##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-QSB
 þ
    
    Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
 For the quarter ended June 30, 2005
 o
    
    Transition Report Under Section 13 or 15(d) of the Exchange Act
 Commission file number 333-43361
 WESTERN
RESERVE BANCORP, INC.
  Ohio
    
    31-1566623(State or other jurisdiction of
    
    (IRS Employerincorporation or organization)
    
    Identification No.)
  
   
  þ o
   
   
  o þ
   Page 1




---



WESTERN
RESERVE BANCORP, INC.
 FORM 10-QSB
Quarter ended June 30, 2005
 PagePART IFinancial InformationITEM 1 FINANCIAL STATEMENTSConsolidated Balance Sheets as of June 30, 2005
and December 31, 2004
    

    
    3Consolidated Statements of Income for the three months
and six months ended June 30, 2005 and 2004
    
    
    4Consolidated Statements of Comprehensive Income for the
three months
and six months ended June 30, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows for the six months
ended June 30, 2005 and 2004
    
    
    6Notes to Consolidated Financial Statements
    
    
    7ITEM 2 MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    14ITEM 3 CONTROLS AND PROCEDURES
    
    
    32PART IIOther Information
    
    
    33SIGNATURES
    
    
    36EX-4.2 Legend to be Placed on CertificatesEX-10.11 Second Amendment to Loan AgreementEX-31.1 Certification of President and CEOEX-31.2 Certification of Senior Vice President and CFOEX-32.1 Certification of President and CEOEX-32.2 Certification of Senior Vice President and CFO
  Page 2




---



##### Table of Contents



(Unaudited)June 30,
    
    December 31,2005
    
    2004AssetsCash and due from financial institutions
    
    $
    3,975,373
    
    
    $
    2,059,119Federal funds sold and other short-term funds
    
    
    4,469,000
    
    
    
    4,877,000Cash and cash equivalents
    
    
    8,444,373
    
    
    
    6,936,119Securities available for sale
    
    
    1,593,617
    
    
    
    1,204,686Loans held for sale
    
    
    
    
    
    
    250,835Loans
    
    
    112,464,459
    
    
    
    104,735,255Allowance for loan losses
    
    
    (1,547,414
    )
    
    
    (1,605,933
    )Loans, net
    
    
    110,917,045
    
    
    
    103,129,322Federal Reserve Bank stock
    
    
    198,300
    
    
    
    198,300Federal Home Loan Bank stock
    
    
    285,300
    
    
    
    278,900Premises and equipment, net
    
    
    1,373,624
    
    
    
    1,371,248Accrued interest receivable and other assets
    
    
    1,577,401
    
    
    
    1,880,740Total Assets
    
    $
    124,389,660
    
    
    $
    115,250,150Liabilities and Shareholders EquityDepositsNoninterest-bearing
    
    $
    12,218,436
    
    
    $
    12,668,555Interest-bearing
    
    
    96,317,214
    
    
    
    89,158,414Total deposits
    
    
    108,535,650
    
    
    
    101,826,969Federal Home Loan Bank advances
    
    
    3,500,000
    
    
    
    2,500,000Accrued interest payable and other liabilities
    
    
    1,225,220
    
    
    
    307,252Total Liabilities
    
    
    113,260,870
    
    
    
    104,634,221Shareholders EquityCommon stock, without par value, $1 stated value:750,000 shares authorized; 457,035 and
455,624 shares issued and outstanding as of
June 30, 2005 and December 31, 2004
    
    
    457,035
    
    
    
    455,624Additional paid-in capital
    
    
    9,519,502
    
    
    
    9,484,470Retained earnings
    
    
    1,155,817
    
    
    
    678,651Accumulated other comprehensive (loss)
    
    
    (3,564
    )
    
    
    (2,816
    )Total Shareholders Equity
    
    
    11,128,790
    
    
    
    10,615,929Total Liabilities and Shareholders Equity
    
    $
    124,389,660
    
    
    $
    115,250,150
  Page 3




---



##### Table of Contents



Three months ended June 30,
    
    Six months ended June 30,2005
    
    2004
    
    2005
    
    2004Interest incomeLoans, including fees
    
    $
    1,864,817
    
    
    $
    1,450,505
    
    
    $
    3,518,177
    
    
    $
    2,836,078Securities
    
    
    18,926
    
    
    
    20,981
    
    
    
    36,959
    
    
    
    42,534Federal funds sold and other
short-term funds
    
    
    36,695
    
    
    
    14,759
    
    
    
    63,865
    
    
    
    22,4901,920,438
    
    
    
    1,486,245
    
    
    
    3,619,001
    
    
    
    2,901,102Interest expenseDeposits
    
    
    671,272
    
    
    
    445,840
    
    
    
    1,233,416
    
    
    
    883,391Borrowings
    
    
    27,644
    
    
    
    60,342
    
    
    
    47,678
    
    
    
    102,458698,916
    
    
    
    506,182
    
    
    
    1,281,094
    
    
    
    985,849Net interest income
    
    
    1,221,522
    
    
    
    980,063
    
    
    
    2,337,907
    
    
    
    1,915,253Provision for loan losses
    
    
    (85,300
    )
    
    
    30,450
    
    
    
    (56,400
    )
    
    
    93,850Net interest income after
provision for loan losses
    
    
    1,306,822
    
    
    
    949,613
    
    
    
    2,394,307
    
    
    
    1,821,403Noninterest incomeService charges on deposit accounts
    
    
    33,270
    
    
    
    29,937
    
    
    
    61,821
    
    
    
    58,941Net gains on sales of loans
    
    
    50,782
    
    
    
    45,404
    
    
    
    128,621
    
    
    
    46,896Other
    
    
    31,772
    
    
    
    36,502
    
    
    
    73,078
    
    
    
    67,698115,824
    
    
    
    111,843
    
    
    
    263,520
    
    
    
    173,535Noninterest expenseSalaries and employee benefits
    
    
    437,735
    
    
    
    399,878
    
    
    
    922,539
    
    
    
    796,025Premises and equipment, net
    
    
    200,222
    
    
    
    101,910
    
    
    
    394,401
    
    
    
    197,682Data processing
    
    
    73,555
    
    
    
    58,760
    
    
    
    147,822
    
    
    
    115,733Professional fees
    
    
    90,350
    
    
    
    53,661
    
    
    
    170,181
    
    
    
    109,938Taxes other than income and payroll
    
    
    23,949
    
    
    
    23,031
    
    
    
    50,258
    
    
    
    47,263Community and shareholder relations
and contributions
    
    
    24,629
    
    
    
    13,247
    
    
    
    40,390
    
    
    
    31,069Supplies, printing and postage
    
    
    19,592
    
    
    
    24,518
    
    
    
    41,274
    
    
    
    41,059Other
    
    
    98,143
    
    
    
    70,950
    
    
    
    172,557
    
    
    
    135,052968,175
    
    
    
    745,955
    
    
    
    1,939,422
    
    
    
    1,473,821Income before income taxes
    
    
    454,471
    
    
    
    315,501
    
    
    
    718,405
    
    
    
    521,117Income tax expense
    
    
    152,466
    
    
    
    106,754
    
    
    
    241,239
    
    
    
    175,931Net income
    
    $
    302,005
    
    
    $
    208,747
    
    
    $
    477,166
    
    
    $
    345,186Average shares outstanding (basic)
    
    
    456,621
    
    
    
    388,054
    
    
    
    456,151
    
    
    
    388,053Average shares outstanding (diluted)
    
    
    471,808
    
    
    
    399,558
    
    
    
    471,380
    
    
    
    398,451Basic income per share
    
    $
    0.66
    
    
    $
    0.54
    
    
    $
    1.05
    
    
    $
    0.89Diluted income per share
    
    $
    0.64
    
    
    $
    0.52
    
    
    $
    1.01
    
    
    $
    0.87
 
 Page 4




---



##### Table of Contents



Three months ended June 30,
    
    Six months ended June 30,2005
    
    2004
    
    2005
    
    2004Net income
    
    $
    302,005
    
    
    $
    208,747
    
    
    $
    477,166
    
    
    $
    345,186Other comprehensive income, net of tax:Unrealized gains/(losses) on securities
arising during the
period
    
    
    10,394
    
    
    
    (13,766
    )
    
    
    (748
    )
    
    
    (14,646
    )Comprehensive income
    
    $
    312,399
    
    
    $
    194,981
    
    
    $
    476,418
    
    
    $
    330,540
  Page 5




---



##### Table of Contents



Six months ended June 30,2005
    
    2004Cash flows from operating activitiesNet income
    
    $
    477,166
    
    
    $
    345,186Adjustments to reconcile net income to net cash from operating activities:Provision for loan losses
    
    
    (56,400
    )
    
    
    93,850Depreciation
    
    
    88,106
    
    
    
    46,713Net amortization of securities
    
    
    3,109
    
    
    
    6,600Loans originated for sale
    
    
    (1,498,376
    )
    
    
    (1,700,436
    )Proceeds from sales of loan originations
    
    
    1,626,997
    
    
    
    1,747,332Gains on sales of loans
    
    
    (128,621
    )
    
    
    (46,896
    )Federal Home Loan Bank stock dividends
    
    
    (6,400
    )
    
    
    (4,600
    )Net change in:Interest receivable
    
    
    (32,397
    )
    
    
    (28,702
    )Interest payable
    
    
    29,920
    
    
    
    9,015Other assets
    
    
    336,119
    
    
    
    (219,902
    )Other liabilities
    
    
    888,048
    
    
    
    7,808Net cash from operating activities
    
    
    1,727,271
    
    
    
    255,968Cash flows from investing activitiesAvailable for sale securities:Purchases
    
    
    (958,171
    )
    
    
    Maturities, repayments and calls
    
    
    564,999
    
    
    
    104,561Purchase of Federal Reserve Bank stock
    
    
    
    
    
    
    (9,000
    )Purchase of Federal Home Loan Bank stock
    
    
    
    
    
    
    (73,200
    )Net increase in loans
    
    
    (7,480,487
    )
    
    
    (6,988,454
    )Purchases of premises and equipment
    
    
    (90,482
    )
    
    
    (139,509
    )Net cash from investing activities
    
    
    (7,964,141
    )
    
    
    (7,105,602
    )Cash flows from financing activitiesNet increase in deposits
    
    
    6,708,681
    
    
    
    9,371,182Proceeds from Federal Home Loan Bank advances
    
    
    1,000,000
    
    
    
    2,500,000Repayments of Federal Home Loan Bank advances
    
    
    
    
    
    
    (1,700,000
    )Proceeds from other borrowings
    
    
    
    
    
    
    300,000Proceeds from stock subscription
    
    
    
    
    
    
    52,500Proceeds from issuance of common stock
under Employee Stock Purchase Plan
    
    
    9,383
    
    
    
    6,780Proceeds from exercise of stock options
    
    
    27,060
    
    
    
    Net cash from financing activities
    
    
    7,745,124
    
    
    
    10,530,462Change in cash and cash equivalents
    
    
    1,508,254
    
    
    
    3,680,828Cash and cash equivalents at beginning of period
    
    
    6,936,119
    
    
    
    6,289,363Cash and cash equivalents at end of period
    
    $
    8,444,373
    
    
    $
    9,970,191Supplemental cash flow information:Interest paid
    
    $
    1,231,294
    
    
    $
    976,384Income taxes paid
    
    
    203,000
    
    
    
    301,000Supplemental disclosure of noncash investing activities:Non cash transfer from loans originated for sale to loans
    
    $
    250,835
    
    
    $
    
  Page 6




---



##### Table of Contents



WESTERN RESERVE BANCORP, INC.
 
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
       Page 7




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Accounting for Stock Based Compensation
 Three months ended June 30,
    
    Six months ended June 30,2005
    
    2004
    
    2005
    
    2004Net income as reported
    
    $
    302,005
    
    
    $
    208,747
    
    
    $
    477,166
    
    
    $
    345,186Deduct: stock based
compensation expense
determined under fair value
based method
    
    
    (857
    )
    
    
    (2,115
    )
    
    
    (1,577
    )
    
    
    (4,231
    )Pro forma net income
    
    $
    301,148
    
    
    $
    206,632
    
    
    $
    475,589
    
    
    $
    340,955Basic earnings per share
as reported
    
    $
    0.66
    
    
    $
    0.54
    
    
    $
    1.05
    
    
    $
    0.89Pro forma basic earnings
per share
    
    $
    0.66
    
    
    $
    0.53
    
    
    $
    1.04
    
    
    $
    0.88Diluted earnings per share
as reported
    
    $
    0.64
    
    
    $
    0.52
    
    
    $
    1.01
    
    
    $
    0.87Pro forma diluted earnings
per share
    
    $
    0.64
    
    
    $
    0.52
    
    
    $
    1.01
    
    
    $
    0.86
 Page 8




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  2005Risk-free interest rate
    
    
    3.96
    %Expected option life (years)
    
    
    7Expected stock price volatility
    
    
    6.96
    %Dividend yield
    
    
    0.00
    %
   Page 9




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
   Three months ended June 30,
    
    Six months ended June 30,2005
    
    2004
    
    2005
    
    2004Numerator:Net income
    
    $
    302,005
    
    
    $
    208,747
    
    
    $
    477,166
    
    
    $
    345,186Denominator:Denominator for basic
earnings per share
weighted average shares
    
    
    456,621
    
    
    
    388,054
    
    
    
    456,151
    
    
    
    388,053Effect of dilutive securities:Nonqualified stock options
    
    
    15,187
    
    
    
    11,504
    
    
    
    15,230
    
    
    
    10,398Denominator for diluted
earnings per share
    
    
    471,808
    
    
    
    399,558
    
    
    
    471,380
    
    
    
    398,451Basic earnings per share
    
    $
    0.66
    
    
    $
    0.54
    
    
    $
    1.05
    
    
    $
    0.89Diluted earnings per share
    
    $
    0.64
    
    
    $
    0.52
    
    
    $
    1.01
    
    
    $
    0.87
  Page 10




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 2  LOANS
  June 30,
    
    December 31,2005
    
    2004Commercial real estate
    
    $
    59,008,619
    
    
    $
    51,972,391Commercial business
    
    
    14,933,735
    
    
    
    16,602,755Commercial lines of credit
    
    
    20,235,486
    
    
    
    16,981,850Commercial construction
    
    
    5,690,573
    
    
    
    6,898,890Home equity
    
    
    9,850,986
    
    
    
    9,857,867Residential mortgage
and construction
    
    
    1,335,141
    
    
    
    821,658Consumer installment
    
    
    1,156,034
    
    
    
    1,308,084Credit card and other
    
    
    253,885
    
    
    
    291,760$
    112,464,459
    
    
    $
    104,735,255
  Six months ended June 30,2005
    
    2004Beginning balance
    
    $
    1,605,933
    
    
    $
    1,502,688Loans charged off
    
    
    (4,000
    )
    
    
    Recoveries
    
    
    1,881
    
    
    
    Provision for loan losses
    
    
    (56,400
    )
    
    
    93,850Ending balance
    
    $
    1,547,414
    
    
    $
    1,596,538
  Page 11




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 3  DEPOSITS
  June 30,
    
    December 31,2005
    
    2004Noninterest-bearing demand
    
    $
    12,218,436
    
    
    $
    12,668,555Interest-bearing demand
    
    
    6,587,729
    
    
    
    6,770,262Market Rate Savings
    
    
    39,734,005
    
    
    
    34,762,160Time under $100,000
    
    
    29,019,654
    
    
    
    29,027,314Time $100,000 and over
    
    
    20,975,826
    
    
    
    18,598,678$
    108,535,650
    
    
    $
    101,826,969
  NOTE 4FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
  June 30,
    
    December 31,2005
    
    2004Maturing March 2009, fixed rate advance at 3.25%
    
    $
    2,500,000
    
    
    $
    2,500,000Maturing April 2010, fixed rate advance at 4.57%
    
    
    1,000,000
    
    
    
    $
    3,500,000
    
    
    $
    2,500,000
   Page 12




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 NOTES TO FINANCIAL STATEMENTS
June 30, 2005
 NOTE 4  FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (continued)
   Page 13




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 OVERVIEW
    FINANCIAL CONDITION
 Assets
   Page 14




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 FINANCIAL CONDITION (continued)
       Page 15




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 FINANCIAL CONDITION (continued)
  Liabilities
    Page 16




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 FINANCIAL CONDITION (continued)
     Shareholders Equity
   Page 17




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS
OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005
  Net Interest Income
  Page 18




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
  ($ in thousands)
    
    2005
    
    2004Average
    
    Income/
    
    Yield/
    
    Average
    
    Income/
    
    Yield/Balance
    
    Expense
    
    Cost
    
    Balance
    
    Expense
    
    CostLoans
    
    $
    108,279
    
    
    $
    3,518
    
    
    
    6.55
    %
    
    $
    100,423
    
    
    $
    2,836
    
    
    
    5.66
    %Investment securities-taxable
    
    
    984
    
    
    
    19
    
    
    
    3.92
    %
    
    
    1,669
    
    
    
    32
    
    
    
    3.87
    %Investment securities-tax exempt
    
    
    328
    
    
    
    8
    
    
    
    4.98
    %
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other
short-term funds
    
    
    4,779
    
    
    
    64
    
    
    
    2.69
    %
    
    
    4,844
    
    
    
    22
    
    
    
    0.93
    %Federal Reserve Bank stock
    
    
    198
    
    
    
    6
    
    
    
    6.05
    %
    
    
    193
    
    
    
    6
    
    
    
    6.05
    %Federal Home Loan Bank stock
    
    
    280
    
    
    
    7
    
    
    
    4.69
    %
    
    
    236
    
    
    
    5
    
    
    
    4.00
    %Total interest earning assets
    
    
    114,848
    
    
    
    3,622
    
    
    
    6.36
    %
    
    
    107,365
    
    
    
    2,901
    
    
    
    5.45
    %Noninterest earning assets
    
    
    3,941
    
    
    
    
    
    
    
    
    
    
    
    2,682Total Assets
    
    $
    118,789
    
    
    
    
    
    
    
    
    
    
    $
    110,047Interest bearing deposits
    
    $
    91,545
    
    
    
    1,233
    
    
    
    2.70
    %
    
    $
    85,569
    
    
    
    883
    
    
    
    2.08
    %Borrowings
    
    
    2,831
    
    
    
    48
    
    
    
    3.40
    %
    
    
    5,381
    
    
    
    103
    
    
    
    3.84
    %Total interest bearing liabilities
    
    
    94,376
    
    
    
    1,281
    
    
    
    2.72
    %
    
    
    90,950
    
    
    
    986
    
    
    
    2.17
    %Noninterest bearing liabilities
    
    
    13,613
    
    
    
    
    
    
    
    
    
    
    
    10,327Shareholders equity
    
    
    10,800
    
    
    
    
    
    
    
    
    
    
    
    8,770Total Liabilities and
Shareholders Equity
    
    $
    118,789
    
    
    
    
    
    
    
    
    
    
    $
    110,047Net interest income/interest rate
spread
    
    
    
    
    
    
    2,341
    
    
    
    3.64
    %
    
    
    
    
    
    
    1,915
    
    
    
    3.28
    %Tax equivalent adjustment
    
    
    
    
    
    
    (3
    )
    
    
    
    
    
    
    
    
    
    
    Net interest income per financial
statements
    
    
    
    
    
    $
    2,338
    
    
    
    3.64
    %
    
    
    
    
    
    $
    1,915
    
    
    
    3.28
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.11
    %
    
    
    
    
    
    
    
    
    
    
    3.58
    %(Net yield on average earning assets)
 Page 19




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
  Six months endedJune 30, 2005 vs. 2004Increase (Decrease)In Net Interest Income Due To:($ in thousands)
    
    Volume
    
    Rate
    
    NetInterest income:Loans
    
    $
    225
    
    
    $
    457
    
    
    $
    682Federal funds sold and
other short-term funds
    
    
    (2
    )
    
    
    44
    
    
    
    42Investment securities-taxable
    
    
    (13
    )
    
    
    
    
    
    
    (13
    )Investment securities-tax exempt
    
    
    8
    
    
    
    
    
    
    
    8Federal Home Loan Bank stock
    
    
    1
    
    
    
    1
    
    
    
    2Total interest-earning assets
    
    
    219
    
    
    
    502
    
    
    
    721Interest expense:Interest-bearing transaction
Accounts
    
    
    
    
    
    
    (4
    )
    
    
    (4
    )Market rate savings accounts
    
    
    (56
    )
    
    
    (238
    )
    
    
    (294
    )Certificates of deposit and IRAs
    
    
    42
    
    
    
    (94
    )
    
    
    (52
    )FHLB advances
    
    
    33
    
    
    
    11
    
    
    
    44Other borrowings
    
    
    11
    
    
    
    
    
    
    
    11Total interest-bearing liabilities
    
    
    30
    
    
    
    (325
    )
    
    
    (295
    )Change in net interest income
    
    $
    249
    
    
    $
    177
    
    
    $
    426
 Page 20




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
 Interest Income
    Interest Expense
    Page 21




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
 Net Interest Margin
    Provision for Loan Losses
   Page 22




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
   Noninterest Income
     Page 23




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
 Noninterest Expense
     Six months endedJune 30,2005
    
    2004Marketing and advertising
    
    $
    45,000
    
    
    $
    27,000Loan expenses
    
    
    36,000
    
    
    
    22,000Insurance
    
    
    27,000
    
    
    
    25,000Travel and entertainment
    
    
    19,000
    
    
    
    21,000Telephone
    
    
    13,000
    
    
    
    12,000Other
    
    
    33,000
    
    
    
    28,000$
    173,000
    
    
    $
    135,000
  Page 24




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE SIX MONTHS ENDED JUNE 30, 2005 (continued)
   RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2005
  Net Interest Income
   Page 25




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2005 (continued)
 Provision for Loan Losses
  Noninterest Income
  Noninterest Expense
   Page 26




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED JUNE 30, 2005 (continued)
  Three months endedJune 30,2005
    
    2004Marketing and advertising
    
    $
    26,000
    
    
    $
    15,000Loan expenses
    
    
    24,000
    
    
    
    9,000Insurance
    
    
    15,000
    
    
    
    14,000Travel and entertainment
    
    
    10,000
    
    
    
    12,000Telephone
    
    
    7,000
    
    
    
    6,000Other
    
    
    17,000
    
    
    
    15,000$
    99,000
    
    
    $
    71,000
 LIQUIDITY AND CAPITAL RESOURCES
    Page 27




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 LIQUIDITY AND CAPITAL RESOURCES (continued)
    Minimum
    
    Minimumto be
    
    required forWestern Reserve Bank
    
    considered
    
    capitalJune 30,
    
    December 31,
    
    well-
    
    adequacy2005
    
    2004
    
    capitalized
    
    purposesTier 1 core capital to
risk-weighted assets
    
    
    7.8
    %
    
    
    7.6
    %
    
    
    6.0
    %
    
    
    4.0
    %Total capital to
risk-weighted assets
    
    
    10.4
    %
    
    
    10.2
    %
    
    
    10.0
    %
    
    
    8.0
    %Tier 1 leverage ratio
    
    
    7.4
    %
    
    
    6.9
    %
    
    
    5.0
    %
    
    
    4.0
    %
   Page 28




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 LIQUIDITY AND CAPITAL RESOURCES (continued)
     Page 29




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 INTEREST RATE SENSITIVITY
       Page 30




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
June 30, 2005
 CRITICAL ACCOUNTING POLICIES
  Page 31




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 CONTROLS AND PROCEDURES
June 30, 2005
   Page 32




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 FORM 10-QSB
June 30, 2005
 
 PART IIOTHER INFORMATION
         Page 33




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 FORM 10-QSB
June 30, 2005
       ExhibitNo.
    
    Description of Exhibits3.1
    
    Articles of Incorporation 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)
    
    *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)
    
    *4.2
    
    Legend to be Placed on Certificates Representing Shares Issued in the Offering10.1
    
    Employment Agreement of Edward J. McKeon, Dated December 14, 2001.
(incorporated by reference to the Companys Report on Form 10-KSB filed with
the Commission on April 1, 2002)
    
    *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 April 20, 2000 (incorporated by reference to the Companys Report on Form
10-QSB filed with the Commission on August 13, 2000)
    
    *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)
    
    *
 Page 34




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 FORM 10-QSB
June 30, 2005
  ExhibitNo.
    
    Description of Exhibits10.6
    
    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)
    
    *10.10
    
    First Amendment to 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 of Form 10-QSB filed with the
Commission on May 16, 2005)
    
    *10.11
    
    Second Amendment to Loan Agreement by and between
Western Reserve Bancorp, Inc. and TCF National Bank,
dated June 30, 200511
    
    Statement re: Computation of Per Share Earnings
(incorporated by reference to Note 1 of this Form
10-QSB)
    
    *31.1
    
    Certification under Section 302 of the
Sarbanes-Oxley Act by Edward J. McKeon, President
and Chief Executive Officer31.2
    
    Certification under Section 302 of the
Sarbanes-Oxley Act by Cynthia A. Mahl, Senior Vice
President and Chief Financial Officer32.1
    
    Certification under Section 906 of the
Sarbanes-Oxley Act by Edward J. McKeon, President
and Chief Executive Officer32.2
    
    Certification under Section 906 of the
Sarbanes-Oxley Act by Cynthia A. Mahl, Senior Vice
President and Chief Financial Officer
 
 *
    
    Previously filed and incorporated herein by reference.    Page 35




---



##### Table of Contents



WESTERN
RESERVE BANCORP, INC.
 FORM 10-QSB
Quarter ended June 30, 2005
 
 SIGNATURES
  Western Reserve Bancorp, Inc.By:Date: August 15, 2005
    
    /s/ Edward J. McKeonEdward J. McKeonPresident and Chief Executive Officer(Principal Executive Officer)/s/ Cynthia A. MahlCynthia A. MahlSenior Vice President/Chief Financial Officer(Principal Financial Officer)
 Page 36