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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1999
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________________ to _________________
Commission File Number 0-28162
LENOX BANCORP, INC.
(Exact name of small business issuer as specified in its charter)
Ohio 31-1445959
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5255 Beech Street, St. Bernard, Ohio 45217
(Address of principal executive offices) (Zip Code)
(513) 242-6900
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year, if changes
since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes X No
------- -------
APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date: 404,668 shares of common
stock, par value $0.01 per share, were outstanding as of May 12, 1999.
Transitional Small Business Disclosure Format (check one): Yes No X
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LENOX BANCORP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED MARCH 31, 1999
INDEX
Page
----
PART I. FINANCIAL INFORMATION................................................3
Item 1. Financial Statements-Unaudited.......................................3
Consolidated Balance Sheets at
March 31, 1999 and December 31, 1998.................................3
Consolidated Statements of Operations - For the Three
Months Ended March 31, 1999 and 1998.................................4
Consolidated Statements of Cash Flows - For the
Three Months Ended March 31, 1999 and 1998...........................5
Notes to Unaudited Consolidated Financial Statements.................6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations................................................7
PART II: OTHER INFORMATION...................................................13
Item 1. Legal Proceedings...................................................13
Item 2. Changes in Securities and Use of Proceeds...........................13
Item 3. Defaults Upon Senior Securities.....................................13
Item 4. Submission of Matters to a Vote of Security Holders.................13
Item 5. Other Information...................................................14
Item 6. Exhibits and Reports on Form 8-K....................................14
SIGNATURES....................................................................15
2
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PART I. FINANCIAL INFORMATION
LENOX BANCORP, INC.
MARCH 31, 1999
Item 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
AT
AT DECEMBER 31,
MARCH 31, 1999 1998
------------------ ------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks.................................................................... $ 725 $ 2,350
Certificates of deposit.................................................................... 186 183
Investment securities - available for sale, at fair value (amortized cost
of $2,803 and $3,303 at March 31, 1999 and December 31, 1998)........................... 2,782 3,301
Mortgage-backed securities - available for sale, at fair value (amortized
cost of $713 and $799 at March 31, 1999 and December 31, 1998).......................... 716 805
Collateralized mortgage obligations - available for sale, at fair value
(amortized cost of $2,167 and $2,167 at March 31, 1999 and December 31, 1998)........... 2,181 2,179
Collateralized mortgage obligations - held to maturity, (fair value of
$5,296 and $5,992 at March 31, 1999 and December 31, 1998).............................. 5,199 5,925
Loans receivable, net...................................................................... 44,650 38,308
Loans held for sale - at lower of cost or market........................................... -- 220
Accrued interest receivable:
Loans............................................................................ 194 161
Mortgage-backed securities....................................................... 4 5
Collateralized mortgage obligations.............................................. 36 40
Investments and certificates of deposit.......................................... 41 63
Property and equipment, net................................................................ 551 564
Federal Home Loan Bank stock - at cost..................................................... 836 822
Prepaid expenses and other assets.......................................................... 265 157
Prepaid federal income taxes............................................................... 9 6
-------- --------
Total assets........................................................... $ 58,375 $ 55,089
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits:
Savings, club and other accounts................................................. $ 5,366 $ 5,113
Money market and NOW accounts.................................................... 4,530 4,813
Certificate accounts............................................................. 26,514 23,141
-------- --------
Total deposits......................................................... 36,410 33,067
Advances from Federal Home Loan Bank.................................................... 14,270 14,440
Advance payments by borrowers for taxes and insurance................................... 136 162
Accrued expenses........................................................................ 339 161
Accrued federal income taxes............................................................ -- --
Deferred federal income taxes........................................................... 106 112
----------- -----------
Total liabilities...................................................... $ 51,261 $ 47,942
======== ========
Stockholders' Equity:
Common stock - no par value: 2,000,000 authorized, 425,677 issued
and 397,165 outstanding at March 31, 1999 and 396,910 issued and outstanding
at December 31, 1998................................................................. -- --
Additional paid in capital.............................................................. $ 3,743 $ 3,743
Retained earnings - substantially restricted............................................ 4,186 4,216
Unearned ESOP shares.................................................................... (240) (240)
Shares acquired for Stock Incentive Plan................................................ (105) (112)
Treasury stock 28,512 shares at March 31, 1999 and 28,767 shares at
December 31, 1998................................................................ (468) (471)
Unrealized gain on available for sale, net of taxes..................................... (2) 11
Total stockholders' equity............................................. 7,114 7,147
---------- ----------
Total liabilities and stockholders' equity.............................................. $ 58,375 $ 55,089
======== ========
</TABLE>
3
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<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED
SEPTEMBER 30,
------------------------------------
1999 1998
-------------- -----------
(UNAUDITED)
(DOLLARS IN THOUSANDS
EXCEPT PER SHARE DATA)
<S> <C> <C>
INTEREST INCOME AND DIVIDEND INCOME:
Loans........................................................................... $735 $769
Mortgage-backed securities...................................................... 11 19
Collateralized mortgage obligations............................................. 85 85
Investments and interest bearing deposits....................................... 68 82
FHLB stock dividends............................................................ 14 13
---- ----
Total...................................................................... $913 $968
==== ====
INTEREST EXPENSE:
Deposits........................................................................ $397 $363
Borrowed money and capitalized leases........................................... 201 205
---- ----
Total...................................................................... 598 568
Net interest income before provision for loan losses............................ 315 400
Provision for loan losses............................................................ 9 --
---- ----
Net interest income after provision for loan losses............................. $306 $400
==== ====
OTHER INCOME:
Service fee income.............................................................. $ 33 $ 36
Gain on sale of loans........................................................... 21 27
Gain on sale of investments..................................................... -- --
---- ----
Total...................................................................... $ 54 $ 63
==== ====
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and employee benefits.............................................. $162 $162
Occupancy and equipment......................................................... 55 52
Federal insurance premium....................................................... 5 5
Franchise taxes................................................................. 21 19
Other expenses.................................................................. 130 126
---- -----
Total...................................................................... 373 364
Income (loss) before provision for income taxes................................. (13) 99
Provision (credit) for income taxes.................................................. (3) 34
---- -----
Net income (loss)............................................................... $(10) $ 65
==== =====
Basic earnings (loss) per share...................................................... $(0.03) $0.18
==== =====
Diluted earnings (loss) per share.................................................... $(0.03) $0.17
==== =====
</TABLE>
4
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<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
MARCH 31, 1999
FOR THE THREE MONTHS ENDED
MARCH 31,
----------------------------------------
1999 1998
----------------- -----------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income(loss)................................................................. $ (10) $ 65
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation and amortization.................................................. 40 17
Provision (credit) for losses on loans......................................... 9 --
Amortization of deferred loan fees............................................. (1) (4)
Deferred loan origination fees (cost).......................................... (31) 2
FHLB stock dividends........................................................... (14) (13)
Gain on sale of loans.......................................................... (21) (27)
Amortization of stock incentive plan award..................................... 6 6
ESOP expense, net of tax benefit............................................... 17 17
Effect of change in operating assets and liabilities:
Accrued interest receivable................................................. (6) 12
Prepaid expenses............................................................ (108) (64)
Advances by borrowers for taxes and insurance............................... (26) (38)
Accrued expenses............................................................ 178 26
Accrued federal income taxes................................................ (3) (12)
Deferred federal income taxes............................................... (6) 8
-------- ------
Net cash provided (used) by operating activities.......................... 24 (5)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions................................................. (6) (11)
Repayments of mortgage-backed securities......................................... 83 15
Purchase of certificates of deposits............................................. (3) (2)
Loan disbursements............................................................... (11,080) (4,692)
Loan principal repayments........................................................ 3,739 4,228
Proceeds from sale of mortgage loans............................................. 1,260 2,072
Purchase of FHLB stock........................................................... -- (142)
Purchase of investments - HTM.................................................... -- (384)
Purchase of investments - AFS.................................................... -- (1,131)
Maturity on investments - HTM.................................................... 701 --
Maturity of investments - AFS.................................................... 500 900
-------- --------
Net cash used by investing activities.......................................... (4,806) 853
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits.............................................. 3,343 (1,266)
Borrowings from FHLB............................................................. 700 3,200
Repayments of FHLB advances...................................................... (870) (153)
Purchase Treasury Stock.......................................................... -- (63)
Reissue Treasury Stock........................................................... 4 --
Dividends paid................................................................... (20) (20)
-------- ----------
Net cash provided by financing activities...................................... 3,157 1,698
-------- -------
Increase (decrease) in cash and cash equivalents.................................... (1,625) 2,546
Cash and cash equivalents at beginning of period.................................... 2,350 664
-------- -----
Cash and cash equivalents at end of period.......................................... $ 725 $3,210
======== ======
SUPPLEMENTAL DISCLOSURE:
Cash paid for:
Interest expense............................................................... $582 $549
Income taxes................................................................... 25 45
</TABLE>
5
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LENOX BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1. Principles of Consolidation
---------------------------
The consolidated unaudited financial statements include the accounts of
Lenox Bancorp, Inc. ("Lenox" or the "Company") and its wholly-owned subsidiary
Lenox Savings Bank (the "Bank"). All significant intercompany transactions have
been eliminated in consolidation. The investment in the Bank on Lenox's
financial statements is carried at the parent company's equity in the underlying
net assets.
The consolidated balance sheet as of March 31, 1999, and the related
consolidated statement of income, cash flows and changes in stockholders' equity
for the three months ending March 31, 1999, and 1998 are unaudited. In the
opinion of management, all adjustments necessary for a fair presentation of such
financial statements have been included. Such adjustments consisted of normal
recurring items. Interim results are not necessarily indicated of results for a
full year.
The financial statements and notes are presented as permitted by Form
10-QSB. The interim statements are unaudited and should be read in conjunction
with the financial statements and notes thereto contained in the Bank's annual
report for the year ended December 31, 1998.
2. Earnings Per Share
------------------
The net loss for the three months ended March 31, 1999, was .03 per
share or $10,000 on an average of 364,887 shares, compared to net income for the
quarter ending March 31, 1998, of $65,000 or $.18 per share.
6
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following analysis discusses changes in the financial condition and
results of operations at and for the three months ended March 31, 1999, and
should be read in conjunction with the Bank's Consolidated Financial Statements
and the notes thereto, appearing in Part I, Item 1 of this document.
FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. The Company intends such
forward-looking statements to be covered by the safe harbor provisions for
forward-looking statements contained in the Private Securities Reform Act of
1995, and is including this statement for purposes of these safe harbor
provisions. Forward-looking statements, which are based on certain assumptions
and describe future plans, strategies and expectations of the Company, are
generally identified by use of the words "believe," "expect," "intend,"
"anticipate," "estimate," "project," or similar expressions. The Company's
ability to predict results or the actual effect of future plans or strategies is
inherently uncertain. Factors which could have a material adverse effect on the
operations of the Company and the subsidiaries include, but are not limited to,
changes in: interest rates, general economic conditions, legislative/regulatory
changes, monetary and fiscal policies of the U.S. Government, including policies
of the U.S. Treasury and the Federal Reserve Board, the quality or composition
of the loan or investment portfolios, demand for loan products, deposit flows,
competition, demand for financial services in the Company's market area and
accounting principles and guidelines. These risks and uncertainties should be
considered in evaluating forward-looking statements and undue reliance should
not be placed on such statements. Further information concerning the Company and
its business, including additional factors that could materially affect the
Company's financial results, is included in the Company's filings with the
Securities and Exchange Commission.
The Company does not undertake -- and specifically disclaims any
obligation -- to publicly release the result of any revisions which may be made
to any forward-looking statements to reflect events or circumstances after the
date of such statements or to reflect the occurrence of anticipated or
unanticipated events.
MANAGEMENT STRATEGY
The Bank's current strategic plan is to enhance its long-term
profitability, reduce the level of interest rate risk and improve market share.
Management is committed to achieving a substantial increase in the Bank's return
on equity within the next three years. Improving earnings and reducing capital
levels are two important steps toward meeting this objective. Reducing capital
levels will be achieved through the Company's repurchase program and continued
focus on asset growth. Asset growth has increased 23% since the Bank's
conversion
7
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from mutual to stock form in 1996 and asset growth is expected to improve
through more aggressive loan production. Special loan programs designed for the
Bank's niche market with Procter & Gamble employees, expanding the loan
portfolio to include multi-family lending and the opportunity to attract new
customers through the Bank's new branch are three major components of planned
growth. The Bank also intends to enhance profitability by continuing to seek
means of increasing non-interest income through the generation of transaction
fees, commissions and participation in the secondary market. Finally, the Bank
intends to continue to seek to reduce costs. Management is committed to its goal
of enhancing shareholder value through improving profitability, reducing
interest rate risk and increasing market share and believes that the actions it
has taken to date and its future strategic plans will enhance the long-term
profitability of the Company.
COMPARISON OF FINANCIAL CONDITION AT MARCH 31, 1999 AND DECEMBER 31, 1998
ASSETS. Total assets increased by $3.3 million or 6.0% to $58.4 million
at March 31, 1999, from $55.1 million at December 31, 1998. This increase was
due to a $6.1 million, or 15.9%, increase in loans receivable from $38.5 million
at December 31, 1998, to $44.7 million at March 31, 1999, primarily due to
increased originations of one- to-four family mortgage loans. Prepaid expenses
also increased $108,000, or 68.9%, from $157,000 at December 31, 1998 to
$265,000 at March 31, 1999. These increases were partially offset by a $1.6
million decrease in cash and due from banks, as the cash was used to finance the
loans made. In addition, mortgage-backed securities decreased and investment
securities collectively decreased $608,000, or 14.8%, to $3.5 million at March
31, 1999 from $4.1 million at December 31, 1998, due to principal payments on
the mortgage-backed securities totalling $89,000 and $519,000 in investment
securities being called. Also affecting total assets was the decrease in
Collateralized Mortgage Obligations, ("CMO's") of $724,000, or 8.9%, to $7.4
million at March 31, 1999 from $8.1 million at December 31, 1998 due to
prepayments on the mortgages underlying the CMOs.
LIABILITIES. Total liabilities increased by $3.3 million or 6.9%, from
$47.9 million at December 31, 1998 to $51.3 million at March 31, 1999, primarily
due to an increase in deposits of $3.3 million, or 10.1%, from $33.1 million at
December 31, 1998 to $36.4 million at March 31, 1999. The increase in deposits
was primarily due to a $3.4 million increase in certificates of deposits to
$26.5 million at March 31, 1999 from $23.1 million at March 31, 1998, resulting
from an aggressive approach by management to attract deposits for loan demand
through increased advertising and higher rates. Savings and other accounts also
increased $253,000 to $5.4 million at March 31, 1999 from $5.1 million at
December 31, 1999. These increases in certificates of deposit were partially
offset by a reduction of $283,000 in money market and NOW accounts from $4.8
million at December 31, 1998 to $4.5 million at March 31, 1999. Accrued expenses
also increased $178,000, to $339,000 at March 31, 1999, from $161,000 at
December 31, 1998. The increases in liabilities were offset by a reduction in
advances from the FHLB of $170,000, or 1.2%, from $14.4 million at December 31,
1998 to $14.3 million at March 31, 1999 as the increase in deposits lowered the
need for such advances.
8
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STOCKHOLDERS' EQUITY. Stockholders' equity decreased $33,000, or 0.5%,
from $7.15 million at December 31, 1998 to $7.11 million at March 31, 1999. The
decrease was a combination of a net loss of $10,000, an unrealized gain on
securities available for sale of $13,000 net of tax and the payment of a
dividend.
LIQUIDITY AND CAPITAL RESOURCES. The Company's primary sources of funds
are deposits, FHLB advances, principal and interest payments on loans and loan
sales in the secondary market. While maturities and scheduled amortization of
loans are predictable sources of funds, deposit flow and mortgage prepayments
are strongly influenced by changes in general interest rates, economic
conditions and competition.
The primary investment activity of the Company for the three months
ended March 31, 1999, was the origination of mortgage and consumer loans in the
amount of $11.1 million. The most significant source of funds for the three
months ended March 31, 1999, was the repayment of mortgage loans totaling $3.7
million.
The Bank is required to maintain a minimum level of liquidity (net cash,
short term and marketable assets divided by total withdrawable deposits and
short term liabilities), as defined by the Federal Deposit Insurance Corporation
("FDIC"). The Bank's liquidity at March 31, 1999, was 16.6%. The Bank's most
liquid assets are cash, federal funds sold, and marketable securities. The
levels of the Bank's liquid assets are dependent on the Bank's operation,
financing, lending and investing activities during any given period. At March
31, 1999, assets qualifying for short term liquidity, including cash and short
term investment, totaled $6.7 million.
At March 31, 1999, the Bank's capital exceeded all the capital
requirements of the FDIC. The Bank's Tier 1 leverage and total capital to
risk-weighted capital ratios were 10.9% and 21.9%, respectively.
For the three months ended March 31, 1999 and 1998, the Company had a
comprehensive loss of $23,000 and comprehensive income of $78,000, respectively.
The difference between net income and comprehensive income consists solely
of the effect of unrealized gain and losses, net of taxes, on available for sale
securities.
COMPARISON OF RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999
AND 1998
GENERAL. The Company reported a net loss of $10,000 for the three months
ended March 31, 1999, which represents a $75,000 decrease from $65,000 of net
income reported for the three months ended March 31, 1998. This decrease was
attributable to a sharp decrease in the Bank's net interest margin as the Bank
was unable to fully invest the increase in deposits the Bank had attracted until
late in the quarter. Additionally, the prepayment of mortgages underlying a
portion of the Company's CMO portfolio resulted in the Bank having to write off
premiums totaling approximately $26,000. The Bank, however, expects to receive
discounts on
9
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additional CMOs in the portfolio over the remainder of fiscal 1999 that will
offset the premium amortization it experienced this quarter.
INTEREST INCOME AND DIVIDEND INCOME. Interest income and dividend income
for the three months ended March 31, 1999 was $913,000 compared to $968,000 for
the three months ended March 31, 1998, a decrease of $55,000, or 5.7%. The
primary reason for the decrease was a $34,000, or 4.4 %, decrease in interest
earned on loans to $735,000 for the three months ended March 31, 1999 from
$769,000 for the three months ended March 31, 1998, due to a 69 basis point
decrease in the average yield from 7.96% for the period ending March 31, 1998 to
7.27% for the period ending March 31, 1999. Also contributing to the decrease
was a $14,000, or 17.1%, decrease in investment interest from $82,000 for the
three months ended March 31, 1998 to $68,000 for the same period ended March
31, 1999, due to a decrease in the investment portfolio and the yield thereon.
Interest income on CMOs for the three months ended March 31, 1999, and March
31, 1998, was $85,000, however, the average balance for the three months ended
March 31, 1999, was $7.6 million compared to $5.5 million for the same period
ended March 31, 1998, reflecting the premium amortization on prepayments.
INTEREST EXPENSE. Interest expense for the three months ended March 31,
1999, was $598,000 compared to $568,000 for the three months ended March 31,
1998, an increase of $30,000, or 5.3%, primarily due to a $34,000 or 9.4%
increase in interest expense on deposits from $397,000 for the three months
ended March 31, 1999 to $363,000 for the three months ended March 31, 1998. The
increase was due to higher average deposits. This increase was offset by a
$4,000, or 2.0%, decrease in interest expense on borrowed money from $205,000
for the three months ended March 31, 1998 compared to $201,000 for the three
months ended March 31, 1999. The decrease was due to a decrease in outstanding
FHLB advances for the period ending March 31, 1999, compared
to the period ended March 31, 1998.
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES. Net interest income
after provision for loan losses decreased $94,000, or 23.5%, for the three
months ended March 31, 1999 to $306,000 from $400,000 for the three months ended
March 31, 1998. Such decrease included a $9,000 provision for loan losses for
the three months ended March 31, 1999, due to an increased loan portfolio.
There were no provision for the three months ended March 31, 1998.
OTHER INCOME. Other income decreased $9,000, or 14.3%, for the three
months ended March 31, 1999 to $54,000 from $63,000 for March 31, 1998. This
decrease was primarily due to a 22.2% decrease in the gain on the sale of loans
for the three months ended March 31, 1999 from $27,000 to $21,000 for the same
period ended March 31, 1998. During the three months ended March 31, 1999, the
bank sold $1.3 million of loans in the secondary market compared to $2.1 million
for the three months ended March 31, 1998. Service fee income decreased $3,000,
or 8.3%, from $36,000 for the three months ended March 31, 1998 to $33,000 for
the three months ended March 31, 1999.
10
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GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the three months ended March 31, 1999, were $373,000 compared to $364,000
for the three months ended March 31, 1998, an increase of $9,000, or 2.5%. This
reflected a slight increase in occupancy and equipment cost for the three months
ended March 31, 1999 to $55,000 from $52,000 for the three months ended March
31, 1998, and an increase in other expenses to $130,000 for the three months
ended March 31, 1999, from $126,000 for the three months ended March 31, 1998,
an increase of $4,000, or 3.2%.
INCOME TAXES. The Company received a tax credit of $3,000 for the three
months ended March 31, 1999, compared to a tax of $37,000 for the three months
ending March 31, 1998, because of a reduction in pre-taxed earnings. Net income
before the tax provision was $99,000 for the three months ended March 31, 1998,
compared to a loss of $13,000 for the same period ended March 31, 1999.
YEAR 2000 COMPLIANCE
Many existing computer programs use only two digits to identify a year
in the date field. These programs were designed without considering the impact
of the upcoming change in the century. If not corrected, many computer
applications and systems could fail or create erroneous results by or at the
"Year 2000." The Bank primarily utilizes a third party vendor and such vendor's
proprietary software to process its electronic data. The third party data
processor vendor has modified, upgraded or replaced its computer software
applications and systems as necessary to accommodate the Year 2000 dating
changes necessary to permit correct recording of year dates for 2000 or later
years. The third party vendors also have engaged various consultants to review
its Year 2000 issues and has implemented a Year 2000 compliance program. The
Bank has also implemented its Year 2000 plan and completed the testing of its
internal system for compliance. The Bank has a representation from its primary
third party data processing vendor that the vendor has completed all of the Year
2000 problems in its software and is Year 2000 compliant.
The Bank's operations may also be affected by the Year 2000 compliance
of its significant suppliers and other vendors, including those vendors that
provide non-informational and technology systems. In the event that the Bank's
significant suppliers or other vendors prove not to be Year 2000 compliant, the
Bank has prepared a contingency plan in the event there are any system
interruptions. As part of the contingency plan, the Bank intends to engage
alternative vendors if its current suppliers or venders fail to meet Year 2000
operating requirements. There can be no assurance, however, that such plan or
the performances by any of the Bank's suppliers will be effective to remedy all
potential problems.
The Company has upgraded its technology system in addition to
implementing its Year 2000 policy. The Bank has held that the cost arising from
Year 2000 issues will not materially impact the institution, and as March 31,
1999, the Bank has incurred cost of approximately $15,000. While the Bank's
testing has been completed, additional costs may be incurred in connection with
the education of the Bank's customers about the Year 2000 issue.
11
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RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the FASB issued SFAS No. 131, "Disclosure about Segments
of an Enterprise and Related Information." SFAS No. 131 significantly changes
the way that public business enterprises report information about operating
segments in annual and interim financial statements issued to shareholders. SFAS
No. 131 uses a "management approach" to disclose financial and descriptive
information about an enterprise's reportable operating segments which is based
on management's method for making operating decisions and assessing
performances. SFAS No. 131 is effective for financial statements for periods
beginning after December 15, 1997. There was no effect from the adoption of this
pronouncement.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which establishes for derivative
instruments, including derivative instruments imbedded in other contracts, and
for hedging activities. It requires that an entire recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133 is affective for all fiscal
quarters of fiscal years beginning after June 15, 1999. Management is currently
assessing the impact that the adoption of this standard will have on the
Company's financial statement.
12
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PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
The Company is not involved in any pending legal proceedings other than
routine legal proceedings occurring in the ordinary course of business. Such
routine legal proceedings, in the aggregate, are believed by management to be
immaterial to the Company's financial condition or results of operation.
Item 2. Changes in Securities and Use of Proceeds.
-----------------------------------------
None.
Item 3. Defaults Upon Senior Securities.
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders.
---------------------------------------------------
On May 7, 1999, the Company held its annual meeting of stockholders for
the purpose of the election of Directors to three-year terms, the ratification
of Clark, Schaefer, Hackett & Company as the Company's independent auditors and
to consider and vote upon a stockholder proposal. The number of votes cast at
the meeting as to each matter to be acted upon was as follows:
<TABLE>
<CAPTION>
NUMBER OF VOTES NUMBER OF VOTES
ELECTION OF DIRECTORS FOR WITHHELD
- ----------------------- ------------------- -------------------
<S> <C> <C>
Virginia M. Deisch....................... 220,953 71,662
Gail R. Behymer.......................... 220,953 71,662
Reba St. Clair........................... 219,953 72,662
John E. Imbus............................ 69,800 --
Norman L. Stammer........................ 69,800 --
Stephen C. Ginn.......................... 69,800 --
</TABLE>
The Directors whose terms continued and the years their terms expire are
as follows: Richard C. Harmeyer (2000), Robert R. Keller (2000), Curtis L.
Jackson (2000), Henry E. Brown (2001) and John C. Lame (2001).
13
<PAGE> 14
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF
VOTES VOTES VOTES
FOR AGAINST ABSTAIN
---------------- ----------------- -----------------
<S> <C> <C> <C>
2. Ratification of Clark, Schaefer,
Hacket & Company as the Company's
Independent Auditors............... 293,240 50,400 18,775
</TABLE>
<TABLE>
<CAPTION>
NO. OF NO. OF NO. OF BROKER
VOTES VOTES VOTES NON-
FOR AGAINST ABSTAIN VOTES
----------- ------------- ------------ ---------
<S> <C> <C> <C> <C>
3. Stockholder proposal that the
Board of Directors take all
reasonable steps to maximize
stockholder value including sale
or merger of the Company........... 158,480 166,760 695 36,480
</TABLE>
Item 5. Other Information.
-----------------
None.
Item 6. Exhibits and Reports on Form 8-K (ss.249.308 of this Chapter).
-------------------------------------------------------------
(a)Exhibits
3.1 Amended Articles of Incorporation of Lenox Bancorp, Inc.*
3.2 Amended and Restated Code of Regulations of Lenox Bancorp,
Inc.*
11.0 Statement re: Computation of Per Share Earnings
27.0 Financial Data Schedule
(b)Reports on Form 8-K
None.
- ----------------------
* Incorporated herein by reference to the Company's Form 10-KSB, filed on March
25, 1998.
14
<PAGE> 15
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
LENOX BANCORP, INC.
Dated: May 14, 1999 By: /s/ Virginia M. Deisch
---------------------------------------
Virginia M. Deisch
President and Chief Executive Officer
(principal executive officer)
Dated: May 14, 1999 By: /s/ Michael P. Cooper
---------------------------------------
Michael P. Cooper
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
15
<PAGE> 16
EXHIBIT INDEX
Pages
-----
11.0 Statement re: Computation of Per Share Earnings.....................17
27.0 Financial Data Schedule (submitted only with electronic filing)... _
16
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 11.0
COMPUTATION OF PER SHARE EARNINGS
THREE MONTHS ENDED
MARCH 31,
---------------------------------------
1999 1998
----------------- -----------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Net income................................................................. $ (10) $ 65
---------- ---------
Average shares outstanding................................................. 365 398
--------- ---------
Per share amount........................................................... $ (0.03) $ 0.16
========= =========
Net income................................................................. $ (10) $ 65
--------- ---------
Average shares outstanding................................................. 365 398
Net effect of dilutive stock options based on the treasury stock
method using the average market price or quarter end price,
whichever is greater.................................................. 12 --
--------- ---------
Total shares outstanding......................................... 377 398
--------- ---------
Per share amount........................................................... $ (0.03) $ 0.16
========= =========
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS OF LENOX BANCORP, INC. FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001000050
<NAME> Lenox Bancorp, Inc.
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1
<CASH> 725
<INT-BEARING-DEPOSITS> 186
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 5,679
<INVESTMENTS-CARRYING> 5,199
<INVESTMENTS-MARKET> 5,296
<LOANS> 44,722
<ALLOWANCE> 72
<TOTAL-ASSETS> 58,375
<DEPOSITS> 36,410
<SHORT-TERM> 4,112
<LIABILITIES-OTHER> 581
<LONG-TERM> 10,158
0
0
<COMMON> 0
<OTHER-SE> 7,114
<TOTAL-LIABILITIES-AND-EQUITY> 58,375
<INTEREST-LOAN> 735
<INTEREST-INVEST> 178
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 913
<INTEREST-DEPOSIT> 397
<INTEREST-EXPENSE> 598
<INTEREST-INCOME-NET> 315
<LOAN-LOSSES> 9
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 373
<INCOME-PRETAX> (13)
<INCOME-PRE-EXTRAORDINARY> (13)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10)
<EPS-PRIMARY> (.03)
<EPS-DILUTED> (.03)
<YIELD-ACTUAL> 6.62
<LOANS-NON> 0
<LOANS-PAST> 99
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 2
<ALLOWANCE-OPEN> 66
<CHARGE-OFFS> 5
<RECOVERIES> 1
<ALLOWANCE-CLOSE> 72
<ALLOWANCE-DOMESTIC> 0
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 72
</TABLE>
