##### 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 September 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
incorporation or organization)
    
    (IRS Employer
Identification No.)
 4015 Medina Road, Suite 100, P.O. Box 585, Medina, Ohio 44256
 (330) 764-3131
 þ o
 o þ
  Common Stock, no par value, $1.00 stated value
 457,185 common shares
 o þ




---



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
Quarter ended September 30, 2005
 PagePART IFinancial InformationITEM 1
    
    FINANCIAL STATEMENTSConsolidated Balance Sheets as of September 30, 2005 and December 31, 2004
    
    
    3Consolidated Statements of Income for the three months and nine months ended September 30, 2005 and 2004
    
    
    4Consolidated Statements of Comprehensive Income for the three months and nine months ended September 30, 2005 and 2004
    
    
    5Consolidated Statements of Cash Flows for the nine months ended September 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
    
    
    31PART IIOther Information
    
    
    32SIGNATURES
    
    
    35EX-4.2 LEGEND FOR CERTIFICATESEX-31.1 CERTIFICATION 302 - CEOEX-31.2 CERTIFICATION 302 - CFOEX-32.1 CERTIFICATION 906 - CEOEX-32.2 CERTIFICATION 906 - CFO
  Page 2




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(Unaudited)Sept 30,
    
    
    December 31,2005
    
    
    2004AssetsCash and due from financial institutions
    
    $
    2,695,733
    
    
    $
    2,059,119Federal funds sold and other short-term funds
    
    
    8,768,829
    
    
    
    4,877,000Cash and cash equivalents
    
    
    11,464,562
    
    
    
    6,936,119Securities available for sale
    
    
    2,029,676
    
    
    
    1,204,686Loans held for sale
    
    
    
    
    
    
    250,835Loans
    
    
    111,265,795
    
    
    
    104,735,255Allowance for loan losses
    
    
    (1,552,814
    )
    
    
    (1,605,933
    )Loans, net
    
    
    109,712,981
    
    
    
    103,129,322Federal Reserve Bank stock
    
    
    219,300
    
    
    
    198,300Federal Home Loan Bank stock
    
    
    288,800
    
    
    
    278,900Premises and equipment, net
    
    
    1,329,367
    
    
    
    1,371,248Accrued interest receivable and other assets
    
    
    1,663,088
    
    
    
    1,880,740Total Assets
    
    $
    126,707,774
    
    
    $
    115,250,150Liabilities and Shareholders EquityDepositsNoninterest-bearing
    
    $
    12,858,581
    
    
    $
    12,668,555Interest-bearing
    
    
    98,717,312
    
    
    
    89,158,414Total deposits
    
    
    111,575,893
    
    
    
    101,826,969Federal Home Loan Bank advances
    
    
    3,500,000
    
    
    
    2,500,000Accrued interest payable and other liabilities
    
    
    276,808
    
    
    
    307,252Total Liabilities
    
    
    115,352,701
    
    
    
    104,634,221Shareholders EquityCommon stock, without par value, $1 stated value:750,000 shares authorized; 457,185 and
455,624 shares issued and outstanding as of
September 30, 2005 and December 31, 2004
    
    
    457,185
    
    
    
    455,624Additional paid-in capital
    
    
    9,523,849
    
    
    
    9,484,470Retained earnings
    
    
    1,383,840
    
    
    
    678,651Accumulated other comprehensive (loss)
    
    
    (9,801
    )
    
    
    (2,816
    )Total Shareholders Equity
    
    
    11,355,073
    
    
    
    10,615,929Total Liabilities and Shareholders Equity
    
    $
    126,707,774
    
    
    $
    115,250,150
  Page 3




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Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Interest incomeLoans, including fees
    
    $
    2,012,958
    
    
    $
    1,503,673
    
    
    $
    5,531,135
    
    
    $
    4,339,751Securities
    
    
    23,635
    
    
    
    20,393
    
    
    
    60,594
    
    
    
    62,927Federal funds sold and other
short-term funds
    
    
    51,052
    
    
    
    16,382
    
    
    
    114,917
    
    
    
    38,8722,087,645
    
    
    
    1,540,448
    
    
    
    5,706,646
    
    
    
    4,441,550Interest expenseDeposits
    
    
    757,066
    
    
    
    462,736
    
    
    
    1,990,482
    
    
    
    1,346,127Borrowings
    
    
    31,999
    
    
    
    43,560
    
    
    
    79,677
    
    
    
    146,018789,065
    
    
    
    506,296
    
    
    
    2,070,159
    
    
    
    1,492,145Net interest income
    
    
    1,298,580
    
    
    
    1,034,152
    
    
    
    3,636,487
    
    
    
    2,949,405Provision for loan losses
    
    
    67,400
    
    
    
    186,800
    
    
    
    11,000
    
    
    
    280,650Net interest income after
provision for loan losses
    
    
    1,231,180
    
    
    
    847,352
    
    
    
    3,625,487
    
    
    
    2,668,755Noninterest incomeService charges on deposit accounts
    
    
    38,348
    
    
    
    30,082
    
    
    
    100,169
    
    
    
    89,023Net gains on sales of loans
    
    
    22,725
    
    
    
    
    
    
    
    151,346
    
    
    
    46,896Other
    
    
    42,789
    
    
    
    26,108
    
    
    
    115,867
    
    
    
    93,806103,862
    
    
    
    56,190
    
    
    
    367,382
    
    
    
    229,725Noninterest expenseSalaries and employee benefits
    
    
    473,137
    
    
    
    411,512
    
    
    
    1,395,676
    
    
    
    1,207,537Premises and equipment, net
    
    
    198,813
    
    
    
    129,761
    
    
    
    593,214
    
    
    
    327,443Data processing
    
    
    75,418
    
    
    
    61,886
    
    
    
    223,240
    
    
    
    177,619Professional fees
    
    
    104,845
    
    
    
    46,206
    
    
    
    275,026
    
    
    
    156,144Taxes other than income and payroll
    
    
    25,084
    
    
    
    22,048
    
    
    
    75,342
    
    
    
    69,311Community and shareholder relations
and contributions
    
    
    13,589
    
    
    
    19,897
    
    
    
    53,979
    
    
    
    50,966Supplies, printing and postage
    
    
    17,442
    
    
    
    8,772
    
    
    
    58,716
    
    
    
    49,831Other
    
    
    83,654
    
    
    
    78,119
    
    
    
    256,211
    
    
    
    213,171991,982
    
    
    
    778,201
    
    
    
    2,931,404
    
    
    
    2,252,022Income before income taxes
    
    
    343,060
    
    
    
    125,341
    
    
    
    1,061,465
    
    
    
    646,458Income tax expense
    
    
    115,037
    
    
    
    42,616
    
    
    
    356,276
    
    
    
    218,547Net income
    
    $
    228,023
    
    
    $
    82,725
    
    
    $
    705,189
    
    
    $
    427,911Average shares outstanding (basic)
    
    
    457,037
    
    
    
    398,628
    
    
    
    456,449
    
    
    
    391,604Average shares outstanding (diluted)
    
    
    472,155
    
    
    
    413,912
    
    
    
    471,641
    
    
    
    403,604Basic income per share
    
    $
    0.50
    
    
    $
    0.21
    
    
    $
    1.54
    
    
    $
    1.09Diluted income per share
    
    $
    0.48
    
    
    $
    0.20
    
    
    $
    1.50
    
    
    $
    1.06
  Page 4




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Three months ended September 30,
    
    
    Nine months ended September 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income
    
    $
    228,023
    
    
    $
    82,725
    
    
    $
    705,189
    
    
    $
    427,911Other comprehensive income, net of tax:Unrealized gains/(losses) on securities
arising during the period
    
    
    (6,237
    )
    
    
    3,505
    
    
    
    (6,985
    )
    
    
    (11,141
    )Comprehensive income
    
    $
    221,786
    
    
    $
    86,230
    
    
    $
    698,204
    
    
    $
    416,770
  Page 5




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Nine months ended September 30,2005
    
    
    2004Cash flows from operating activitiesNet income
    
    $
    705,189
    
    
    $
    427,911Adjustments to reconcile net income to net cash from operating activities:Provision for loan losses
    
    
    11,000
    
    
    
    280,650Depreciation
    
    
    132,363
    
    
    
    71,985Net amortization of securities
    
    
    4,231
    
    
    
    10,122Loans originated for sale
    
    
    (2,003,376
    )
    
    
    (3,647,942
    )Proceeds from sales of loan originations
    
    
    2,154,722
    
    
    
    1,747,332Gains on sales of loans
    
    
    (151,346
    )
    
    
    (46,896
    )Federal Home Loan Bank stock dividends
    
    
    (9,900
    )
    
    
    (7,500
    )Net change in:Interest receivable
    
    
    (89,570
    )
    
    
    (63,975
    )Interest payable
    
    
    (21,427
    )
    
    
    (3,771
    )Other assets
    
    
    310,820
    
    
    
    (165,461
    )Other liabilities
    
    
    (6,677
    )
    
    
    (102,907
    )Net cash from operating activities
    
    
    1,036,029
    
    
    
    (1,500,452
    )Cash flows from investing activitiesAvailable for sale securities:Purchases
    
    
    (1,458,171
    )
    
    
    Maturities, repayments and calls
    
    
    618,367
    
    
    
    169,199Purchase of Federal Reserve Bank stock
    
    
    (21,000
    )
    
    
    (9,000
    )Purchase of Federal Home Loan Bank stock
    
    
    
    
    
    
    (73,200
    )Net increase in loans
    
    
    (6,343,824
    )
    
    
    (8,615,200
    )Purchases of premises and equipment
    
    
    (90,482
    )
    
    
    (270,642
    )Net cash from investing activities
    
    
    (7,295,110
    )
    
    
    (8,798,843
    )Cash flows from financing activitiesNet increase in deposits
    
    
    9,748,924
    
    
    
    6,922,158Proceeds 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
    
    
    
    
    
    
    1,225,384Proceeds from issuance of common stock under Employee Stock Purchase Plan
    
    
    13,880
    
    
    
    16,577Proceeds from exercise of Stock option
    
    
    24,720
    
    
    
    5,000Net cash from financing activities
    
    
    10,787,524
    
    
    
    9,269,119Change in cash and cash equivalents
    
    
    4,528,443
    
    
    
    (1,030,176
    )Cash and cash equivalents at beginning of period
    
    
    6,936,119
    
    
    
    6,289,363Cash and cash equivalents at end of period
    
    $
    11,464,562
    
    
    $
    5,259,187Supplemental cash flow information:Interest paid
    
    $
    2,091,586
    
    
    $
    1,495,916Income taxes paid
    
    
    322,000
    
    
    
    446,000Supplemental disclosure of noncash activities:Investing Activities: Non cash transfer from loans originated for sale to loans
    
    $
    250,835
    
    
    $
    Financing Activities: Income tax benefit from exercise of stock options
    
    
    2,340
    
    
    
    
  Page 6




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##### Table of Contents



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




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Accounting for Stock Based Compensation
 Three months ended Sept. 30,
    
    
    Nine months ended Sept. 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Net income as reported
    
    $
    228,023
    
    
    $
    82,725
    
    
    $
    705,189
    
    
    $
    427,911Deduct: stock basedcompensation expensedetermined under fair valuebased method
    
    
    (788
    )
    
    
    (2,115
    )
    
    
    (2,365
    )
    
    
    (6,346
    )Pro forma net income
    
    $
    227,235
    
    
    $
    80,610
    
    
    $
    702,824
    
    
    $
    421,565Basic earnings per shareas reported
    
    $
    0.50
    
    
    $
    0.21
    
    
    $
    1.54
    
    
    $
    1.09Pro forma basic earningsper share
    
    $
    0.50
    
    
    $
    0.20
    
    
    $
    1.54
    
    
    $
    1.08Diluted earnings per shareas reported
    
    $
    0.48
    
    
    $
    0.20
    
    
    $
    1.50
    
    
    $
    1.06Pro forma diluted earningsper share
    
    $
    0.48
    
    
    $
    0.19
    
    
    $
    1.49
    
    
    $
    1.04




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
September 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
    %




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
September, 2005
 NOTE 1  ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
  Three months ended Sept. 30,
    
    
    Nine months ended Sept. 30,2005
    
    
    2004
    
    
    2005
    
    
    2004Numerator:Net income
    
    $
    228,023
    
    
    $
    82,725
    
    
    $
    705,189
    
    
    $
    427,911Denominator:Denominator for basicearnings per shareweighted average shares
    
    
    457,037
    
    
    
    398,628
    
    
    
    456,449
    
    
    
    391,604Effect of dilutive securities:Nonqualified stock options
    
    
    15,118
    
    
    
    15,284
    
    
    
    15,192
    
    
    
    12,000Denominator for diluted
earnings per share
    
    
    472,155
    
    
    
    413,912
    
    
    
    471,641
    
    
    
    403,604Basic earnings per share
    
    $
    0.50
    
    
    $
    0.21
    
    
    $
    1.54
    
    
    $
    1.09Diluted earnings per share
    
    $
    0.48
    
    
    $
    0.20
    
    
    $
    1.50
    
    
    $
    1.06




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
 NOTE 2  LOANS
  September 30,
    
    
    December 31,2005
    
    
    2004Commercial real estate
    
    $
    62,888,137
    
    
    $
    51,972,391Commercial business
    
    
    12,729,496
    
    
    
    16,602,755Commercial lines of credit
    
    
    18,048,859
    
    
    
    16,981,850Commercial construction
    
    
    4,709,343
    
    
    
    6,898,890Home equity
    
    
    9,824,771
    
    
    
    9,857,867Residential mortgage
and construction
    
    
    1,092,260
    
    
    
    821,658Consumer installment
    
    
    1,653,880
    
    
    
    1,308,084Credit card and other
    
    
    319,049
    
    
    
    291,760$
    111,265,795
    
    
    $
    104,735,255
  Nine months ended September 30,2005
    
    
    2004Beginning balance
    
    $
    1,605,933
    
    
    $
    1,502,688Loans charged off
    
    
    (66,000
    )
    
    
    Recoveries
    
    
    1,881
    
    
    
    Provision for loan losses
    
    
    11,000
    
    
    
    280,650Ending balance
    
    $
    1,552,814
    
    
    $
    1,783,338
  Page 11




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WESTERN RESERVE BANCORP, INC.
NOTES TO FINANCIAL STATEMENTS
September 30, 2005
 NOTE 3  DEPOSITS
  September 30,
    
    
    December 31,2005
    
    
    2004Noninterest-bearing demand
    
    $
    12,858,581
    
    
    $
    12,668,555Interest-bearing demand
    
    
    6,888,305
    
    
    
    6,770,262Market Rate Savings
    
    
    43,219,842
    
    
    
    34,762,160Time under $100,000
    
    
    28,735,174
    
    
    
    29,027,314Time $100,000 and over
    
    
    19,873,991
    
    
    
    18,598,678$
    111,575,893
    
    
    $
    101,826,969
  NOTE 4FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
  September 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




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




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




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




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




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 FINANCIAL CONDITION (continued)
   Shareholders Equity
  RESULTS
OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005
  Net Interest Income
  Page 17




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WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
  ($ in thousands)
    
    2005
    
    
    2004Average
    
    
    Income/
    
    
    Yield/
    
    
    Average
    
    
    Income/
    
    
    Yield/Balance
    
    
    Expense
    
    
    Cost
    
    
    Balance
    
    
    Expense
    
    
    CostLoans
    
    $
    109,610
    
    
    $
    5,531
    
    
    
    6.75
    %
    
    $
    101,870
    
    
    $
    4,340
    
    
    
    5.67
    %Investment securities-taxable
    
    
    1,119
    
    
    
    33
    
    
    
    3.92
    %
    
    
    1,633
    
    
    
    45
    
    
    
    3.80
    %Investment securities-tax exempt
    
    
    364
    
    
    
    13
    
    
    
    4.93
    %
    
    
    
    
    
    
    
    
    
    
    Federal funds sold and other
short-term funds
    
    
    5,147
    
    
    
    115
    
    
    
    2.98
    %
    
    
    4,894
    
    
    
    39
    
    
    
    1.06
    %Federal Reserve Bank stock
    
    
    199
    
    
    
    9
    
    
    
    6.01
    %
    
    
    195
    
    
    
    9
    
    
    
    6.00
    %Federal Home Loan Bank stock
    
    
    282
    
    
    
    10
    
    
    
    4.75
    %
    
    
    249
    
    
    
    8
    
    
    
    4.08
    %Total interest earning assets
    
    
    116,721
    
    
    
    5,711
    
    
    
    6.54
    %
    
    
    108,841
    
    
    
    4,441
    
    
    
    5.44
    %Noninterest earning assets
    
    
    3,869
    
    
    
    
    
    
    
    
    
    
    
    2,669Total Assets
    
    $
    120,590
    
    
    
    
    
    
    
    
    
    
    $
    111,510Interest bearing deposits
    
    $
    93,764
    
    
    
    1,990
    
    
    
    2.84
    %
    
    $
    86,389
    
    
    
    1,346
    
    
    
    2.08
    %Borrowings
    
    
    3,057
    
    
    
    80
    
    
    
    3.48
    %
    
    
    5,185
    
    
    
    146
    
    
    
    3.75
    %Total interest bearing liabilities
    
    
    96,821
    
    
    
    2,070
    
    
    
    2.86
    %
    
    
    91,574
    
    
    
    1,492
    
    
    
    2.17
    %Noninterest bearing liabilities
    
    
    12,828
    
    
    
    
    
    
    
    
    
    
    
    10,829Shareholders equity
    
    
    10,941
    
    
    
    
    
    
    
    
    
    
    
    9,107Total Liabilities and
Shareholders Equity
    
    $
    120,590
    
    
    
    
    
    
    
    
    
    
    $
    111,510Net interest income/interest rate
spread
    
    
    
    
    
    
    3,641
    
    
    
    3.68
    %
    
    
    
    
    
    
    2,949
    
    
    
    3.27
    %Tax equivalent adjustment
    
    
    
    
    
    
    (5
    )
    
    
    
    
    
    
    
    
    
    
    Net interest income per financial
statements
    
    
    
    
    
    $
    3,636
    
    
    
    3.67
    %
    
    
    
    
    
    $
    2,949
    
    
    
    3.27
    %Net interest margin
    
    
    
    
    
    
    
    
    
    
    4.17
    %
    
    
    
    
    
    
    
    
    
    
    3.61
    %(Net yield on average earning assets)
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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
  Nine months endedSeptember 30, 2005 vs. 2004Increase (Decrease)In Net Interest Income Due To:($ in thousands)
    
    Volume
    
    
    Rate
    
    
    NetInterest income:Loans
    
    $
    355
    
    
    $
    836
    
    
    $
    1,191Federal funds sold and
other short-term funds
    
    
    (3
    )
    
    
    79
    
    
    
    76Investment securities-taxable
    
    
    (15
    )
    
    
    3
    
    
    
    (12
    )Investment securities-tax exempt
    
    
    13
    
    
    
    
    
    
    
    13Federal Home Loan Bank stock
    
    
    1
    
    
    
    1
    
    
    
    2Total interest-earning assets
    
    
    351
    
    
    
    919
    
    
    
    1,270Interest expense:Interest-bearing transaction
Accounts
    
    
    
    
    
    
    (7
    )
    
    
    (7
    )Market rate savings accounts
    
    
    (100
    )
    
    
    (417
    )
    
    
    (517
    )Certificates of deposit and IRAs
    
    
    63
    
    
    
    (183
    )
    
    
    (120
    )FHLB advances
    
    
    38
    
    
    
    10
    
    
    
    48Other borrowings
    
    
    18
    
    
    
    
    
    
    
    18Total interest-bearing liabilities
    
    
    19
    
    
    
    (597
    )
    
    
    (578
    )Change in net interest income
    
    $
    370
    
    
    $
    322
    
    
    $
    692
 Interest Income
    Page 19




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
 Interest Expense
    Net Interest Margin
    Page 20




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
 Provision for Loan Losses
     Page 21




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
 Noninterest Income
     Noninterest Expense
   Page 22




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS OF OPERATIONS  FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
   Nine months endedSeptember 30,2005
    
    
    2004Marketing and advertising
    
    $
    63,000
    
    
    $
    48,000Loan expenses
    
    
    50,000
    
    
    
    35,000Insurance
    
    
    42,000
    
    
    
    39,000Travel and entertainment
    
    
    27,000
    
    
    
    28,000Telephone
    
    
    20,000
    
    
    
    18,000Other
    
    
    54,000
    
    
    
    45,000$
    256,000
    
    
    $
    213,000
   Page 23




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005
  Net Interest Income
   Provision for Loan Losses
  Noninterest Income
  Page 24




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 RESULTS
OF OPERATIONS  FOR THE THREE MONTHS ENDED SEPTEMBER 30, 2005 (continued)
 Noninterest Expense
    Three months endedSeptember 30,2005
    
    
    2004Marketing and advertising
    
    $
    18,000
    
    
    $
    21,000Loan expenses
    
    
    14,000
    
    
    
    13,000Insurance
    
    
    15,000
    
    
    
    15,000Travel and entertainment
    
    
    8,000
    
    
    
    6,000Telephone
    
    
    7,000
    
    
    
    6,000Other
    
    
    22,000
    
    
    
    17,000$
    84,000
    
    
    $
    78,000
 Page 25




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 LIQUIDITY AND CAPITAL RESOURCES
       Page 26




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 LIQUIDITY AND CAPITAL RESOURCES (continued)
  Minimum
    
    
    Minimumto be
    
    
    required forWestern Reserve Bank
    
    
    considered
    
    
    capitalSept. 30,
    
    
    December 31,
    
    
    well-
    
    
    Adequacy2005
    
    
    2004
    
    
    capitalized
    
    
    purposesTier 1 core capital to
risk-weighted assets
    
    
    8.1
    %
    
    
    7.6
    %
    
    
    6.0
    %
    
    
    4.0
    %Total capital to
risk-weighted assets
    
    
    10.7
    %
    
    
    10.2
    %
    
    
    10.0
    %
    
    
    8.0
    %Tier 1 leverage ratio
    
    
    7.4
    %
    
    
    6.9
    %
    
    
    5.0
    %
    
    
    4.0
    %
     Page 27




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 LIQUIDITY AND CAPITAL RESOURCES (continued)
    INTEREST RATE SENSITIVITY
  Page 28




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
September 30, 2005
 INTEREST RATE SENSITIVITY (continued)
      Page 29




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##### Table of Contents



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




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
 
 CONTROLS AND PROCEDURES
September 30, 2005
   Page 31




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
September 30, 2005
 
 PART IIOTHER INFORMATION
         Page 32




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
September 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)
    
    *10.6
    
    Loan Agreement between Western Reserve Bancorp, Inc. and TCF National Bank,
dated May 5, 2003 (incorporated by reference to the Companys Report on Form
10-QSB filed with the Commission on August 14, 2003)
    
    *10.7
    
    Western Reserve Bank Supplemental Executive Retirement Plan, dated May 15,
2003 (incorporated by reference to the Companys Report on Form 10-QSB filed
with the Commission on August 14, 2003)
    
    *10.8
    
    Western Reserve Bancorp, Inc. Employee Stock Purchase Plan (incorporated by
reference to the Companys Report on Form 10-QSB filed with the Commission on
November 14, 2003)
    
    *10.9
    
    Lease Agreement by and between Western Reserve of Brecksville, LLC and
Western Reserve Bank (incorporated by reference to the Companys Report on
Form 10-KSB filed with the Commission on March 30, 2005)
    
    *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 on 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, 2005 (incorporated by reference to
the Companys Report on Form 10-QSB filed with the Commission on August 15,
2005)
    
    *
 Page 33




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
September 30, 2005
  ExhibitNo.
    
    Description of Exhibits11
    
    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 34




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##### Table of Contents



WESTERN RESERVE BANCORP, INC.
FORM 10-QSB
Quarter ended September 30, 2005
 
 SIGNATURES
  Western Reserve Bancorp, Inc.By:Date: November 14, 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 35