<PAGE>

                                                                   Exhibit 13.1

                          WESTERN RESERVE BANCORP, INC.
                                  Medina, Ohio

                                   [Graphic]

                                  ANNUAL REPORT
                                December 31, 2003
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                                  MEDINA, OHIO

                                  ANNUAL REPORT
                                DECEMBER 31, 2003

                                    CONTENTS

<TABLE>
<S>                                                                          <C>
LETTER TO SHAREHOLDERS ....................................................   1

REPORT OF INDEPENDENT AUDITORS.............................................   3

CONSOLIDATED FINANCIAL STATEMENTS

           CONSOLIDATED BALANCE SHEETS.....................................   4

           CONSOLIDATED STATEMENTS OF INCOME...............................   5

           CONSOLIDATED STATEMENTS OF CHANGES IN
             SHAREHOLDERS' EQUITY..........................................   6

           CONSOLIDATED STATEMENTS OF CASH FLOWS...........................   7

           NOTES TO CONSOLIDATED FINANCIAL STATEMENTS......................   8

COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA.............................  28

MANAGEMENT'S DISCUSSION AND ANALYSIS.......................................  29
</TABLE>

Cover photograph courtesy of Bill Eggers, The Printery Edition, Medina, Ohio.
<PAGE>
Dear Fellow Shareholder:

When we look back at the year 2003, and in fact every year since we opened, it
is apparent that our growth outpaced that of the banking industry and certainly
our local competitors by a considerable margin. We are definitely pleased with
that track record. But we are now poised on the next phase of our evolution
which has led us to Brecksville and an acceleration of that growth curve. In
this report we will give you a flavor of the opportunity we see with this new
direction and the related implications.

We'll stick to the question and answer approach we have used for the past few
years. However, we can only give you a cursory look in a publication such as
this annual report. So we encourage you to come to the annual meeting where we
enjoy discussing our bank with fellow owners.

WHY EXPAND TO BRECKSVILLE AND NOT AROUND MEDINA COUNTY? AREN'T WE A MEDINA
COMMUNITY BANK? We presently serve the Medina market with our main office and
two limited hours satellite offices.


Management and the Board have a significant responsibility to consider
shareholder value when evaluating major strategic moves such as an expansion.
Since we do not anticipate doing this very often, we have certain requirements
in order to consider any particular area. That being said, we have evaluated
several Medina County opportunities over the last five years. However, none of
these locations met our requirements. It just so happens that we have a number
of shareholders in Brecksville. They suggested that we consider this area for
expansion. Once we did our research, we agreed.

We believe that by taking this action we can provide our unique style of
community banking to Brecksville as well as Medina while improving the value of
our shareholders' stock.

We are excited about the potential of Brecksville.

WHAT IS THE STATUS OF BRECKSVILLE? We plan to lease about 5,000 square feet of a
building in a highly visible location in downtown Brecksville.

The regulators have approved the expansion and the City of Brecksville has
approved our plans. Mike Gorman, our Brecksville Regional President, is on board
and a Brecksville Advisory Board will be formed over the next few months.

The enthusiastic reception which we have received in Brecksville is very
encouraging. However, we must recognize that this expansion, no matter what the
ultimate potential (which we believe to be significant), will be a drag on our
earnings for 2004 and 2005.

We intend to find Brecksville talent to form our new team. Obviously, they also
need to be dedicated to an extremely high customer service approach. We will
keep you posted on the progress.

ARE WE GOING TO BE SELLING MORE STOCK? In conjunction with our expansion to
Brecksville, we do anticipate selling additional common stock. This will be one
of the approaches for increasing the capital needed for our continued growth. In
addition we believe that if Brecksville residents and business people buy our
stock they will be more likely to become customers and referral sources. We
understand that issuing new stock is dilutive to us as present shareholders, but
we are also

                                                                              1.
<PAGE>
convinced that in the long run our shareholders and customers in both
communities will prosper by this action. As of this writing, we do not yet know
the specifics of the stock offering*.

WHY HAVEN'T PROFITS KEPT PACE WITH OVERALL GROWTH? The lag between the growth in
the bank's size and its profits is related to several factors. We often invest
money in the process of growing our earning assets and it takes a period of time
for those assets to overcome these initial costs. Our investment in Brecksville
is an excellent example of this. In addition, in mid-2003 we observed some
deterioration in the financial condition of one of our commercial loan
customers. Therefore, we reserved a significant amount out of our income in the
third quarter in connection with this loan. Finally, we became concerned about
the risks of fixed rate lending in a low rate environment. As a result we
shifted our emphasis to more of a floating rate approach. This move compressed
our net interest margin during 2003 but does offer increased margins and income
in a rising rate scenario (Alan Greenspan, can you hear me now?).

WHERE ARE WE ON INTERNET BANKING? We have had our business internet banking
product up since February 2003. There are 14 customers on the system and we have
enjoyed an enthusiastic response from them. The system is very sophisticated and
Mary Weakland, our Operations Officer who installs the system, really custom
designs it to the requirements of each customer.

We are in the process of bringing up the consumer internet banking system. It
should be available by the third quarter of this year. Since we are such a high
touch group, internet banking, being such a remote transaction oriented product,
has not been a high priority. However, it's a desirable convenience for some of
our customers and it will soon be available.

ANYTHING ELSE? Yes. Our past growth necessitated that the Commercial Loan
Department move next door to the middle building of our complex. This was a less
than desirable solution but we needed more space. That growth has continued and
now even that space isn't enough, so our lending group will move back to space
adjacent to our branch in our headquarters building. This particular space is
presently occupied by Merrill Lynch (formerly Oakwood Financial) who will be
moving across the street. The move back will allow us to continue our growth and
improve communications by having our Medina team together on one floor.

Again, we look forward to seeing you at the annual meeting on Wednesday, April
28 at the Fox Meadows Country Club - Weymouth Ballroom, 3946 Weymouth Road
(Route 3), Medina, Ohio.

Sincerely,


-s- Edward J. McKeon                   -s- P.M. Jones
Edward J. McKeon                       P.M. Jones
President & CEO                        Chairman

P.S. If you cannot make the annual meeting and are still interested in
discussing the bank, just call us at 330-764-3131 or stop by. We're very
accessible.

* Our lawyer says we have to tell you: "Sales of stock may only be made after
receipt and review of appropriate offering documents."

                                                                              2.
<PAGE>
(CROWE LOGO)


                         REPORT OF INDEPENDENT AUDITORS

Board of Directors and Shareholders
Western Reserve Bancorp, Inc.
Medina, Ohio

We have audited the accompanying consolidated balance sheets of Western Reserve
Bancorp, Inc. as of December 31, 2003 and 2002, and the related consolidated
statements of income, changes in shareholders' equity and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Western Reserve
Bancorp, Inc. as of December 31, 2003 and 2002, and results of its operations
and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.


                                                -s- Crowe Chizek and Company LLC
                                                Crowe Chizek and Company LLC

Cleveland, Ohio
February 20, 2004

                                                                              3.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                           CONSOLIDATED BALANCE SHEETS
                          December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                             2003               2002
                                                             ----               ----
<S>                                                    <C>                 <C>
ASSETS

Cash and due from financial institutions               $   2,186,363       $   1,762,735
Federal funds sold                                         4,103,000           2,164,000
                                                       -------------       -------------
      Cash and cash equivalents                            6,289,363           3,926,735
Securities available for sale                              1,733,762           2,864,855
Loans held for sale                                               --             237,141
Loans                                                     95,548,286          74,649,961
Allowance for loan losses                                 (1,502,688)         (1,042,309)
                                                       -------------       -------------
      Loans, net                                          94,045,598          73,607,652
Federal Reserve Bank stock                                   189,300             171,100
Federal Home Loan Bank stock                                 195,300             187,900
Premises and equipment, net                                  675,404             734,157
Accrued interest receivable and other assets               1,187,821             646,848
                                                       -------------       -------------
                                                       $ 104,316,548       $  82,376,388
                                                       =============       =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Deposits
      Noninterest-bearing                              $   9,559,885       $   8,875,323
      Interest-bearing                                    82,220,372          62,005,088
                                                       -------------       -------------
           Total deposits                                 91,780,257          70,880,411
Federal Home Loan Bank advances                            3,200,000           3,200,000
Other borrowings                                             500,000              59,965
Accrued interest payable and other liabilities               223,636             230,512
                                                       -------------       -------------
           Total liabilities                              95,703,893          74,370,888

Shareholders' equity
      Common stock, no par value, $1 stated value
           750,000 shares authorized,
           388,052 shares issued and outstanding             388,052             388,052
      Additional paid-in capital                           7,557,845           7,557,845
      Retained earnings                                      654,171              31,111
      Accumulated other comprehensive income                  12,587              28,492
                                                       -------------       -------------
           Total shareholders' equity                      8,612,655           8,005,500
                                                       -------------       -------------
                                                       $ 104,316,548       $  82,376,388
                                                       =============       =============
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                              4.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                 For the years ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                             2003             2002
                                                             ----             ----
<S>                                                       <C>             <C>
INTEREST INCOME
      Loans, including fees                               $5,113,721      $4,410,699
      Securities                                              87,139         157,885
      Federal funds sold and other short-term funds           44,457          60,843
                                                          ----------      ----------
                                                           5,245,317       4,629,427
INTEREST EXPENSE
      Deposits                                             1,526,047       1,352,930
      Federal Home Loan Bank advances and other debt         139,541         116,587
                                                          ----------      ----------
                                                           1,665,588       1,469,517
                                                          ----------      ----------
NET INTEREST INCOME                                        3,579,729       3,159,910

PROVISION FOR LOAN LOSSES                                    431,100         297,004
                                                          ----------      ----------
Net interest income after provision for loan losses        3,148,629       2,862,906

NONINTEREST INCOME
      Service charges on deposit accounts                    108,566          86,707
      Net gains on sales of loans                            267,518          99,775
      Other                                                   93,138          60,068
                                                          ----------      ----------
                                                             469,222         246,550
NONINTEREST EXPENSE
      Salaries and employee benefits                       1,433,689       1,209,286
      Premises and equipment                                 386,676         350,013
      Data processing                                        227,573         193,344
      Professional fees                                      190,491         104,027
      Taxes other than income and payroll                     78,991          74,182
      Supplies, printing and postage                          63,137          56,566
      Community relations and contributions                   52,433          60,277
      Other                                                  240,832         186,782
                                                          ----------      ----------
                                                           2,673,822       2,234,477
                                                          ----------      ----------
INCOME BEFORE INCOME TAXES                                   944,029         874,979

Income tax expense                                           320,969         300,681
                                                          ----------      ----------
NET INCOME                                                $  623,060      $  574,298
                                                          ==========      ==========
EARNINGS PER SHARE:
      Basic                                               $     1.61      $     1.48
      Diluted                                             $     1.57      $     1.45
</TABLE>

          See accompanying notes to consolidated financial statements.
                                                                              5.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
           CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
                 For the years ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                                      Retained     Accumulated
                                                      Additional      Earnings        Other           Total
                                           Common       Paid-In    (Accumulated   Comprehensive    Shareholders'
                                            Stock       Capital       Deficit)       Income           Equity
                                            -----       -------       -------        ------           ------
<S>                                        <C>        <C>          <C>            <C>              <C>
Balance, January 1, 2002                    $388,052   $7,557,845    $(543,187)     $ 14,931        $7,417,641

Comprehensive income:
   Net income                                                          574,298                         574,298
   Change in unrealized net gain
      (loss) on securities available
      for sale, net of tax                                                            13,561            13,561
                                                                                                    ----------
   Total comprehensive income                                                                          587,859
                                            --------   ----------    ---------      --------        ----------

Balance, December 31, 2002                   388,052    7,557,845       31,111        28,492         8,005,500

Comprehensive income:
   Net income                                                          623,060                         623,060
   Change in unrealized net gain
      (loss) on securities available
      for sale, net of tax                                                           (15,905)          (15,905)
                                                                                                    ----------
   Total comprehensive income                                                                          607,155
                                            --------   ----------    ---------      --------        ----------
Balance, December 31, 2003                  $388,052   $7,557,845    $ 654,171      $ 12,587        $8,612,655
                                            ========   ==========    =========      ========        ==========
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                              6.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                 For the years ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                                              2003                 2002
                                                                              ----                 ----
<S>                                                                       <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES
      Net income                                                          $    623,060       $    574,298
      Adjustments to reconcile net income
        to net cash from operating activities
           Provision for loan losses                                           431,100            297,004
           Depreciation                                                        131,101            123,959
           Net amortization of securities                                       16,598             21,262
           Loans originated for sale                                       (13,107,241)       (10,286,142)
           Proceeds from sales of loan originations                         13,611,900         11,397,656
           Gains on sales of loans                                            (267,518)           (99,775)
           Federal Home Loan Bank stock dividends                               (7,400)            (6,400)
           Net change in:
                Interest receivable                                             17,850            (69,292)
                Interest payable                                                30,949             29,306
                Other assets                                                   (58,823)            79,123
                Other liabilities                                              (29,631)            98,675
                                                                          ------------       ------------
           Net cash from operating activities                                1,391,945          2,159,764

CASH FLOWS FROM INVESTING ACTIVITIES
      Available for sale securities:
           Purchases                                                          (512,369)        (1,023,397)
           Maturities, prepayments and calls                                 1,602,765          1,176,530
      Purchase of Federal Reserve Bank stock                                   (18,200)            (5,500)
      Purchase of Federal Home Loan Bank stock                                      --            (85,200)
      Net increase in loans                                                (20,869,046)       (19,441,307)
      Purchases of premises and equipment                                      (72,348)          (202,757)
      Purchase of bank-owned life insurance                                   (500,000)                --
                                                                          ------------       ------------
           Net cash from investing activities                              (20,369,198)       (19,581,631)

CASH FLOWS FROM FINANCING ACTIVITIES
      Net increase in deposits                                              20,899,846         17,778,275
      Net change in short-term borrowings                                      (59,965)           (72,666)
      Proceeds from Federal Home Loan Bank advances                                 --          1,500,000
      Proceeds from other borrowings                                           500,000                 --
                                                                          ------------       ------------
           Net cash from financing activities                               21,339,881         19,205,609
                                                                          ------------       ------------

Change in cash and cash equivalents                                          2,362,628          1,783,742
Cash and cash equivalents at beginning of period                             3,926,735          2,142,993
                                                                          ------------       ------------
Cash and cash equivalents at end of period                                $  6,289,363       $  3,926,735
                                                                          ============       ============
Supplemental cash flow information:
           Interest paid                                                  $  1,634,639       $  1,440,211
           Income taxes paid                                                   398,000            260,000
</TABLE>

          See accompanying notes to consolidated financial statements.

                                                                              7.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The consolidated financial statements include
Western Reserve Bancorp, Inc. and its wholly-owned subsidiary, Western Reserve
Bank ("the Bank"), together referred to as "the Company." Significant
intercompany transactions and balances are eliminated in consolidation.

Nature of Operations: Western Reserve Bancorp, Inc. is a one-bank holding
company. Its subsidiary, Western Reserve Bank, is a state-chartered commercial
bank with one full-service location in Medina, Ohio and two satellite offices in
retirement communities in Medina, engaged in the single industry of commercial
banking. It offers a full range of traditional banking services to consumers and
businesses located primarily in Medina County, Ohio. Services offered include
commercial, real estate, home equity, consumer and credit card loans, as well as
deposit products such as checking accounts, savings and money market accounts,
certificates of deposit and individual retirement arrangements. The Bank
commenced operations on November 6, 1998.

Use of Estimates: To prepare financial statements in conformity with accounting
principles generally accepted in the United States of America, management makes
estimates and assumptions based on available information. These estimates and
assumptions affect the amounts reported in the financial statements and related
disclosures, and future results could differ. The allowance for loan losses, the
fair value of securities and the fair values of financial instruments are
particularly subject to change.

Cash and Cash Equivalents: Cash and cash equivalents include cash, deposits with
other financial institutions under 90 days and federal funds sold. Net cash
flows are reported for loan and deposit transactions and short term borrowings.

Securities: Securities are classified as held to maturity and carried at
amortized cost when management has the positive intent and ability to hold them
to maturity. Securities are classified as available for sale when they might be
sold before maturity and are carried at fair value with unrealized holding gains
and losses reported separately in other comprehensive income. All of the
Company's securities are classified as available for sale. Other securities such
as Federal Reserve Bank stock and Federal Home Loan Bank stock are carried at
cost.

Interest income includes amortization and accretion of purchase premiums and
discounts. Gains and losses on sales are based on the amortized cost of the
security sold. Securities are written down to fair value when a decline in fair
value is not temporary.

                                                                              8.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Concentrations of Credit Risk: The Company grants loans primarily to customers
in Medina and contiguous counties. At December 31, 2003, the composition of the
loan portfolio is approximately 57.4% commercial real estate loans, 30.7% other
commercial loans, 8.8% home equity loans, 1.5% residential mortgage and
construction loans and 1.6% consumer and credit card loans. At December 31,
2003, approximately 3.0% of the total loan portfolio was unsecured. Other
financial instruments which potentially represent concentrations of credit risk
include deposit accounts in other financial institutions and federal funds sold.

Loans: Loans that management has the intent and ability to hold for the
foreseeable future or until maturity or payoff are reported at the principal
balance outstanding, net of deferred loan fees and costs and an allowance for
loan losses.

Interest income on loans is reported on the interest method and includes
amortization of deferred loan fees and costs. In the event management deems the
full repayment of a loan to be in doubt, typically if payments are past due over
90 days, interest income is not recorded, and any interest accrued but
uncollected is reversed. Payments received on such loans are reported as
principal reductions. Loans are returned to accrual status when all the
principal and interest amounts contractually due are brought current and future
payments are reasonably assured.

Loans Held for Sale: Mortgage loans originated and intended for sale in the
secondary market are carried at the lower of cost or estimated fair value, on an
aggregate basis.

Allowance for Loan Losses: The allowance for loan losses is a valuation
allowance for probable incurred credit losses, increased by the provision for
loan losses and decreased by charge-offs less recoveries. Management estimates
the allowance balance required using past loan loss experience, known or
inherent risks in the portfolio, information about specific borrowers'
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 uncollectibility of a loan balance is confirmed.

A loan is impaired when full payment under the loan terms is not expected.
Impairment is evaluated in total for smaller-balance loans of similar nature
such as residential mortgage, consumer, and credit card loans, and on an
individual loan basis for other loans. If a loan is impaired, a portion of the
allowance is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing rate or at the fair
value of collateral if repayment is expected solely from the collateral. Loans
are evaluated for impairment when payments are delayed, typically 90 days or
more, or when it is probable that all principal and interest amounts will not be
collected according to the original terms of the loan.

                                  (continued)

                                                                              9.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Foreclosed Assets: Assets acquired through or instead of loan foreclosure are
initially recorded at fair value when acquired, establishing a new cost basis.
If fair value declines, a valuation allowance is recorded through expense. Costs
after acquisition are expensed.

Premises and Equipment: Premises and equipment are reported at cost less
accumulated depreciation. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, which range from five to
twenty years. Maintenance and repairs are charged to expense as incurred.

Company-Owned Life Insurance: The Company has purchased a life insurance policy
on a key executive. Company-owned life insurance is recorded at its cash
surrender value, or the amount that can be realized.

Long-term Assets: Premises and equipment and other long-term assets are reviewed
for impairment when events indicate their carrying amount may not be recoverable
from future undiscounted cash flows. If impaired, the assets would be recorded
at fair value.

Loan Commitments and Related Financial Instruments: Financial instruments
include off-balance sheet credit instruments, such as commitments to make loans
and commercial letters of credit, issued to meet customer financing needs. The
face amount for these items represents the exposure to loss, before considering
customer collateral or ability to repay. Such financial instruments are recorded
when they are funded. Instruments, such as standby letters of credit, that are
considered financial guarantees in accordance with FASB Interpretation No. 45
are recorded at fair value.

                                  (continued)

                                                                             10.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

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>
                                         2003             2002
                                         ----             ----
<S>                                 <C>               <C>
Net income as reported              $   623,060       $   574,298
Deduct: stock based
   compensation expense
   determined under fair value
   based method                         (74,610)         (127,297)
                                    -----------       -----------
Pro forma net income                $   548,450       $   447,001
                                    ===========       ===========
Basic earnings per share
   as reported                      $      1.61       $      1.48
Pro forma basic earnings
   per share                        $      1.41       $      1.15

Diluted earnings per share
   as reported                      $      1.57       $      1.45
Pro forma diluted earnings
   per share                        $      1.38       $      1.12
</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>

During 2003, a total of 1,500 stock options were granted at market value to
three non-executive officers of the Company. The weighted-average fair value of
options granted in 2003 was $5.76. No options were granted during 2002.

                                  (continued)

                                                                             11.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Income Taxes: Income tax expense is the total of the current year income tax due
or refundable and the change in deferred tax assets and liabilities. Deferred
tax assets and liabilities are the expected future tax amounts for the temporary
differences between carrying amounts and tax bases of assets and liabilities,
computed using enacted tax rates.

Earnings per Common Share: Basic earnings per common share is net income divided
by the weighted average number of common shares outstanding during the period.
Diluted earnings per common share includes the dilutive effect of additional
potential common shares issuable under stock options.

Comprehensive Income: Comprehensive income consists of net income and other
comprehensive income. Other comprehensive income includes unrealized gains and
losses on securities available for sale, which are also recognized as separate
components of equity.

Adoption of New Accounting Standards: During 2003, the Company adopted FASB
Statement 149, Amendment of Statement 133 on Derivative Instruments and Hedging
Activities, FASB Statement 150, Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equities, FASB Statement 132
(revised 2003), Employers' Disclosures about Pensions and Other Postretirement
Benefits, FASB Interpretation 45, Guarantor's Accounting and Disclosure
Requirements for Guarantees, and FASB Interpretation 46, Consolidation of
Variable Interest Entities. Adoption of the new standards did not materially
affect the Company's operating results or financial condition.

Loss Contingencies: Loss contingencies, including claims and legal actions
arising in the ordinary course of business, are recorded as liabilities when the
likelihood of loss is probable and an amount or range of loss can be reasonably
estimated. Management does not believe there now are such matters that will have
a material effect on the financial statements.

Restrictions on Cash: Cash on hand or on deposit with the Federal Reserve Bank
of $280,000 and $245,000 was required to meet regulatory reserve and clearing
requirements at year-end 2003 and 2002. These balances do not earn interest.
Also included in cash and cash equivalents at year-end 2003 was approximately
$295,000 required to be on deposit with Great Lakes Bankers Bank as a
compensating balance for correspondent banking services.

Dividend Restriction: Banking regulations require maintaining certain capital
levels and may limit the dividends paid by the Bank to the Company or by the
Company to shareholders. See Note 14 for more specific disclosures related to
the Bank.

                                   (continued)

                                                                             12.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Fair Values of Financial Instruments: Fair values of financial instruments are
estimated using relevant market information and other assumptions, as more fully
disclosed in a separate note. Fair value estimates involve uncertainties and
matters of significant judgment regarding interest rates, credit risk,
prepayments and other factors, particularly in the absence of broad markets for
particular items. Changes in assumptions or in market conditions could
significantly affect the estimates.

Operating Segments: While the chief decision-makers monitor the revenue streams
of the various products and services, the identifiable segments are not material
and operations are managed and financial performance is evaluated on a
Company-wide basis. Accordingly, all of the financial service operations are
considered by management to be aggregated in one reportable operating segment.

Reclassifications: Some items in the prior year financial statements were
reclassified to conform to the current presentation.


NOTE 2 - ORGANIZATION

Western Reserve Bancorp, Inc. was incorporated under the laws of the State of
Ohio on February 27, 1997. The Company initially sold 320,267 shares of common
stock at a price of $20 per share resulting in proceeds, net of offering costs,
of approximately $6,368,000. A substantial portion of the proceeds of the
offering were used by the Company to provide the initial capitalization of the
Bank which occurred in November 1998, at which time the Bank began operations.
During 2000, the Company sold an additional 67,785 shares of common stock
resulting in proceeds, net of offering costs, of approximately $1,577,000.

                                  (continued)

                                                                             13.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 3 - SECURITIES

The fair value of available for sale securities and the related gross unrealized
gains and losses recognized in accumulated other comprehensive income were as
follows:

<TABLE>
<CAPTION>
                                                Gross            Gross
                               Fair          Unrealized        Unrealized
                              Value             Gains            Losses
                              -----             -----            ------
<S>                          <C>             <C>               <C>
2003
   U.S. agencies             $  777,601         $18,791          $    --
   Mortgage-backed              956,161           1,215             (935)
                             ----------         -------          -------
                             $1,733,762         $20,006          $  (935)
                             ==========         =======          =======

2002
   U.S. agencies             $2,061,251         $43,216          $    --
   Mortgage-backed              803,604           2,454           (2,500)
                             ----------         -------          -------
                             $2,864,855         $45,670          $(2,500)
                             ==========         =======          =======
</TABLE>

As of December 31, 2003, there was one mortgage-backed security with an
unrealized loss of $115 that had been in an unrealized loss position for more
than 12 months. Management believes this security is not impaired.

The fair values of debt securities at year-end 2003 by contractual maturity were
as follows. Securities not due at a single maturity date, primarily
mortgage-backed securities, are shown separately.

<TABLE>
<S>                             <C>
Due in one year or less         $  261,162
Due from one to five years         516,439
Due from five to ten years              --
Mortgage-backed                    956,161
                                ----------
                                $1,733,762
                                ==========
</TABLE>

Actual maturities may differ from contractual maturities because issuers may
have the right to call or prepay obligations.

No securities were sold during 2003 or 2002. At year-end 2003 and 2002,
securities with carrying values of $1,221,000 and $2,603,000 were pledged to
secure public deposits, borrowings and for other purposes as required or
permitted by law.

                                  (continued)

                                                                             14.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 4 - LOANS

Loans at year-end were as follows:

<TABLE>
<CAPTION>
                                2003             2002
                                ----             ----
<S>                          <C>              <C>
Commercial business          $29,377,484      $22,844,715
Commercial real estate        49,695,518       38,906,291
Commercial construction        5,126,269        2,418,218
Home equity                    8,415,148        7,482,574
Residential mortgage
   and construction            1,390,523        1,264,597
Consumer installment           1,248,743        1,505,334
Credit card and other            294,601          228,232
                             -----------      -----------
                             $95,548,286      $74,649,961
                             ===========      ===========
</TABLE>

Activity in the allowance for loan losses was as follows:

<TABLE>
<CAPTION>
                                   2003              2002
                                   ----              ----
<S>                            <C>              <C>
Beginning balance              $ 1,042,309      $   754,679
Provision for loan losses          431,100          297,004
Loans charged off                       --          (68,802)
Recoveries                          29,279           59,428
                               -----------      -----------
Ending balance                 $ 1,502,688      $ 1,042,309
                               ===========      ===========
</TABLE>

At December 31, 2003 and 2002, there were $1,126,175 and $340,776 loans in
nonaccrual status. There were no other loans more than 90 days past due.

Impaired loans were as follows:

<TABLE>
<CAPTION>
                                        2003            2002
                                        ----            ----
<S>                                   <C>             <C>
Year-end loans with no allocated
   allowance for loan losses          $  125,990      $   80,000
Year-end loans with allocated
   allowance for loan losses           1,183,531         308,851
                                      ----------      ----------
                                      $1,309,521      $  388,851
                                      ==========      ==========
</TABLE>

                                  (continued)

                                                                             15.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 4 - LOANS (continued)

<TABLE>
<S>                              <C>             <C>
Amount of the allowance for
   loan losses allocated         $  269,895      $   68,895
Average of impaired loans
   during the year                1,579,054         263,712
Interest income recognized
   during impairment                 28,804           5,909
Cash-basis interest income
   recognized                        28,804           5,886
</TABLE>

Loans to principal officers, directors and their affiliates in 2003 were as
follows:

<TABLE>
<S>                    <C>
Beginning balance      $ 1,569,762
New loans                  789,634
Repayments                (718,501)
                       -----------
Ending balance         $ 1,640,895
                       ===========
</TABLE>

NOTE 5 - PREMISES AND EQUIPMENT, NET

Year-end premises and equipment were as follows:

<TABLE>
<CAPTION>
                                        2003            2002
                                        ----            ----
<S>                                <C>               <C>
Leasehold improvements             $   614,858       $   614,858
Furniture and equipment                614,576           551,413
                                   -----------       -----------
                                     1,229,434         1,166,271
Less accumulated depreciation         (554,030)         (432,114)
                                   -----------       -----------
                                   $   675,404       $   734,157
                                   ===========       ===========
</TABLE>

The Company's main facility is leased under an operating lease from a member of
the Board of Directors. The lease term is ten years, with two five-year renewal
options. In 2002, the Company leased additional space in an adjacent building
from the same Director. Total rent expense for these facilities was $139,884 and
$117,521 in 2003 and 2002, respectively. At December 31, 2003, the total
estimated future minimum rental payments under the leases are as follows:

<TABLE>
<S>                              <C>
                    2004         $   170,508
                    2005             175,515
                    2006             178,996
                    2007             182,572
                    2008             154,682
                                 -----------
                                 $   862,273
                                 ===========
</TABLE>

                                  (continued)

                                                                             16.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 6 - DEPOSITS

At year-end, total interest-bearing deposits are as follows:

<TABLE>
<CAPTION>
                                  2003            2002
                                  ----            ----
<S>                          <C>              <C>
Interest-bearing demand      $ 6,392,660      $ 5,302,358
Savings                       17,952,690       18,594,935
Money market                   8,492,004        8,880,422
Time under $100,000           31,349,601       18,376,589
Time $100,000 and over        18,033,417       10,850,784
                             -----------      -----------
                             $82,220,372      $62,005,088
                             ===========      ===========
</TABLE>

Deposits of $100,000 or more were $37,647,868 and $29,860,793 at year-end 2003
and 2002.

Scheduled maturities of time deposits for the next five years were as follows:

<TABLE>
<S>                          <C>
                   2004       $  23,450,886
                   2005           8,794,126
                   2006           7,436,387
                   2007           4,491,415
                   2008           5,210,204
                              -------------
                              $  49,383,018
                              =============
</TABLE>

At year-end 2003 and 2002, there were $23,292,000 and $10,099,000 in national
market certificates of deposit, primarily in amounts of $99,000.

Deposits from principal officers, directors and their affiliates at year-end
2003 and 2002 were $1,637,067 and $2,278,000.

NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS

In December 2001 the Company borrowed $1,700,000 under a 4.28% fixed rate
advance that matures June 30, 2004. In April 2002 the Company borrowed
$1,500,000 under a 4.15% fixed rate advance that matures on October 30, 2004.
Interest is payable monthly, and the advances are payable at their maturity
dates, with prepayment penalties for early payment. The advances are
collateralized by $4,320,000 of first mortgage loans and $195,300 of FHLB stock
under a blanket lien arrangement.

                                  (continued)

                                                                             17.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 7 - FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS (continued)

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. At the end of
the third quarter 2003, the Company borrowed $500,000 against the line of credit
and invested the proceeds in the Bank as additional paid-in capital.

The Company has the ability to borrow under various other credit facilities that
totaled $5,733,000 at year-end 2003. Of this amount, $710,000 is available for
short-term borrowing under an unsecured federal funds line through a
correspondent bank at overnight borrowing rates, and $5,023,000 is available at
market rates that would vary based on the term of each borrowing, and would be
secured by the Company's securities or residential loans.

NOTE 8 - OTHER NON-INTEREST EXPENSE

Other expense amounts for the year were as follows:

<TABLE>
<CAPTION>
                                      2003         2002
                                      ----         ----
<S>                                <C>           <C>
Insurance                          $ 44,270      $ 33,738
Loan expenses                        34,738        26,906
Marketing and advertising            45,345        26,175
Collection/repo/OREO expenses         6,883        21,531
Telephone                            25,917        21,094
Travel and entertainment             29,348        19,655
Losses on other assets                    0           500
Other                                54,331        37,183
                                   --------      --------
Total                              $240,832      $186,782
                                   ========      ========
</TABLE>

NOTE 9 - EMPLOYEE BENEFITS

The Company has a 401(k) Profit Sharing Plan that covers substantially all
employees and allows eligible employees to contribute up to 100% of their
compensation subject to maximum statutory limitations. Under the Plan, the
Company is permitted to make discretionary profit sharing or matching
contributions to the Plan. During 2003 and 2002, the Company matched eligible
contributions up to 50% of the first 6% of each employee's compensation,
resulting in expense of $27,460 and $25,416.

                                  (continued)

                                                                             18.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 9 - EMPLOYEE BENEFITS (continued)

In 2003, the Company adopted a Supplemental Executive Retirement Plan for the
Chief Executive Officer. Under the terms of the Plan, the Chief Executive
Officer will be paid an annual benefit of 20 percent of his base salary for a
period of ten years following his retirement at or after age 65 or his
termination other than for cause. The Company accrues its projected obligation
under this plan and during 2003 accrued and expense of $21,253. In a related
transaction, in the second quarter of 2003 the Company invested $500,000 in a
single-premium cash-surrender value life insurance policy. The named insured is
the Company's Chief Executive Officer, and the Company is the owner and sole
beneficiary of the policy. This is a tax-advantaged investment in that the
increases in cash surrender value and the eventual death benefit are not taxable
income to the Company. In 2003, the Company recorded income of $15,039 from this
policy.

NOTE 10 - INCOME TAXES

Income tax expense (benefit) was as follows:

<TABLE>
<CAPTION>
                                 2003            2002
                                 ----            ----
<S>                           <C>             <C>
Current                       $ 460,178       $ 309,946
Deferred                       (139,209)         (9,265)
                              ---------       ---------
Total income tax expense      $ 320,969       $ 300,681
                              =========       =========
</TABLE>

Total income tax expense differed from the amounts computed by applying the
federal income tax rate of 34% in all periods presented to income before income
taxes as a result of the following for the periods ended December 31:

<TABLE>
<CAPTION>
                                           2003             2002
                                           ----             ----
<S>                                      <C>             <C>
Income tax expense
    at statutory rate                    $ 320,969       $ 297,493
Income from life insurance contract         (3,486)             --
Other, net                                   3,486           3,188
                                         ---------       ---------
Total income tax expense                 $ 320,969       $ 300,681
                                         =========       =========
</TABLE>

                                   (continued)

                                                                             19.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 10 - INCOME TAXES (continued)

The components of the net deferred tax asset (liability) recorded in the
consolidated balance sheets as of December 31 are as follows:

<TABLE>
<CAPTION>
                                            2003            2002
                                            ----            ----
<S>                                      <C>             <C>
Deferred tax assets:
   Bad debt deduction                    $ 465,536       $ 318,962
   Deferred loan fees                       44,779          33,398
   Organizational costs capitalized             --          29,866
   Deferred compensation                     7,226              --
                                         ---------       ---------
                                           517,541         382,226
Deferred tax liabilities:
   Accrual to cash adjustment              (48,806)        (65,196)
   Depreciation                            (42,275)        (32,295)
   Unrealized gain on securities
     available for sale                     (6,484)        (14,678)
   FHLB stock dividends                     (8,432)         (5,916)
                                         ---------       ---------
                                          (105,997)       (118,085)
                                         ---------       ---------
Net deferred tax asset                   $ 411,544       $ 264,141
                                         =========       =========
</TABLE>

NOTE 11 - STOCK OPTIONS

The Company has a nonqualified stock option plan that provides for up to 100,000
shares of the Company's common stock to be available for grant to officers,
employees, directors and others. The exercise price is the market price at date
of grant, so there is no compensation expense recognized in the income
statement. The maximum option term is ten years, and options vest over three
years as follows: 25% one year from the grant date, 50% after two years, and
100% after three years.

                                   (continued)

                                                                             20.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 11 - STOCK OPTIONS (continued)

A summary of the activity in the plan is as follows:

<TABLE>
<CAPTION>
                                     2003                        2002
                                     ----                        ----
                                          Weighted                   Weighted
                                          Average                     Average
                                          Exercise                   Exercise
                             Shares        Price        Shares          Price
                             ------        -----        ------          -----
<S>                          <C>          <C>           <C>          <C>
Options outstanding
  at beginning of year         90,912      $23.03         91,012       $23.03
Granted                         1,500       26.00              0
Exercised                           0                          0
Forfeited                           0                       (100)       20.00
                              -------                     ------
Options outstanding
  at end of year               92,412      $23.08         90,912       $23.03
                               ======                     ======
Shares available for
 grant at year-end              7,588                      9,088

Options exercisable
  at year-end                  86,287                     64,724
</TABLE>

Options outstanding at year-end 2003 were as follows:

<TABLE>
<CAPTION>
                                      Outstanding                      Exercisable
                                      -----------                      -----------
                                             Weighted Average
                                                 Remaining                Weighted
                                                Contractual                Average
                                                   Life                   Exercise
Range of Exercise Prices          Number          (years)       Number      Price
------------------------          ------          -------       ------      -----
<S>                               <C>        <C>                <C>       <C>
      $20.00-$24.99                72,044           5.6         72,044      $20.72
      $25.00-$29.99                10,750           7.5          4,625       25.14
      $30.00-$39.99                 6,412           4.8          6,412       34.00
      $40.00                        3,206           4.8          3,206       40.00
                                  -------                       ------
      Outstanding at year-end      92,412           5.8         86,287      $23.14
                                   ======                       ======
</TABLE>

                                  (continued)

                                                                             21.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 12 - LOAN COMMITMENTS AND OTHER RELATED ACTIVITIES

Some financial instruments, such as loan commitments, credit lines, letters of
credit, and overdraft protection, are issued to meet customer financing needs.
These are agreements to provide credit or to support the credit of others, as
long as conditions established in the contract are met, and usually have
expiration dates or other termination clauses and may require payment of a fee.
Since some commitments are expected to expire without being used, total
commitments do not necessarily represent future cash requirements.
Off-balance-sheet risk to credit loss exists up to the face amount of these
instruments, although material losses are not anticipated. The same credit
policies are used to make such commitments as are used for loans, including
obtaining collateral at exercise of the commitment.

The contractual amounts of loan commitments were as follows at year-end.

<TABLE>
<CAPTION>
                                                 2003                            2002
                                                 ----                            ----
                                      Fixed          Variable          Fixed           Variable
                                      Rate             Rate             Rate            Rate
                                      ----             ----             ----            ----
<S>                                  <C>           <C>               <C>             <C>
Commitments to extend credit
  (net of participations)            $828,000      $ 9,022,000       $1,113,000      $ 8,206,000
Unused credit card, home
  equity and overdraft
  lines of credit                           0        8,976,000                0        7,681,000
Unused commercial lines
  of credit                           108,000       12,651,000           40,000        7,970,000
</TABLE>

Commitments to make loans are generally made for periods of one year or less. At
December 31, 2003, the fixed rate loan commitments have interest rates ranging
from 4.25% to 8.50% and maturities ranging from one month to three and one-half
years.

There were $103,000 and $357,000 of standby letters of credit outstanding as of
December 31, 2003 and 2002, respectively. The fair value of these instruments
was immaterial.

Under an employment agreement with the Chief Executive Officer, in the event the
officer is terminated without cause, the Company has an obligation to pay the
officer's base pay through December 31, 2005, the termination date of the
agreement.

                                  (continued)

                                                                             22.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 13 - FAIR VALUES OF FINANCIAL INSTRUMENTS

Carrying amounts and estimated fair values of financial instruments at year-end
are as follows:

<TABLE>
<CAPTION>
                                                  2003                                2002
                                                  ----                                ----
                                     Carrying         Estimated Fair       Carrying        Estimated Fair
                                      Amount              Value             Amount             Value
                                      ------              -----             ------             -----
<S>                                <C>                <C>                <C>               <C>
Cash and cash equivalents          $  6,289,363       $  6,289,000       $  3,926,735       $  3,927,000
Securities available for sale         1,733,762          1,734,000          2,864,855          2,865,000
Loans held for sale                          --                 --            237,141            237,000
Loans, net of allowance              94,045,598         93,994,000         73,607,652         73,790,000
Federal Reserve Bank stock              189,300            189,000            171,100            171,000
Federal Home Loan Bank stock            195,300            195,000            187,900            188,000
Accrued interest receivable             270,518            271,000            288,368            288,000

Demand and savings deposits         (42,397,239)       (42,397,000)       (41,653,038)       (41,653,000)
Time deposits                       (49,383,018)       (50,115,000)       (29,227,373)       (29,939,000)
Federal Home Loan Bank
   advances                          (3,200,000)        (3,199,000)        (3,200,000)        (3,207,000)
Other borrowings                       (500,000)          (500,000)           (59,965)           (60,000)
Accrued interest payable               (103,419)          (103,000)           (72,470)           (72,000)
</TABLE>

For purposes of these disclosures of estimated fair values, the following
assumptions were used. Carrying amount is the estimated fair value for cash and
cash equivalents, Federal Home Loan Bank and Federal Reserve Bank stock, accrued
interest receivable and payable, demand deposits, short-term borrowings, and
variable rate loans and deposits that reprice frequently and fully. Fair values
of securities are based on market prices or dealer quotes, and if no such
information is available, on the rate and term of the security and information
about the issuer. For fixed rate loans or deposits and for variable rate loans
or deposits with infrequent repricing or repricing limits, fair value is based
on discounted cash flows using current market rates applied to the estimated
life and credit risk. Fair value of debt is based on current rates for similar
financing. Fair values of unrecorded commitments were not material.

These estimates are based on management's judgment of the most appropriate
factors. However, there is no assurance that, had these items been liquidated,
the estimated fair values would have been realized. Estimated fair values should
not be assumed to apply at subsequent dates. Other assets and liabilities of the
Company, such as fixed assets or the value of its core deposits, customer
goodwill or workforce, may have value but are not included in the above
disclosures.

                                  (continued)

                                                                             23.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 14 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS

The payment of dividends by the Bank to the Company is subject to restrictions
by its regulatory agencies. These restrictions generally limit dividends to the
lesser of its undivided profits or the total of its net income for that year,
combined with its retained net income from the preceding two years, as defined.
As of December 31, 2003, the Bank has approximately $1,092,000 available to be
paid as dividends to the Company. In addition, dividends may not reduce capital
levels below the minimum regulatory requirements as described below.

Banks and bank holding companies are subject to regulatory capital requirement
administered by state and federal banking agencies. Capital adequacy guidelines
and prompt corrective action regulations involve quantitative measures of
assets, liabilities and certain off-balance-sheet items calculated under
regulatory accounting practices. Capital amounts and classifications are also
subject to qualitative judgments by regulators. Failure to meet capital
requirements can initiate regulatory action.

Prompt corrective action regulations provide five classifications:
well-capitalized, adequately-capitalized, undercapitalized, significantly
undercapitalized and critically undercapitalized, although these terms are not
used to represent overall financial condition. If less than well-capitalized,
regulatory approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset growth and
expansion, and capital restoration plans are required.

The Bank's actual and required capital amounts and ratios at year-end are
presented below. At year-end 2003 and 2002, the Bank was categorized as
well-capitalized. Management is not aware of any events since December 31, 2003
that would change the Bank's capital category.

<TABLE>
<CAPTION>
                                                                            Minimum To Be
                                                        Minimum           Well-Capitalized
                                                      Required For          Under Prompt
                               Western Reserve      Capital Adequacy     Corrective Action
                                    Bank                Purposes            Provisions
($ thousands)                 ----------------     -----------------     -----------------
2003                          Amount     Ratio     Amount      Ratio      Amount    Ratio
----                          ------     -----     ------      -----      ------    -----
<S>                           <C>        <C>       <C>         <C>       <C>        <C>
Total Capital to
   risk-weighted assets       $10,100     10.6%     $7,643      8.0%     $9,553      10.0%
Tier 1 (Core) Capital to
  risk-weighted assets          7,402      7.7%      3,821      4.0%      5,732       6.0%
Tier 1 (Core) Capital to
  average assets                7,402      7.1%      4,161      4.0%      5,201       5.0%
</TABLE>

                                  (continued)

                                                                             24.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 14 - CAPITAL REQUIREMENTS AND RESTRICTIONS ON RETAINED EARNINGS (continued)

<TABLE>
<CAPTION>
                                                                            Minimum To Be
                                                        Minimum           Well-Capitalized
                                                      Required For           Under Prompt
                                 Western Reserve    Capital Adequacy      Corrective Action
($ thousands)                         Bank              Purposes              Provisions
-------------                         ----              --------              ----------
<S>                           <C>         <C>       <C>         <C>       <C>         <C>
2002
----
Total Capital to
   risk-weighted assets       $8,689      11.7%     $5,922      8.0%      $7,403      10.0%
Tier 1 (Core) Capital to
  risk-weighted assets         6,262       8.5%      2,961      4.0%       4,442       6.0%
Tier 1 (Core) Capital to
  average assets               6,262       7.6%      3,283      4.0%       4,104       5.0%
</TABLE>

NOTE 15 - PARENT COMPANY ONLY CONDENSED FINANCIAL STATEMENTS

Condensed financial information of Western Reserve Bancorp, Inc. follows:

                            CONDENSED BALANCE SHEETS
                           December 31, 2003 and 2002


<TABLE>
<CAPTION>
                                           2003            2002
                                           ----            ----
<S>                                     <C>             <C>

ASSETS
   Cash and cash equivalents            $  151,142      $  147,022
   Investment in bank subsidiary         7,414,850       6,290,353
   Subordinated debt due from bank       1,500,000       1,500,000
   Other assets                             46,663          68,125
                                        ----------      ----------
      Total assets                      $9,112,655      $8,005,500
                                        ==========      ==========
LIABILITIES AND EQUITY
   Borrowings                           $  500,000      $       --
   Shareholders' equity                  8,612,655       8,005,500
                                        ----------      ----------
      Total liabilities and
         shareholder's equity           $9,112,655      $8,005,500
                                        ==========      ==========
</TABLE>

                                  (continued)

                                                                             25.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 15 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION (Continued)

                         CONDENSED STATEMENTS OF INCOME
                     Years ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                2003         2002
                                                ----         ----
<S>                                        <C>             <C>
Interest income                            $  18,750       $  25,140
Interest expense                               4,198              --
Operating expenses                            40,828          25,199
                                           ---------       ---------
Loss before income tax and
   undistributed income of subsidiary        (26,276)            (59)
Income tax benefit                             8,934              20
Equity in undistributed income
   of subsidiary                             640,402         574,337
                                           ---------       ---------
Net income                                 $ 623,060       $ 574,298
                                           =========       =========
</TABLE>

                       CONDENSED STATEMENTS OF CASH FLOWS
                     Years ended December 31, 2003 and 2002

<TABLE>
<CAPTION>
                                                  2003              2002
                                                  ----              ----
<S>                                              <C>             <C>
Cash flows from operating activities
   Net income                                    $ 623,060       $ 574,298
   Equity in undistributed
      income of subsidiary                        (640,402)       (574,337)
   Change in other assets
      and liabilities                               21,462          20,731
                                                 ---------       ---------
         Net cash from operating activities          4,120          20,692

Cash flows from investing activities
   Investment in subsidiary                       (500,000)             --

Cash flows from financing activities
   Proceeds from borrowing                         500,000              --
                                                 ---------       ---------
Change in cash and cash equivalents                  4,120          20,692
Cash and cash equivalents at
   beginning of year                               147,022         126,330
                                                 ---------       ---------
Cash and cash equivalents at
   end of year                                   $ 151,142       $ 147,022
                                                 =========       =========
</TABLE>

                                  (continued)

                                                                             26.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                           December 31, 2003 and 2002


NOTE 16  - EARNINGS PER SHARE

Basic earnings per share is computed by dividing net income by the weighted
average number of shares outstanding during the period. Diluted earnings per
share is computed using the weighted average number of shares determined for the
basic computation plus the dilutive effect of potential common shares issuable
under stock options. In computing earnings per common and common equivalent
share, the Company has utilized the treasury stock method.

The factors used in the earnings per share computation follow.

<TABLE>
<CAPTION>
                                          2003            2002
                                          ----            ----
<S>                                      <C>           <C>
Basic
   Net income                            $623,060      $574,298
                                         ========      ========
   Weighted average common
     shares outstanding                   388,052       388,052
                                         ========      ========
   Basic earnings per
     common share                        $   1.61      $   1.48
                                         ========      ========
Diluted
   Net income                            $623,060      $574,298
                                         ========      ========
   Weighted average common
     shares outstanding for basic
     earnings per common share            388,052       388,052
   Add: Dilutive effects of assumed
      exercises of stock options            9,291         9,291
                                         --------      --------
   Average shares and dilutive
     potential common shares              397,343       397,343
                                         ========      ========
   Diluted earnings per
     common share                        $   1.57      $   1.45
                                         ========      ========
</TABLE>

Stock options for 11,118 and 9,618 shares of common stock were not considered in
computing diluted earnings per common share for 2003 and 2002 because they were
antidilutive.

                                  (continued)

                                                                             27.
<PAGE>
                 COMPARATIVE SUMMARY OF SELECTED FINANCIAL DATA
            As of December 31, 2003 and 2002, and for the Years ended
                           December 31, 2003 and 2002


<TABLE>
<CAPTION>
($000's except per share data)                                      2003           2002
                                                                    ----           ----
<S>                                                               <C>            <C>
BALANCE SHEET DATA:
Total assets                                                      $104,317       $ 82,376
Securities available for sale                                        1,734          2,865
Total loans                                                         95,548         74,650
Allowance for loan losses                                            1,503          1,042
Total deposits                                                      91,780         70,880
Shareholders' equity                                                 8,613          8,006

INCOME STATEMENT DATA:
Total interest income                                             $  5,245       $  4,629
Total interest expense                                               1,665          1,469
                                                                  --------       --------
Net interest income                                                  3,580          3,160
Provision for loan losses                                              431            297
                                                                  --------       --------
Net interest income after provision for loan losses                  3,149          2,863
Noninterest income                                                     469            246
Noninterest expense                                                  2,674          2,234
                                                                  --------       --------
Income before income tax                                               944            875
Income tax expense                                                     321            301
                                                                  --------       --------
Net income                                                        $    623       $    574
                                                                  ========       ========

PER SHARE DATA:
Basic income per common share                                     $   1.61       $   1.48
Diluted income per common share                                       1.57           1.45
Book value per share at year-end                                     22.19          20.63
Cash dividends per share                                               n/a            n/a
Average shares used in basic income per share calculations         388,052        388,052
Average shares used in diluted income per share calculations       397,343        397,343

OPERATING RATIOS:
Total loans to total deposits                                       104.11%        105.32%
Total shareholders' equity to total assets                            8.26%          9.72%
Average shareholders' equity to average assets                        8.79%         10.12%
Return on average equity                                              7.57%          7.47%
Return on average assets                                              0.67%          0.76%
Dividend payout ratio                                                  n/a            n/a
Allowance for loan losses to total loans                              1.57%          1.40%
Average assets                                                    $ 93,677       $ 75,953
Average shareholders' equity                                         8,233          7,687
</TABLE>

                                                                             28.
<PAGE>
                          WESTERN RESERVE BANCORP, INC.
                      MANAGEMENT'S DISCUSSION AND ANALYSIS

OVERVIEW

In the following section, management presents an analysis of Western Reserve
Bancorp, Inc.'s financial condition and results of operations as of and for the
years ended December 31, 2003 and 2002. This discussion is provided to provide a
more comprehensive review of the operating results and financial condition than
could be obtained from an examination of the financial statements alone. This
analysis should be read in conjunction with the consolidated financial
statements and related footnotes and the selected financial data elsewhere in
this report.

Western Reserve Bancorp, Inc. (the Company) was incorporated under the laws of
the State of Ohio on February 25, 1997. During 1997 and the first ten months of
1998, the Company's activities were limited to the organization of Western
Reserve Bank (the Bank) and preparation for and completion of a common stock
offering (the Offering). The Company sold 320,267 shares of common stock at a
price of $20.00 per share in the Offering. Net proceeds from the initial
Offering were $6,368,499. Most of the proceeds of the Offering were used by the
Company to provide the initial capitalization of the Bank, which occurred on
November 6, 1998, at which time the Bank began operations. During 2000, the
Company sold an additional 67,785 shares of common stock in an intra-state
offering. The Offering resulted in proceeds, net of offering costs, of
$1,577,000.

FINANCIAL CONDITION

Total assets at December 31, 2003, were $104,316,548, an increase of
$21,940,160, or 26.6% over 2002 year-end assets of $82,376,388.

The primary reason for the increase in total assets was continuing strong loan
demand, which resulted in significant loan growth throughout 2003. The increase
in total assets was funded primarily by the continuing growth of new deposit
accounts, as well as by obtaining national market certificates of deposit.

During 2003, cash and cash equivalents increased to $6,289,363 from $3,926,735.
This increase is primarily the result of obtaining additional deposits, and
provides additional liquidity.

SECURITIES

The Company owns government agency and mortgage-backed securities. At year-end
2003, the portfolio totaled $1,733,762, and was comprised of 45% U.S. government
agency securities, and 55% mortgage-backed securities. During 2003, $1,250,000
of agency securities were called, and the Company purchased $500,000 of
mortgage-backed securities during the year. The securities portfolio provides
liquidity and a higher yield than the rate paid on overnight federal

                                                                             29.
<PAGE>
funds or other short-term instruments. They are also used as collateral for
public fund deposits.

LOANS

Total loans grew $20,898,325 in 2003, compared to growth of $19,431,933 in 2002.
Total loans were $95,548,286 at December 31, 2003, compared to $74,649,961 at
December 31, 2002. While the Company makes all types of loans to businesses and
consumers, its primary lending focus is commercial loans to small businesses in
its market area. The net growth in the loan portfolio during 2003 was comprised
of $20,030,048 in commercial loans and $932,574 in home equity loans.
Residential mortgage and construction, consumer installment and credit card
loans decreased a total of $64,296 during 2003, primarily due to mortgage
refinancings.

The commercial loan growth consisted of approximately $10,789,000 in commercial
real estate loans, $2,708,000 in short-term commercial construction loans,
$4,615,000 in commercial lines of credit, $1,751,000 in other commercial loans
to businesses and $1,162,000 in loan participations purchased from other
financial institutions. During 2003, commercial dealer-owned leases decreased
$430,000 due to repayments and management's decision to de-emphasize that type
of lending, and SBA guaranteed loans decreased by $586,000.

Of the total loans at December 31, 2003, approximately $87,265,000 or 91.3% are
at a variable rate of interest, and $8,283,000 or 8.7% are fixed rate. Of the
total loans, $73,336,000, or 76.8% mature or are able to be repriced within
twelve months. Just $1,687,000, or 1.8% of total loans mature or reprice in more
than five years.

At December 31, 2003 and 2002, the loan-to-deposit ratio was 104.1% and 105.3%,
respectively, and the loan-to-asset ratio was 91.6% and 90.6% at year-end 2003
and 2002. Management expects loan demand to remain strong, especially in the
commercial loan segment, and anticipates the loan-to-deposit ratio to remain in
the range of approximately 100%-105% and the loan-to-assets ratio to be between
85% and 95% during the coming year.

In the fourth quarter of 2003, the Company sold portions of several commercial
real estate loans totaling $3,244,000 to another financial institution that was
able to provide our borrowers with long-term fixed rate financing. Additionally,
$489,000 of SBA-guaranteed loans were sold. These two transactions resulted in
pre-tax gains totaling $176,695. The proceeds from these transactions also
provided funding to be able to make additional new loans.

During 2003 and 2002, respectively, the Company originated approximately
$9,374,000 and $10,286,000 and sold approximately $9,611,000 and $11,938,000 of
fixed rate residential mortgage loans, including the related loan servicing. At
December 31, 2003, there were no mortgage loans held for sale, compared to
$237,141 at December 31, 2002.

                                                                             30.
<PAGE>
DEPOSITS AND OTHER FUNDING SOURCES

Total deposits increased to $91,780,257 at December 31, 2003, compared to
$70,880,411 at December 31, 2002, an increase of $20,899,846 or 29.5%. At
year-end 2003, $9,559,885, or 10.4% of total deposits are in noninterest bearing
demand deposit accounts, and $6,392,660 or 7.0% are in interest-bearing NOW
accounts. Variable-rate savings and money market accounts (collectively known as
Market Rate Savings Accounts) total $26,444,694, or 28.8% of total deposits.
Certificates of deposit total $45,915,656, or 50.0% of total deposits, and
individual retirement arrangements (IRAs) were $3,442,340, or 3.8% of total
deposits. Included in the time deposits total is $5,300,000 in six month public
fund CDs maturing in January through May of 2004, at a weighted average rate of
1.00%. Management plans to replace these CDs with similar instruments as they
mature.

The deposit mix has changed in the past two years. As interest rates declined,
depositors seeking increased yields shifted balances out of Market Rate Savings
Accounts and into higher-yielding certificates of deposit. The average weighted
rate on Market Rate Savings Accounts during 2003 was 0.79%, compared with 1.43%
in 2002 and 3.75% in 2001. During 2003, Market Rate Savings Account balances
decreased approximately $1,031,000, and in 2002, these balances decreased
$2,146,307.

Overall, management expects deposits to continue to grow, although at a slower
rate during 2004, as the Company continues to attract new customers. During 2002
and early 2003, management actively sought longer-term CD funding (with three to
five year maturities) in order to match-fund certain commercial real estate
loans with fixed rates for up to three years. This strategy has the effect of
minimizing interest rate risk and has allowed the Company to take advantage of
the historically low interest rates. As of December 31, 2003, the Company had
obtained $23,292,000 of national market CDs, primarily from other banks and
credit unions, in increments of $99,000, with terms ranging from one year to
five years, and rates ranging from 1.70% to 5.25%. As of year-end 2003, the
weighted average rate of these CDs was 3.36%, and the weighted average remaining
maturity was 21.0 months. At December 31, 2002, there was $10,099,000 in
national market CDs. Although management believes these CDs were obtained at
market rates at the time they were originated, they may be more vulnerable to
price sensitivity than local deposits.

Deposits of $100,000 or more totaled $37,647,868, or 41.0% of total deposits as
of December 31, 2003, compared to $29,860,793 or 42.1% of total deposits at
December 31, 2002.

The Company obtained additional funding through the Federal Home Loan Bank. As
of December 31, 2003 and 2002, the Bank had borrowed $3,200,000, from the FHLB.

The Company also has a $3,000,000 line of credit with an unrelated bank. The
purpose of this line of credit is to provide additional capital to the Bank as
needed. At December 31, 2003, there was $500,000 outstanding on this line of
credit. The interest rate was the prime rate minus 0.75%, or 3.25% as of
December 31, 2003.

                                                                             31.
<PAGE>
RESULTS OF OPERATIONS

Consolidated net income was $623,060 in 2003, compared to $574,298 in 2002.
Income before income taxes was $944,029 in 2003, compared to $874,979 in the
prior year. The primary reason for the increase in net income in 2003 was the
increase in net interest income due to both growth in the loan portfolio and
lower interest rates paid on deposits. This effect was partially offset by lower
yields on loans and other interest-earning assets, as well as the increase in
interest-bearing deposits.

Basic and diluted income per common share were $1.61 and $1.57, respectively, in
2003 compared to $1.48 and $1.45 in 2002.

No dividends were paid in 2003 or 2002.

NET INTEREST INCOME

Net interest income for 2003 was $3,579,739, an increase of $419,829, or 13.3%
compared with $3,159,910 in 2002. The increase was due primarily to continued
growth in the loan portfolio in 2003, which was funded primarily by deposit
growth. Net interest income benefited from a decrease in the rates paid on
deposits, but was negatively impacted by a decrease in the rates on interest
earning assets and the increase in interest-bearing deposits.

The average net interest margin for 2003 was 3.92%, down from 4.28% in 2002.
Several factors have negatively impacted the net interest margin. The major
factor is a decrease in the yield on earning assets. The net interest margin has
also been impacted by management's strategy to obtain longer-term funding. (See
the discussion of "Interest Rate Sensitivity" later in this section.) These
funds provided additional liquidity but 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.

The average yield on interest earning assets in 2003 was 5.74%, compared to
6.27% in 2002. During 2003, loans yielded 6.02%, compared to 6.61% in 2002. This
included loan fees of $144,475 in 2003 and $102,936 in 2002, which contributed
0.16% and 0.14%, respectively, to the net interest margin.

The yield on earning assets, including loans, has decreased significantly
throughout 2002 and 2003. During 2001 and 2002, the Federal Reserve Bank
implemented eleven interest rate decreases throughout 2001 that totaled 4.75%,
plus another 0.50% in November of 2002. There were corresponding decreases in
the prime rate and deposit rates. In June 2003, the Federal Reserve Bank again
lowered short-term interest rates, causing most large banks to once again
decrease their prime rate, to 4.00%. Management made the decision to not lower
the Company's prime rate on commercial loans, but to keep that rate at 4.25%.
This action was communicated directly to all affected borrowers. When interest
rates begin to rise in the future, the Company expects to delay increasing its
prime rate until the national prime rate "catches up" to the Company's prime
rate.

                                                                             32.
<PAGE>
The cost of interest-bearing funds decreased as well during 2003, to 2.22% on
average. This was down significantly from the 2.47% during 2002. Management
expects that the cost of funds will remain fairly stable during 2004.

Following is a table showing the average balances, interest and rates on the
Bank's interest-earning assets and interest-bearing liabilities as of December
31, 2003 and 2002.

<TABLE>
<CAPTION>
                                                 Year ended                         Year ended
                                              December 31, 2003                 December 31, 2002
                                              -----------------                 -----------------
                                      Average                 Average    Average                 Average
($ thousands)                         Balance     Interest      Rate     Balance    Interest      Rate
                                      -------     --------      ----     -------    --------      ----
<S>                                   <C>         <C>         <C>        <C>        <C>          <C>
Interest-earning assets:
   Federal funds sold and
      other short-term funds          $  4,342    $    44        1.02%   $  3,873     $    61      1.57%
   Securities                            1,749         69        3.95       2,962         141      4.76
   Loans                                84,947      5,114        6.02      66,679       4,410      6.61
   Federal Reserve Bank stock              173         10        6.00         169          10      6.00
   Federal Home Loan Bank
      stock                                191          8        4.00         143           7      4.63
                                      --------    -------                --------     -------
Total interest-earning assets           91,402      5,245        5.74      73,826       4,629      6.27

Interest-bearing liabilities

   Transaction accounts (NOW)            5,172         37        0.71       4,518          54      1.20
   Market rate savings accounts         26,376        207        0.79      29,795         426      1.43
   Time deposits                        40,021      1,282        3.20      22,205         872      3.92
   Short-term borrowings                    85         --        0.39         217           2      0.94
   Federal Home Loan Bank
      advances                           3,200        135        4.22       2,711         115      4.22
   Other borrowings                        129          4        3.25          --          --        --
                                      --------    -------                --------     -------
Total interest-bearing liabilities    $ 74,983      1,665        2.22    $ 59,446       1,469      2.47
                                                  -------                             -------
Net interest margin                               $ 3,580        3.92%                $ 3,160      4.28%
                                                  =======                             =======
</TABLE>

NONINTEREST INCOME

Total noninterest income was $469,222, compared with $246,550 in 2002. During
2003, the primary source of noninterest income was the gain on the origination
and sale of both commercial and mortgage loans, with resulted in a gain before
tax of $267,518. In the fourth quarter of 2003, the Company sold $3,733,000 of
commercial loans. This resulted in a gain on the sale of these loans of
$176,695. In both 2003 and 2002, the Bank also originated and sold long-term
fixed rate mortgages. Gains on sales of mortgage loans of $90,823 in 2003,
compared to $99,775 in 2002, were recorded. The Company sold these mortgages and
the related servicing, which helped minimize the interest rate risk that would
be associated with keeping long-term mortgages in the loan portfolio. The
Company originated and sold significant volumes of mortgage loans during the
past two years due to the lower interest rate environment. However, management
expects mortgage volume to decrease as longer-term interest rates have
stabilized and a significant proportion of mortgage-holders has already

                                                                             33.
<PAGE>
refinanced their mortgages. As a result, in mid-2003 the Company changed the way
it operates its mortgage lending area. The Company has developed an arrangement
with an outside entity under which an employee of the Company 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. The Company earns a fee from the other entity for providing
these mortgage processing services. This change allows the Company to offer a
much wider range of mortgage programs and products to its customers, while
reducing the overhead associated with the mortgage lending function.

Service charges on deposits totaled $108,566 in 2003 and $86,707 in 2002. The
increase was due to increases in the number of checking accounts, as well as an
increase in certain fees in the second quarter of 2002. However, a significant
number of customers keep balances in their deposit accounts sufficient to offset
or waive many of the routine service charges.

The largest components of "other" noninterest income are fee income from credit
card and ATM programs, the rental of safe deposit boxes, and the sales of checks
to depositors. Management expects that noninterest income will continue to
increase as the Company increases in size and continues to increase the number
of customers served.

NONINTEREST EXPENSE

Total noninterest expense in 2003 was $2,673,822, an increase of $439,345 or
19.7% over the $2,234,477 in 2002. Major components of this increase include
salaries and employee benefits (which increased $224,403 or 18.5% in 2003 when
compared to 2002), professional fees (which increased $86,464, or 83.1%, to
$190,491 in 2003, from $104,027 in 2002), premises and equipment (an increase of
$36,663, or 10.5% over the prior year) and data processing (a $34,229, or 17.7%,
increase).

The increase in salaries and employee benefits is related to the continued
growth of the Bank. In 2003, the Company added staff in its commercial lending
area, including a Vice President of Commercial Lending and a Loan Secretary, and
in late 2002 added an Accounting Assistant. The increase in professional fees is
attributable to increased directors' fees as well as legal and other costs
associated with understanding and implementing new corporate governance rules
under the Sarbanes-Oxley Act. Also, in the second quarter of 2002, the Company
leased approximately 2,080 square feet of additional space in the building
adjoining its headquarters, and the commercial lending group moved into that
space in April 2002.

Total assets per employee increased to approximately $4,170,000 at December 31,
2003, compared to $3,740,000 at December 31, 2002. Overhead as a percentage of
average assets was 2.85% in 2003 compared to 2.94% in 2002, and overhead
compared to net interest income also improved, to 74.7% and 70.7% in 2003 and
2002, respectively. The efficiency ratio remained steady in 2003, at 65.27%,
compared to 65.34% in 2002.

                                                                             34.
<PAGE>
PROVISION AND ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is maintained by management at a level considered
adequate to cover probable incurred credit losses in the loan portfolio.
Management's determination of the appropriate provision for loan losses and the
adequacy of the allowance for loan losses is based, in part, on the
consideration of loss histories of other similar community financial
institutions which management believes are representative of the probable
expected loss experience of the Company. Other factors considered by management
include the composition of the loan portfolio, economic conditions, the
creditworthiness of the Company's borrowers and other related factors. The
provision for probable loan losses was $431,100 in 2003, compared with $297,004
in 2002. The increase in 2003 in the provision for loan losses is due primarily
to the provision in the third quarter of an additional $175,000 related to one
loan relationship based on an analysis of the sources of repayment, the
collateral securing the loans, the borrower's industry and other factors
directly related to the loan relationship. Management continues to closely
monitor the status of this borrower.

During 2003, there was $29,279 in net recoveries on previously charged-off
loans, compared to a net loss in 2002 of $9,374. At December 31, 2003, the
allowance for loan losses was 1.57% of total loans, compared to 1.40% at
year-end 2002. Management allocated approximately 77.1% of the total allowance
to commercial loans, 3.1% to residential mortgage and home equity loans and 1.8%
to consumer and credit card loans to individuals. At December 31, 2003,
$269,895, or 18.0% of the allowance for loan losses was allocated to impaired
loan balances. At December 31, 2003, nine loans totaling $1,126,175 were in
nonaccrual status, compared to four loans totaling $340,776 at year-end 2002.
$153,735 of the nonaccrual loans at year-end 2003 are guaranteed by the Small
Business Administration, compared to $198,796 at year-end 2002. There were no
other loans more than 90 days delinquent as of December 31, 2003 and 2002.
Management believes the allowance for loan losses at December 31, 2003, is
adequate to absorb probable losses in the loan portfolio.

LIQUIDITY

Liquidity refers to the ability to fund loan demand, meet deposit customers'
withdrawal needs and provide for operating expenses. As summarized in the
Statement of Cash Flows, the main sources of cash flow are receiving deposits
from customers and, to a lesser extent, repayment of loan principal and the
interest on loans and investments, and borrowings. The primary uses of cash are
lending to borrowers and, secondarily investing in securities and short-term
interest-earning assets. Assets available to satisfy those needs include cash
and due from banks, federal funds sold, interest-bearing deposits in other
banks, loans held for sale and available-for-sale investment securities. These
assets are commonly referred to as liquid assets. Liquid assets were $8,023,125
at December 31, 2003, compared to $7,028,731 at the same date in 2002.

In 2002 and 2003, to the extent that loan demand outpaced local deposit growth,
the Company used other sources of funding, including national market CDs and
Federal Home Loan Bank advances (as previously discussed).

If additional liquidity is needed, the Company has several possible sources,
including the sale of securities from the securities portfolio, the sale of
loans, purchasing federal funds, obtaining

                                                                             35.
<PAGE>
additional Federal Home Loan Bank advances, acquiring additional national market
CDs or brokered deposits, and using surety bonds to secure public deposits. The
Bank and Holding Company also can borrow under various lines of credit. At
December 31, 2003, these credit facilities aggregated approximately $5,733,000
at the Bank and $2,500,000 at the Holding Company.

INTEREST RATE SENSITIVITY/GAP

One of management's objectives in managing the balance sheet for interest rate
sensitivity is to attempt to reduce volatility in the net interest margin by
matching, as closely as possible, the timing of the repricing of its interest
rate sensitive assets with interest rate sensitive liabilities.

In the past few years, interest rates decreased significantly, to levels not
seen in over 40 years. In 2001, there were eleven 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 2002. Finally, in June
2003, there was another 25 basis point rate cut.

At year-end 2002, approximately 55.5% of the interest-bearing assets on the
Bank's balance sheet matured or could reprice in one year or less. There was
$1,108,534 in fixed rate loans with a maturity greater than five years. Nearly
all of the interest-bearing liabilities were variable-rate core deposits. As of
December 31, 2002, there was approximately $44,355,000 of assets and $45,126,000
of liabilities that mature or are able to reprice in one year. As a result, the
Bank was in a balanced, or neutral, interest rate sensitivity position, with a
one-year "GAP" of ($771,000), or 98%, which means that for every $1.00 in
interest-bearing liabilities that could reprice within one year, $0.98 of
interest-earning assets could reprice.

By mid-2002, management believed that rates were at or near their low point, and
began to change its strategy to position the balance sheet to benefit when rates
would begin to increase. In implementing this strategy, the Company 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 low-rate
funding. 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 incur additional interest expense, since the
Company has to pay depositors a higher rate to accept longer-term deposits.

By year-end 2003, approximately 76.1% of the interest-bearing assets on the
Bank's balance sheet mature or reprice in one year or less. There are currently
$1,687,000 in fixed rate loans with a maturity greater than five years. As of
December 31, 2003, approximately $74,010,000 of assets and $59,153,000 of
liabilities mature or are able to reprice in one year. The one-year "GAP" has
increased significantly, to $14,857,000, or 125%. This means that, for every
$1.00 of interest-bearing liabilities that could reprice within one year, $1.25
of interest-earning assets could reprice. This position will benefit the Company
in a rising rate environment. However, in the short term, the effect has been to
compress the net interest margin.

                                                                             36.
<PAGE>
CAPITAL RESOURCES

Total shareholders' equity at December 31, 2003 was $8,612,655, compared to
$8,005,500 at December 31, 2002. The increase of $607,155 was the result of the
net income for 2003 of $623,060, offset by a decrease of $15,905 in the net
unrealized gains on available for sale securities.

Banking regulators have established minimum capital ratios for banks and bank
holding companies. Total risk-based capital is made up of Tier 1 Capital and
Tier 2 Capital. Tier 1 Capital is total shareholders' equity less any intangible
assets. Tier 2 Capital is the allowance for loan losses (includible up to a
maximum of 1.25% of risk-weighted assets), plus the qualifying portion of
subordinated debt. Refer to Note 14 in the Company's consolidated financial
statements for a more complete discussion of risk-based capital. The Bank
exceeded the applicable minimum regulatory capital requirements at December 31,
2003 and 2002, and was considered to be well-capitalized under the regulatory
guidelines. Management intends to maintain the Bank's well-capitalized status.

The Company has grown rapidly in its five-year history, and continued rapid
growth will require it to consider capital strategies to support that growth. In
2003, the Company obtained a line of credit through an unaffiliated financial
institution. By borrowing against the line of credit and then investing the
funds into the Bank as capital, the Bank is able to manage its capital ratios.
Other strategies that the Company continues to evaluate include selling more
stock, issuing trust preferred securities, or additional borrowing. See the
section entitled "Expansion Plans" for additional information.

Restrictions exist regarding the ability of the Bank to transfer funds to the
Company in the form of cash dividends, loans or advances, as discussed in Note
14. No cash or other dividends were declared or paid during the periods ended
December 31, 2003 and 2002. Management does not expect the Company to pay cash
dividends in the foreseeable future. Management believes that the capital that
would be used to pay dividends is more effectively invested in the continuing
growth of the Company and the Bank.

As of December 31, 2003, management is not aware of any current recommendations
by the banking regulatory authorities which, if they were to be implemented,
would have, or are reasonably likely to have, a material adverse effect on the
Company's liquidity, capital resources or operations.

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 decreased by
charge-offs less recoveries. 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.

                                                                             37.
<PAGE>
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
at least 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.

CONTRACTUAL OBLIGATIONS, COMMITMENTS, CONTINGENT LIABILITIES AND OFF-BALANCE
SHEET ARRANGEMENTS

The following table presents, as of December 31, 2003, significant fixed and
determinable contractual obligations by payment date. The payment amounts
represent those amounts contractually due to the recipient and do not include
any unamortized premiums or discounts, hedge basis adjustments, or other similar
adjustments. Further discussion of the nature of each obligation is included in
the referenced note to the consolidated financial statements.

<TABLE>
<CAPTION>
(Dollars in thousands)               Note
                                   Reference       2004       2005       2006      2007     2008      Thereafter
                                   ---------       ----       ----       ----      ----     ----      ----------
<S>                                <C>           <C>         <C>        <C>       <C>      <C>        <C>
Deposits without maturity                                                                               $42,397
Time deposits                          6         $23,451     $8,794     $7,436    $4,491   $5,210            --
FHLB advances and other
 borrowings                            7           3,200        500         --        --       --            --
Operating leases                       5             171        176        179       183      155            --
</TABLE>

Note 12 to the consolidated financial statements discusses in greater detail
other commitments and contingencies and the various obligations that exist under
those agreements. Examples of these commitments and contingencies include
commitments to extend credit to borrowers under lines of credit and employment
agreements between the Company and certain of its executive officers.

At December 31, 2003, the Company had no unconsolidated, related special purpose
entities, nor did it engage in derivatives and hedging contracts, such as
interest rate swaps, that may expose it to liabilities greater than the amounts
recorded on the consolidated balance sheet. The Company's investment policy
prohibits engaging in derivatives contracts for speculative trading purposes;
however, in the future, management may pursue certain contracts, such as
interest rate swaps, in the effort to execute a sound and defensive interest
rate risk management policy.

IMPACT OF INFLATION AND CHANGING PRICES

The majority of assets and liabilities of the Company are monetary in nature and
therefore the Company differs greatly from most commercial and industrial
companies that have significant investments in fixed assets or inventories.
However, inflation does have an important impact on the growth of total assets
in the banking industry and the resulting need to increase equity capital in
order to maintain an appropriate equity to assets ratio. Inflation significantly
affects noninterest expense, which tends to rise during periods of general
inflation. Management

                                                                             38.
<PAGE>
believes the most significant impact on financial results is the Company's
ability to react to changes in interest rates. Management seeks to maintain a
fairly balanced position between interest rate sensitive assets and liabilities
and to actively manage the balance sheet in order to protect against the effects
of wide interest rate fluctuations on net income and shareholders' equity.

EXPANSION PLANS

The Company's Board and management have been evaluating selected growth
opportunities for an extended period of time. Several criteria were considered
as essential for an expansion, including: the area must have a large deposit
base; the community must have a strong community identity; there should not be
another community bank located in the same area; and there must be significant
opportunities for profit. After extensive study and evaluation, the Board
authorized management to pursue expansion into the Brecksville, Ohio market
area. In December 2003, the Ohio Division of Financial Institutions approved the
Bank's application to establish a banking office in Brecksville. This office
will have a Regional President, and will offer all of the services and amenities
that are offered in the Medina banking office. There will also be a local
advisory board of directors to offer guidance and assistance.

An investor group has purchased a building at 8747 Brecksville Road, and is
finalizing plans for its complete remodeling. There will be approximately 11,000
square feet in the building, and the Bank will be the anchor tenant, leasing
approximately 5,000 square feet. The City of Brecksville has granted its
approval for the project, and construction should begin in March 2004. The Bank
expects to open The Western Reserve Bank of Brecksville in the fall of 2004.

In conjunction with the Company's expected growth in both Medina and
Brecksville, it is anticipated that there will be an offering of additional
Western Reserve Bancorp, Inc. stock in mid-2004.

FORWARD LOOKING STATEMENTS

Certain statements contained in this report that are not historical facts are
forward looking statements that are 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. The Company's 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.

                                                                             39.
<PAGE>
                             BOARD OF DIRECTORS (1)

<TABLE>
<S>                                 <C>
P.M. Jones, Chairman                Lease Marketing Consultant and
                                    President, Leasing Times, Inc.
                                    Medina, Ohio

Edward J. McKeon                    President and Chief Executive Officer
                                    Western Reserve Bancorp, Inc. and Western Reserve Bank
                                    Medina, Ohio

Roland H. Bauer                     President and Chief Operating Officer
                                    The Cypress Companies
                                    Akron, Ohio

Bijay K. Jayaswal, M.D.             Physician, Internal Medicine and Cardiology
                                    Medina, Ohio

Ray E. Laribee                      Attorney
                                    Laribee, Hertrick and Kray
                                    Medina, Ohio

C. Richard Lynham                   President and Owner
                                    Harbor Castings, Inc.
                                    North Canton, Ohio

R. Hal Nichols                      Chairman and Manager
                                    Austin Associates, LLC
                                    Toledo, Ohio

Rory H. O'Neil                      President
                                    Quetzal Corp.
                                    Westfield Center, Ohio

Michael R. Rose                     President
                                    Washington Properties, Inc.
                                    Medina, Ohio

Glenn M. Smith                      Retired President
                                    Smith Bros., Inc.
                                    Medina, Ohio

Thomas A. Tubbs                     C.E.O.
                                    The Tubbs Group
                                    Akron, Ohio
</TABLE>

(1) All are Directors of Western Reserve Bancorp, Inc. and Western Reserve Bank

                                                                             40.
<PAGE>
EXECUTIVE OFFICERS -- WESTERN RESERVE  BANCORP, INC.

Edward J. McKeon, President and Chief Executive Officer
Brian K. Harr, Senior Vice President
Cynthia A. Mahl, Senior Vice President, Corporate Secretary, Treasurer


EXECUTIVE OFFICERS -- WESTERN RESERVE BANK

Edward J. McKeon, President and Chief Executive Officer
Brian K. Harr, Senior Vice President, Senior Lender
Cynthia A. Mahl, Senior Vice President, Chief Financial Officer,
       Senior Operations Officer

TRANSFER AGENT, REGISTRAR & DIVIDEND AGENT

Western Reserve Bank
4015 Medina Road, Suite 100
P.O. Box 585
Medina, Ohio 44258-0585
(330) 764-3131 or (800) 633-4622


STOCK INFORMATION

The Company's Common Stock was held by approximately 425 holders of record as of
December 31, 2003 and is quoted on the OTC pink sheets. In 2003, there were five
transactions in the Company's stock, each at $26.00 per share, reported by the
market maker. There have been no dividends paid on the Company's common stock.

ANNUAL REPORT ON FORM 10-KSB

A copy of the Company's 2003 Annual Report on Form 10-KSB filed with the
Securities and Exchange Commission is available to shareholders without charge.
To obtain a copy, direct your request to Cynthia A. Mahl, Senior Vice President
and CFO, Western Reserve Bancorp, Inc. P.O. Box 585, Medina, OH 44258-0585. You
may also access the report at www.sec.gov.

ANNUAL MEETING

The Annual Shareholders' Meeting will be held Wednesday, April 28, 2004, at 9:00
a.m. at Fox Meadows Country Club (Weymouth Ballroom), 3946 Weymouth Road (Route
3), Medina, Ohio 44256.