%     1,899           58       4.07%
Federal funds sold and other
   short-term funds                          4,894        39        1.06%     4,204           33       1.05%
Federal Reserve Bank stock                     195         9        6.00%       172            8       6.00%
Federal Home Loan Bank stock                   249         8        4.08%       190            6       3.99%
                                        ----------  --------               --------     --------
   Total interest earning assets           108,841     4,441        5.44%    87,861        3,801       5.76%
Noninterest earning assets                   2,669                            2,310
                                        ----------                        ---------
   Total Assets                         $  111,510                         $ 90,171
                                        ==========                         ========

Interest bearing deposits               $   86,389     1,346        2.08%  $ 68,596        1,101       2.14%
Borrowings                                   5,185       146        3.75%     3,316          101       4.07%
                                        ----------  --------               --------     --------
   Total interest bearing liabilities       91,574     1,492        2.17%    71,912        1,202       2.23%
                                                    --------                            --------
Noninterest bearing liabilities             10,829                           10,092
Shareholders' equity                         9,107                            8,167
                                        ----------                         --------
   Total Liabilities and
      Shareholders' Equity              $  111,510                         $ 90,171
                                        ==========                         ========
Net interest income/rate spread                     $  2,949        3.27%               $  2,599       3.53%
                                                    ========                            ========
Net yield on average earning assets                                 3.61%                              3.94%
</TABLE>

                                    Page 17

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

The table below analyzes changes in net interest income in terms of changes in
the volumes and rates of various categories of interest earning assets and
interest bearing liabilities.

<TABLE>
<CAPTION>
                                                    Nine months ended
                                               September 30, 2004 vs. 2003
                                           ---------------------------------
                                               Increase (Decrease) Due to
                                           ---------------------------------
                                           Volume        Rate           Net
($ in thousands)                           ------        ----           ---
<S>                                        <C>           <C>           <C>
Interest income:
   Loans                                   $ 857         $(214)        $ 643
   Federal funds sold and
      other short-term funds                   6            --             6
   Securities available-for-sale              (8)           (4)          (12)
   Federal Reserve Bank stock                  1            --             1
   Federal Home Loan Bank stock                2            --             2
                                           -----         -----         -----
     Total interest-earning assets           858          (218)          640

Interest expense:
   Interest-bearing transaction
      accounts                                (7)            6            (1)
   Market rate savings accounts               (9)          (33)          (42)
   Certificates of deposit and IRAs         (320)          117          (203)
   FHLB advances                             (37)           11           (26)
   Other borrowings                          (18)           --           (18)
                                           -----         -----         -----
     Total interest-bearing
       liabilities                          (391)          101          (290)
                                           -----         -----         -----
Change in net interest income              $ 467         $(117)        $ 350
                                           =====         =====         =====
</TABLE>

INTEREST INCOME

Total interest income increased $640,507 or 16.9% when comparing the nine months
ended September 30, 2004 with the same period in 2003. For the third quarter,
interest income was up $217,742, or 16.5% when comparing 2004 with 2003.

Interest and fee income on loans for the first nine months of 2004 was
$4,339,751, up $643,440 or 17.4% from $3,696,311 in the same period of the prior
year. This increase was due to increases in loans outstanding, offset somewhat
by an overall decrease in the rate earned on those loans. For the third quarter,
loan income was up 15.7%, or $203,864, to $1,503,673 in 2004 vs. $1,299,809 in
2003.

Interest income from securities and short-term funds decreased slightly to
$101,799 year-to-date in 2004, from $104,732 for the same period of 2003. The
decrease in 2004 was primarily due to lower rates and lower average balances in
securities in 2004 than in 2003. This was offset by an increase in the average
balances of Federal funds sold and other short term funds.

                                    Page 18

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

INTEREST EXPENSE

Interest expense totaled $1,492,145 for the first nine months of 2004, compared
to $1,201,705 in the same period of 2003. In the third quarter, interest expense
increased $93,975 or 22.8%, from the $412,321 in 2003 to the $506,296 in 2004.

Interest on deposits increased $245,825, or 22.3%, to $1,346,127 in the first
nine months of 2004, from $1,100,302 in the same period last year. The increase
in deposit interest expense was due to higher balances in interest-bearing
deposits, especially CDs, somewhat offset by decreases in the average rates paid
on those deposits. Also, new deposits have generally been acquired at lower
interest rates than maturing deposits.

Interest on borrowings was $146,018 in the first nine months of 2004, up $44,615
or 44.0% when compared to the same period in 2003. This is due to increased
borrowings from the Federal Home Loan Bank, and the $18,169 in interest expense
on the Holding Company's line of credit in 2004, compared to $90 in the same
period of 2003. In the third quarter, interest on borrowings was $43,560 in
2004, compared to $34,159 in 2003. This represents an increase of $9,401 or
27.5%, again due to FHLB advances and the Holding Company line of credit.

NET INTEREST MARGIN

Although net interest income has increased, the net interest margin had been
decreasing. In the first nine months of 2004, the net interest margin was 3.61%,
down when compared with 3.96% in the same period in 2003. However, in the third
quarter of 2004, the net interest margin improved to 3.67%, up from the 3.54% in
the second quarter. In the third quarter of 2003, the net interest margin was
3.93%.

In the first nine months 2004, the yield on loans was 5.67%, compared with 6.05%
in the first nine months of 2003. In the third quarter of 2004, the yield on
loans was up slightly, to 5.70%, compared to 5.66% in both the first and second
quarters of this year. This compares with 5.90% in the third quarter of 2003.

The overall yield on earning assets had decreased each quarter until the third
quarter of 2004, reflecting overall interest rate decreases, the scheduled
repricing of existing loans, new loans being booked at current, lower rates, and
competitive factors in our market area.

                                    Page 19

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

The overall cost of interest-bearing funds (deposits and borrowings) was down
slightly, to 2.17% in the first nine months of 2004, compared with 2.23% in the
same period of 2003. The cost of interest-bearing funds has remained stable in
the first three quarters of 2004. In the third quarter, the cost of
interest-bearing funds was 2.16%, compared to 2.15% and 2.20% in the second and
first quarters, respectively. This compares with 2.17% in the third quarter of
2003.

The net interest margin has been impacted by our strategy, beginning in the
second quarter of 2002, to obtain longer-term funding. (See the discussion of
"Interest Rate Sensitivity" later in this section.) These funds have provided
additional liquidity but have had a negative effect on the net interest margin
in that excess funds were invested in lower-yielding Federal funds sold until
they could be deployed in higher-yielding loans. Also, these longer-term funds
are more expensive than short-term funding, which negatively impacts the net
interest margin.

PROVISION FOR LOAN LOSSES

In the first nine months of 2004, the provision for probable loan losses was
$280,650, compared with $403,100 in the first nine months of 2003. The provision
for loan losses in the third quarter of 2004 was $186,800, versus $247,900 in
the third quarter of 2003. Provisions for specific loans impacted the third
quarter in both 2004 and 2003. In 2004, a specific provision of $150,000 was
made for one loan. In 2003, we made specific loan loss provisions totaling
$175,000 for one loan relationship. Both of these special provisions were based
on our analysis of the expected sources of repayment, the collateral securing
the loans, and other factors known to us related to these loan relationships.

At September 30, 2004 and December 31, 2003, loans totaling $1,395,317 and
$1,126,175, respectively, were in nonaccrual status (i.e., on which no interest
income is being recorded). There were no other loans more than 90 days past due.
$151,694 and $153,735 of the nonaccrual loans were guaranteed by the Small
Business Administration as of September 30, 2004 and December 31, 2003.

Our determination of the appropriate level of the allowance for loan losses is
based, in part, on an evaluation of specific loans, as well as the consideration
of historical loss experiences of other similar community financial institutions
which we believe are representative of the probable loss experience of the Bank.
Other factors we consider include the composition of the loan portfolio, current
economic conditions, the creditworthiness of our borrowers and other related
factors. The provision for loan losses has been impacted by the rapid loan
growth we have experienced, as well as the effects of the loan portfolio
maturing. Management and the Board believe the allowance for loan losses at
September 30, 2004, is adequate to absorb probable losses in the loan portfolio.

                                    Page 20

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

NONINTEREST INCOME

Total noninterest income for the first nine month of 2004 was $229,725, up $146
compared to $229,579 in the same period of 2003. In the third quarter of 2004,
noninterest income was $56,190, down $25,935 or 31.6% compared to the $82,125 in
the third quarter of 2003.

Service charges on deposit accounts have increased to $89,023 year-to-date in
2004, compared to $80,178 in the same period of 2003, an increase of 11.0%. This
is mainly due to an increased number of checking accounts, and the increased
collection of fees for overdrafts and insufficient funds on checking accounts.

There has been a change in gains on sales of loans. In mid-2003, we changed the
way we provide mortgage services to our customers. Prior to that time, we
originated, closed and sold long-term fixed rate mortgages and the related
servicing and recorded a gain on the sale. In the first nine months of 2003, we
recorded $90,823 in gains on sales of mortgage loans. However, we expected
mortgage volume to decrease as longer-term interest rates stabilized and a
significant proportion of mortgage-holders had already refinanced their
mortgages. As a result, we changed the way we operate our mortgage lending area.
We have developed an arrangement with an outside entity so that our employee
meets with prospective borrowers, takes the mortgage application, and provides
certain additional services before referring the applicant to the other company
to complete the loan. We earn a fee from the other entity for providing these
mortgage processing services. This change allows us to offer a much wider range
of mortgage programs and products to our customers, while reducing the overhead
associated with the mortgage lending function. These fees amounted to $8,475 in
the first nine months of 2004 and are included in "other noninterest income."

In the second quarter of 2004, we sold two commercial real estate loans totaling
$1,327,000 to enable the borrowers to lock in long-term fixed rates. As a result
of these transactions, we realized gains of $43,062.

 "Other" noninterest income includes fee income from the bank's credit card and
ATM programs, which have increased over last year due to higher activity in both
programs and our changing the company that processes our ATM and debit card
transactions. Also, as discussed above, the Bank purchased a cash-value life
insurance policy on its Chief Executive Officer in the second quarter of 2003.
In the first nine months of 2004 and 2003, we recorded increases in the policy's
cash surrender value of $16,504 and $10,026, respectively. In the third quarter,
the increases were $5,478 in 2004 and $5,013 in 2003.

                                    Page 21

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

NONINTEREST EXPENSE

Noninterest expenses were $2,252,022 for the first nine months of 2004, an
increase of $262,382 or 13.2% over the $1,989,640 for the same period of 2003.
The primary component of noninterest expense is salaries and employee benefits,
which amounted to $1,207,537, or 53.6% of noninterest expense in the first nine
months of 2004. Salaries and benefits were $1,057,247, or 53.1% of noninterest
expense, in the same period of 2003. The increase of $150,290, or 14.2%, was
attributable to increased staffing, including $72,600 related to new staff for
the Brecksville location, including a Regional President for that location.
Another factor is the increased cost of employee benefits. Other categories of
noninterest expenses increased moderately when comparing the first nine months
of 2004 with the same period in 2003. In the third quarter of 2004, total
noninterest expenses increased $120,703 or 18.4% when compared with the same
quarter of 2003. The increases were primarily in salaries and employee benefits,
up $56,502 or 15.9%.

Total "other" noninterest expenses in the third quarter and first nine months of
2004 and 2003 consisted of the following:

<TABLE>
<CAPTION>
                                    Three months ended              Nine months ended
                                         Sept. 30,                      Sept. 30,
                                   2004            2003            2004            2003
                                   ----            ----            ----            ----
<S>                              <C>             <C>             <C>             <C>
Marketing and advertising        $ 21,378        $ 10,076        $ 47,971        $ 29,177
Loan expenses                      12,907          14,664          34,887          29,348
Insurance                          14,766          11,942          39,476          32,034
Travel and entertainment            6,540           6,082          27,858          24,690
Telephone                           5,933           6,087          17,925          19,364
Other                              16,595          13,656          45,054          41,744
                                 --------        --------        --------        --------
                                 $ 78,119        $ 62,507        $213,171        $176,357
                                 ========        ========        ========        ========
</TABLE>

We expect that noninterest expenses will continue to increase significantly over
the next several quarters as costs related to the new Brecksville location are
incurred. Prior to its opening, there have been costs for staff who were hired
in August and September for training, as well as for marketing and advertising,
public relations and other expenses. Through September 30, 2004, we have
incurred approximately $74,640 of expenses, net of income taxes, related to the
Brecksville location.

We expect that there will be a negative impact on earnings during the early
years of the new Brecksville office's operations, until it grows to a size that
can cover its overhead.

                                    Page 22

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

RESULTS OF OPERATIONS (CONTINUED)

As of December 31, 2005, Western Reserve Bancorp, Inc. will be required to be in
compliance with Section 404 of the Sarbanes Oxley Act of 2002. This rule
requires that management certify that our internal controls over financial
reporting are designed properly and operating effectively. This will require us
to identify significant internal controls that affect financial reporting,
document those controls, and test their effectiveness. Furthermore, the
Company's external auditing firm, Crowe Chizek and Company LLC, will be required
to issue an opinion on our representations about the effectiveness of our
internal controls. This project will require us to devote significant resources,
both in terms of time and effort by management and staff, as well as financial
resources to obtain specialized software, additional work to be done by our
internal auditing firm, project management assistance from outside sources, and
additional auditing costs. Management estimates that the additional financial
costs in 2005 will be in excess of $100,000.

LIQUIDITY AND CAPITAL RESOURCES

Liquidity refers to the ability to fund loan demand, meet deposit customers'
withdrawal needs and provide for operating expenses. As summarized in the
Consolidated Statements of Cash Flows, the main sources of cash flows are
receiving deposits from customers, and to a lesser extent, proceeds from FHLB
advances and borrowings, repayment of loan principal and interest income on
loans and investments.

Assets available to satisfy our liquidity needs include cash and due from banks,
federal funds sold, interest-bearing deposits in other banks, loans held for
sale and available-for-sale securities. These assets are commonly referred to as
liquid assets. Liquid assets were $8,744,000 at September 30, 2004, compared to
$8,023,000 at December 31, 2003.

To the extent that loan demand has outpaced local deposit growth, we have used
other sources of funding, including national market CDs and Federal Home Loan
Bank advances (as previously discussed). Other potential sources of liquidity
include selling securities from the securities portfolio, selling loans,
obtaining additional Federal Home Loan Bank advances, purchasing federal funds,
borrowing on the Company's line of credit, issuing repurchase agreements, and
obtaining brokered deposits.

As discussed above, total shareholders' equity increased $1,663,731, to
$10,276,386 at September 30, 2004 from $8,612,655 at December 31, 2003. This
increase was due to our net income of $427,911 for the first nine months of
2004, the $1,122,394 net of offering costs, received in the first two phases of
our common stock offering, the $102,990 in stock subscriptions received since
September 15, 2004, $16,577 in common stock purchased by our employees through
the Employee Stock Purchase Plan, and $5,000 from the exercise of an employee
stock option. These increases

                                    Page 23

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

were offset slightly by the decrease in the fair value of available-for-sale
securities, net of tax, of $11,141.

At September 30, 2004 and December 31, 2003, the Bank's risk-based capital
ratios and the minimums to be considered well-capitalized under the Federal
Reserve Board's prompt corrective action guidelines were as follows:

<TABLE>
<CAPTION>
                                                              Western Reserve Bank
                                                              --------------------           Minimum to be
                                                        September 30,      December 31,        considered
                                                            2004               2003         well-capitalized
                                                            ----               ----         ----------------
<S>                                                     <C>                <C>              <C>
Tier 1 leverage ratio                                       7.1%                7.1%               5.0%
Tier 1 "core" capital to risk-weighted assets               7.7                 7.7                6.0
Total capital to risk-weighted assets                      10.4                10.6               10.0
</TABLE>

We have grown rapidly in our six year history, and our continued growth has
required us to consider capital strategies to support that growth. We have
evaluated the growth trends and alternative mechanisms for supporting that
growth. Some of the options that management and the Board considered included
selling more common stock, issuing trust preferred securities, or borrowing
through a line of credit.

In May 2003 we obtained a $3,000,000 line of credit from a regional bank outside
of our market area. Under this facility, the Company can borrow against the line
of credit and then downstream capital as needed to the Bank in order to maintain
the Bank's capital levels above the well-capitalized minimums. Factors that the
Board and management considered in choosing to use a line of credit include the
fact that this approach does not dilute current shareholders' positions, and
interest rates are extremely favorable at this time. This line carries an
interest rate of 0.75% below the prime rate, and has a term of two years,
maturing in May 2005. Interest payments are due monthly, with the principal due
at maturity. The debt is secured by the common stock of the Bank. By borrowing
against the line of credit and then investing the funds into the Bank as
capital, we are able to manage the Bank's capital ratios. As of September 30,
2004, the Company had borrowed $800,000 under the line of credit, and invested
the proceeds in the Bank in the form of additional paid-in capital.

In October 2003, the Bank submitted an application to the Ohio Division of
Financial Institutions and the Federal Reserve Board for permission to establish
a banking office in Brecksville, Ohio. We received regulatory approval in
December 2003, and the office opened on October 4, 2004.

                                    Page 24

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

LIQUIDITY AND CAPITAL RESOURCES (CONTINUED)

In conjunction with our continuing growth in Medina as well as the expected
future growth of the Brecksville location, we have been raising additional
capital through an intrastate common stock offering. Shares of stock purchased
in the offering may not be resold to anyone outside of the State of Ohio for
nine months after their issuance. This offering, which began on May 15, 2004, is
for up to 83,333 additional common shares at an offering price of $30.00 per
share, for a total of up to $2,499,990. Through July 15, the offer was open
exclusively to residents and businesspeople in Brecksville and adjacent
communities in order to encourage ownership and involvement in the Brecksville
area. After that date, remaining shares were made available for purchase to
anyone in the State of Ohio, including current shareholders. The offering, which
was originally scheduled to close on September 15, 2004, was extended by the
Board of Directors through November 30, 2004. The Company issued 38,400 shares
of common stock to fill all the subscriptions received through September 15,
2004. As of September 30, 2004, we have received additional subscriptions for
3,433 shares of stock. Those shares will be issued after the close of the
offering.

In October 2003, the Board of Directors approved The Western Reserve Bancorp,
Inc. Employee Stock Purchase Plan. We filed a Form S-8 Registration Statement
with the Securities and Exchange Commission on April 1, 2004, and the Plan
became effective on that date. Under this Plan, each of our employees is
eligible to purchase, through payroll deduction or direct payment to the
Company, up to $3,000 worth of common stock per year at market prices and
without brokerage commissions. Because the Plan has been registered with the
SEC, there will be no restrictions on the resale of the stock, other than those
applicable to "affiliates" as defined in Rule 144 of the Securities and Exchange
Commission. There were 5,000 shares of authorized but unissued shares of stock
originally allocated to the Plan. In the second and third quarters of 2004,
twenty participating employees purchased a total of 553 shares of stock at
$30.00 per share through the Plan.

                                    Page 25

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

INTEREST RATE SENSITIVITY

In the past few years, interest rates have decreased significantly, to levels
not seen in over 40 years. In 2001, there were 11 interest rate decreases
totaling 475 basis points. In 2002, rates seemed to have stabilized, and then
there was another 50 basis point rate cut in November. Then, in June 2003,
short-term rates were decreased by another 25 basis points.

As short-term rates approached zero (the overnight Federal funds rate was as low
as 1.00%), already-low deposit rates could not be reduced as quickly or as
deeply as loan rates. This has caused downward pressure on most banks' net
interest margins, including ours.

At year-end 2002, approximately 55.5% of the interest-bearing assets on our
balance sheet matured or could reprice in one year or less. Nearly all of the
interest-bearing liabilities were variable-rate core deposits. As of December
31, 2002, there were $44,355,000 of assets and $45,126,000 of liabilities that
matured or could be repriced within one year. Our one-year GAP ratio was 98.3%.
Therefore, our balance sheet was in a balanced, or neutral, interest rate
sensitivity position.

By mid-2002, we believed that rates were at or near their low point, and began
to change our strategy to position the balance sheet to benefit when rates would
begin to increase. In implementing this strategy, we made more loans tied to the
prime rate, which would reprice higher when rates begin to rise, and, on the
deposit side, emphasized longer-term CDs to lock in funding at the historically
low rates. The immediate impact of this strategy was to give up some interest
income, since variable rate loans are generally offered at a lower rate than
fixed rate loans, and also to include additional interest expense, since we had
to pay depositors a higher rate to accept longer-term deposits.

By year-end 2003, $74,010,000 of assets and $59,153,000 of liabilities matured
or could be repriced in one year. Thus the asset sensitivity, or GAP, in the
balance sheet had increased significantly, to $14,857,000, or 125.1%. As of
September 30, 2004, the one-year GAP was $22,363,000, or 134.4%, and remains in
a strongly asset-sensitive position.

While this strategy will benefit our net interest income in a rising rate
environment, in the short term, the effect has been to compress the net interest
margin while rates were low.

In June of 2004, the Federal Reserve changed its outlook and has increased its
target overnight Federal funds rate three times, by a total of 75 basis points,
to 1.75%. Provided the Federal Reserve continues its bias toward increasing
interest rates, we should benefit from an increase in our net interest margin.

                                    Page 26

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
                            AND RESULTS OF OPERATIONS
                               SEPTEMBER 30, 2004

CRITICAL ACCOUNTING POLICIES

The allowance for loan losses is a valuation allowance for probable incurred
credit losses, increased by the provision for loan losses and recoveries and
decreased by charge-offs. Management estimates the allowance balance by
considering the nature and volume of the portfolio, information about specific
borrower situations and estimated collateral values, economic conditions and
other factors. Allocations of the allowance may be made for specific loans, but
the entire allowance is available for any loan that, in management's judgment,
should be charged-off. Loan losses are charged against the allowance when
management believes the loan balance cannot be collected. Management considers
various factors, including portfolio risk, economic environment and loan
delinquencies, when determining the level of the provision for loan losses. Loan
quality is monitored on a monthly basis by management and twice annually by an
independent third party. Given the fact that the Company began operations in
1998, there is not sufficient historical data on the loan portfolio to identify
consistent or significant trends in loan losses.

                                    Page 27

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                             CONTROLS AND PROCEDURES
                               SEPTEMBER 30, 2004

The Company carried out an evaluation, under the supervision and with the
participation of the Company's management, including its Chief Executive Officer
and Chief Financial Officer, of the effectiveness of the design and operation of
the Company's disclosure controls and procedures as of September 30, 2004,
pursuant to Exchange Act Rule 13a-15. Based upon that evaluation, the Chief
Executive Officer and Chief Financial Officer concluded that the Company's
disclosure controls and procedures were, to the best of their knowledge,
effective as of September 30, 2004, in timely alerting them to material
information relating to the Company (including its consolidated subsidiary)
required to be included in the Company's periodic SEC filings.

There was no change in the Company's internal control over financial reporting
that occurred during the Company's fiscal quarter ended September 30, 2004, that
has materially affected, or is reasonably likely to materially affect, the
Company's internal control over financial reporting.

                                    Page 28

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                                   FORM 10-QSB
                               SEPTEMBER 30, 2004

                           PART II--OTHER INFORMATION

Items 1, 3, 4 and 5 are not applicable.

Item 2 - Changes in Securities

         (c) The Company began an offering of up to 83,333 shares of its common
         stock on May 15, 2004. The offering was made first to persons that are
         residents of, operate businesses in, or otherwise have a connection to
         the City of Brecksville, Ohio and immediately surrounding communities.
         After July 15, 2004, the sale of any remaining shares was opened to any
         resident of the State of Ohio. The offering price is $30.00 per share.
         As of September 30, 2004, 38,400 shares had been issued under the
         offering, and an additional 3,433 shares had been subscribed. Through
         November 8, a total of 11,366 shares have been subscribed but not yet
         issued. The Company has extended the offering through November 30,
         2004.

         The Company did not employ an underwriter or broker to sell the shares.
         Instead, the shares have been sold directly by the Company through its
         officers and directors without the payment of any commissions.

         The shares have been sold in reliance upon Section 3(a)(11) of the
         Securities Act of 1933 and Rule 147 promulgated thereunder solely to
         residents of the State of Ohio. A registration statement on Form
         6(A)(1) was filed on May 3, 2004, with the Ohio Division of Securities
         pursuant to Section 1707.06(A)(1) of the Ohio Revised Code.

         Because of the requirements of Rule 147, the shares issued under the
         offering can not be sold outside of the State of Ohio for nine (9)
         months after issuance. The certificates representing the shares sold in
         the offering will bear a legend noting such restriction. A copy of the
         legend to be placed on the shares is attached hereto as Exhibit 4.2.

         The proceeds raised through the sale of the shares in the offering will
         be used for general corporate purposes. The majority of the proceeds
         will be used to augment the capital of Western Reserve Bank, the
         Company's wholly owned commercial bank subsidiary.

                                    Page 29

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                                   FORM 10-QSB
                               SEPTEMBER 30, 2004

Item 6 - Exhibits and Reports on Form 8-K:

    (a)  Exhibits

<TABLE>
<CAPTION>
EXHIBIT
NUMBER                                            DESCRIPTION
------                                            -----------
<S>          <C>                                                                                            <C>
  3.1        Articles of Incorporation of Western Reserve Bancorp, Inc.                                     *

  3.2        Code of Regulations of Western Reserve Bancorp, Inc.                                           *

  4.1        Stock Certificate of Western Reserve Bancorp, Inc.                                             *

  4.2        Legend to be Placed on Certificates Representing Shares Issued in the Offering

 10.1        Employment Agreement of Edward J. McKeon, Dated December 14, 2001                              *

 10.2        Lease Agreement by and between Michael Rose DBA Washington Properties and Western Reserve
             Bancorp, Inc.                                                                                  *

 10.3        Western Reserve Bancorp, Inc. 1998 Stock Option Plan, Amended and Restated as of April 20,
             2000                                                                                           *

 10.4        Agreement by and between Western Reserve Bancorp, Inc. and Brian K. Harr, dated June 18,
             2001, as amended February 20, 2002                                                             *

 10.5        Agreement by and between Western Reserve Bancorp, Inc. and Cynthia A. Mahl, dated June 18,
             2001, as amended February 20, 2002                                                             *

 10.6        Loan Agreement between Western Reserve Bancorp, Inc. and TCF National Bank, dated May 5, 2003  *

 10.7        Western Reserve Bank Supplemental Executive Retirement Plan, dated May 15, 2003                *

 10.8        Western Reserve Bancorp, Inc. Employee Stock Purchase Plan                                     *

 31.1        Certification under Section 302 of the Sarbanes-Oxley Act by Edward J. McKeon, President and
             Chief Executive Officer

 31.2        Certification under Section 302 of the Sarbanes-Oxley Act by Cynthia A. Mahl, Senior Vice
             President and Chief Financial Officer

 32.1        Certification under Section 906 of the Sarbanes-Oxley Act by Edward J. McKeon, President and
             Chief Executive Officer

 32.2        Certification under Section 906 of the Sarbanes-Oxley Act by Cynthia A. Mahl, Senior Vice
             President and Chief Financial Officer
</TABLE>

* Previously filed and incorporated herein by reference.

    (b)  Reports on Form 8-K

         No current reports on Form 8-K were filed by the Company during the
         quarter ended September 30, 2004.

                                    Page 30

<PAGE>

                          WESTERN RESERVE BANCORP, INC.
                                   FORM 10-QSB
                        QUARTER ENDED SEPTEMBER 30, 2004

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.

                                         Western Reserve Bancorp, Inc.
                                         By:

Date: November 12, 2004                  /s/ Edward J. McKeon
                                         Edward J. McKeon
                                         President and Chief Executive
                                         Officer
                                         (Principal Executive Officer)

                                         /s/ Cynthia A. Mahl
                                         Cynthia A. Mahl
                                         Senior Vice President/Chief
                                         Financial Officer
                                         (Principal Financial Officer)

                                    Page 31