<PAGE> 1
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 September 30, 2000
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 Identification No.)
incorporation or organization)
4730 Montgomery Road, Norwood, Ohio 45212
(Address of principal executive offices) (Zip Code)
(513) 531-8655
(Issuer's telephone number)
Not Applicable
(Former name, former address and former fiscal year,
if changes since last report)
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: 285,028 shares of common stock,
par value $0.01 per share, were outstanding as of November 13, 2000.
Transitional Small Business Disclosure Format (check one): Yes No X
---- -----
<PAGE> 2
LENOX BANCORP, INC.
FORM 10-QSB
FOR THE QUARTER ENDED SEPTEMBER 30, 2000
INDEX
Page
----
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements-Unaudited
Consolidated Balance Sheets at
September 30, 2000 and December 31, 1999........................ 3
Consolidated Statements of Income - For the Three and Nine
Months Ended September 30, 2000 and 1999........................ 4
Consolidated Statements of Cash Flows - For the
Nine Months Ended September 30, 2000 and 1999................... 5
Notes to Unaudited Consolidated Financial Statements............ 6
Item 2. Management's Discussion and Analysis or Plan of Operation....... 7
PART II: OTHER INFORMATION
Item 1. Legal Proceedings..............................................12
Item 2. Changes in Securities..........................................12
Item 3. Defaults Upon Senior Securities................................12
Item 4. Submission of Matters to a Vote of Security Holders............12
Item 5. Other Information..............................................12
Item 6. Exhibits and Reports on Form 8-K...............................13
SIGNATURES
2
<PAGE> 3
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION
LENOX BANCORP, INC.
Item 1. FINANCIAL STATEMENTS.
LENOX BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
AT AT
SEPTEMBER 30, DECEMBER 31,
2000 1999
--------------- --------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Cash and due from banks......................................................... $ 1,115 $ 738
Certificates of deposit......................................................... 97 193
Investment securities - available for sale, at fair value (amortized cost
of $2,700 and $2,702 at September 30, 2000 and December 31, 1999)............ 2,566 2,535
Mortgage-backed securities - available for sale, at fair value (amortized
cost of $528 and $602 at September 30, 2000 and December 31, 1999)........... 518 588
Collateralized mortgage obligations - available for sale, at fair value
(amortized cost of $4,158 and $4,114 at September 30, 2000 and December 31, 1999) 4,051 4,171
-------- ---------
Total investment securities.................................................. 7,135 7,294
Loans receivable, net........................................................... 58,529 59,434
Loans held for sale - at lower of cost or market................................ -- 5,611
Accrued interest receivable:
Loans.................................................................. 429 361
Mortgage-backed securities............................................. 4 4
Collateralized mortgage obligations.................................... 26 23
Investments and certificates of deposit................................ 36 50
Property and equipment, net..................................................... 1,305 399
Federal Home Loan Bank stock - at cost.......................................... 1,732 1,583
Prepaid expenses and other assets............................................... 517 217
Deferred Federal income tax benefit............................................. -- --
Prepaid federal income taxes.................................................... 20 77
-------- ---------
Total assets.................................................. $ 70,945 $ 75,984
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES:
DEPOSITS:
Savings, club and other accounts....................................... $ 7,710 $ 5,129
Money market and NOW accounts.......................................... 4,256 5,050
Certificate accounts................................................... 25,147 29,257
-------- ---------
Total deposits................................................ 37,113 39,436
Advances from Federal Home Loan Bank......................................... 28,246 31,139
Advance payments by borrowers for taxes and insurance........................ 144 265
Accrued expenses............................................................. 735 309
Accrued federal income taxes................................................. -- --
Deferred federal income taxes................................................ 3 55
-------- ---------
Total liabilities............................................. $ 66,241 $ 71,204
======== =========
STOCKHOLDERS' EQUITY:
Common stock - no par value: 2,000,000 authorized, 425,677 issued
and 285,028 outstanding at September 30, 2000 and at December 31, 1999.... $ -- $ --
Additional paid in capital................................................... 3,777 3,776
Retained earnings - substantially restricted................................. 4,073 4,108
Unearned ESOP shares......................................................... (208) (208)
Shares acquired for Stock Incentive Plan..................................... (201) (217)
Treasury stock 140,649 shares at September 30, 2000 and December 31, 1999.... (2,567) (2,567)
Unrealized loss on available for sale securities, net of taxes............... (168) (112)
-------- ---------
Total stockholders' equity.................................... 4,705 4,780
-------- ---------
Total liabilities and stockholders' equity................................... $ 70,945 $ 75,984
======== =========
</TABLE>
3
<PAGE> 4
<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF INCOME
THREE MONTHS ENDED NINE MONTHS ENDED
JUNE 30, SEPTEMBER 30,
----------------------- -----------------------
2000 1999 2000 1999
---------- --------- --------- ----------
(UNAUDITED)
(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
INTEREST INCOME AND DIVIDEND INCOME:
Loans...................................................... $1,196 $1,030 $3,564 $2,655
Mortgage-backed securities................................. 10 12 28 34
Collateralized mortgage obligations........................ 77 83 219 249
Investments and interest bearing deposits.................. 46 47 140 161
FHLB stock dividends....................................... 32 24 90 54
--------- --------- --------- ---------
Total.................................................. 1,361 1,196 4,041 3,153
INTEREST EXPENSE:
Deposits................................................... 461 442 1,370 1,261
Borrowed money............................................. 529 368 1,496 805
-------- -------- ------- --------
Total.................................................. 990 810 2,866 2,066
Net interest income before provision for loan losses....... 371 386 1,175 1,087
Provision for loan losses....................................... 9 10 41 28
-------- --------- --------- ---------
Net interest income after provision for loan losses........ 362 376 1,134 1,059
OTHER INCOME:
Service fee income......................................... 38 42 116 102
Loss on sale of assets..................................... -- (18) -- --
Gain on sale of loans and investments.................... (12) 32 11 79
Mortgage corporation operations............................ 30 -- 155 5
-------- --------- -------- ----------
Total.................................................. 56 56 282 186
GENERAL AND ADMINISTRATIVE EXPENSES:
Compensation and employee benefits......................... 216 170 651 497
Occupancy and equipment.................................... 59 187 169 295
Federal insurance premiums................................. 5 5 9 15
Franchise taxes............................................ 14 17 43 62
Other expenses............................................. 183 162 589 447
-------- -------- -------- --------
Total.................................................. 477 541 1,461 1,316
Loss before credit for income taxes........................ (59) (109) (45) (71)
Credit for income taxes......................................... (17) (35) (10) (18)
---- ---- ---- ----
Net loss................................................... $(42) $(74) $(35) $(53)
==== ==== ==== ====
Basic loss per share............................................ $(0.15) $(0.30) $(0.10) $(0.17)
====== ====== ====== ======
Diluted loss per share.......................................... $(0.15) $(0.30) $(0.10) $(0.17)
====== ====== ====== ======
</TABLE>
4
<PAGE> 5
<TABLE>
<CAPTION>
LENOX BANCORP, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED
SEPTEMBER 30,
----------------------------------
2000 1999
-------------- ---------------
(UNAUDITED)
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss............................................................... $ (35) $ (53)
Adjustments to reconcile net income to net cash provided (used)
by operating activities:
Depreciation and amortization........................................ 55 222
Provision for losses on loans........................................ 41 28
Amortization of deferred loan (fees) costs........................... 47 (9)
Deferred loan origination fees (costs)............................... (39) (79)
FHLB stock dividends................................................. (90) (54)
Loss on sale of investments.......................................... -- (5)
Loss on sale of loans................................................ (111) (80)
Amortization of stock incentive plan award........................... 15 19
ESOP expense, net of tax benefit..................................... -- 50
Effect of change in operating assets and liabilities:
Accrued interest receivable........................................ (57) (110)
Prepaid expenses................................................... (300) (165)
Prepaid federal income tax......................................... 35 --
Advances by borrowers for taxes and insurance...................... (121) 12
Accrued expenses................................................... 426 33
Accrued federal income taxes....................................... -- (68)
Deferred federal income taxes...................................... -- (41)
------- -------
Net cash provided (used) by operating activities................. (134) (300)
CASH FLOWS FROM INVESTING ACTIVITIES:
Property and equipment additions....................................... (955) (66)
Repayments of mortgage-backed securities............................... 67 160
Purchase of certificates of deposits................................... (4) (8)
Maturity of certificate of deposits.................................... 100 --
Net change in loans.................................................... 6,578 (27,463)
Proceeds from sale of investments..................................... -- 2,348
Proceeds from sale of mortgage loans................................... -- 5,997
Purchase of FHLB stock................................................. (59) (567)
Maturity of investments - held-to-maturity............................. -- 1,337
Maturity of investments - available-for-sale........................... -- 867
------- -------
Net cash provided (used) by investing activities..................... 5,727 (17,395)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net increase (decrease) in deposits.................................... (2,323) 6,200
Borrowings from FHLB................................................... 14,950 21,000
Repayments of FHLB advances............................................ (17,843) (8,387)
Purchase of Treasury Stock............................................. -- (2,223)
Reissue Treasury Stock................................................. -- 4
Dividends paid......................................................... -- (49)
------- -------
Net cash provided (used) by financing activities..................... (5,216) 16,545
------- -------
Increase (decrease) in cash and cash equivalents.......................... 377 (1,150)
------- -------
Cash and cash equivalents at beginning of period.......................... 738 2,350
------- -------
Cash and cash equivalents at end of period................................ $ 1,115 $ 1,200
======= =======
SUPPLEMENTAL DISCLOSURE:
Cash paid for:
Interest expense..................................................... $2,868 $2,026
Income taxes......................................................... -- 51
</TABLE>
5
<PAGE> 6
LENOX BANCORP, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999
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"), which includes Lenox Mortgage Corporation. 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 September 30, 2000 and the related
consolidated statement of income, cash flows and changes in stockholders' equity
for the three and nine months ending September 30, 2000 and 1999 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, 1999.
2. Conversion to Capital Stock Form of Ownership
---------------------------------------------
The Board of Directors of Lenox Savings Bank adopted a plan of conversion,
pursuant to which the Bank converted from an Ohio-chartered mutual savings bank
to an Ohio-chartered capital stock savings bank, with the concurrent formation
of the holding company, Lenox Bancorp, Inc. On July 17, 1996, the conversion
from the mutual to stock form was finalized. Lenox was capitalized through the
initial sale of 425,677 shares of common stock to eligible account holders, an
employee benefit plan of the Bank, supplemental eligible account holders, other
members of the Bank and the general public. Lenox then used a portion of the
proceeds from the sale to purchase all of the outstanding shares of the Bank.
This transaction was accounted for in a manner similar to the pooling of
interest method.
The Bank may not declare or pay cash dividends on or repurchase any of its
shares of common stock if the effect thereof would cause equity to be reduced
below applicable regulatory capital maintenance requirements or if such
declaration and payment would otherwise violate regulatory requirements.
3. Earnings Per Share
------------------
The Company reported a net loss for the three months ended September 30,
2000 of $0.15 per share, or $42,000, on an average of 285,028 shares, compared
to a loss for the quarter ending September 30, 1999 of $35,000, or $0.30, per
share on an average of 285,028 shares. The
6
<PAGE> 7
Company reported a loss for the nine months ending September 30, 2000 of
$35,000, or $0.10 per share, on an average of 285,028 shares compared to
$53,000, or $0.17 per share, on an average of 285,028 shares for the nine months
ended September 30, 1999. At present, there is no difference between the average
shares outstanding for the computation of basic and dilutive earnings per share
as options have a dilutive effect only when the average market price of the
common stock exceeds the exercise price of the options.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION
The following analysis discusses changes in the financial condition and
results of operations at and for the nine months ended September 30, 2000, 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.
7
<PAGE> 8
COMPARISON OF FINANCIAL CONDITION AT SEPTEMBER 30, 2000 AND DECEMBER 31, 1999
ASSETS. Total assets decreased by $5.0 million or 6.6% to $70.9 million at
September 30, 2000, from $76.0 million at December 31, 1999. This decrease was
due to a $6.5 million, or 10.02% decrease in loans receivable from $65.0 million
at December 31, 1999, to $58.5 million at September 30, 2000. This decrease in
loans was due predominately to a sale of loans approximating $5.0 million on
August 31, 2000 and the remainder of the decrease has been determined to a
general reduction in loan demand driven by higher market interest rates. The
decrease in loans just mentioned was partially offset by an increase in property
and equipment of $906,000 or 227.1% due to new corporate facilities. Prepaid
expenses and other assets also increased $300,000 or 138.2% from $217,000 at
December 31, 1999, to $517,000 at September 30, 2000, resulting from an increase
in prepaid and other assets which include mortgage loan servicing rights. Cash
and due from banks increased $377,000 to $1.1 million at September 30, 2000 from
$738,000 at December 31, 1999 as funds from the sale of loans were held in
interest bearing accounts.
LIABILITIES. Total liabilities decreased by $5.0 million or 6.97% from
$71.2 million at December 31, 1999, to $66.2 million at September 30, 2000,
primarily due to an decrease in Federal Home Loan Bank ("FHLB") overnight
variable rate advances of $2.9 million or 9.29% from $31.1 million at December
31, 1999, to $28.2 million at September 30, 2000 and a decrease in deposits by
$2.3 million or 5.89% from $39.4 million at December 31, 1999, to $37.1 million
at September 30, 2000. The decrease in the FHLB advances was due to using the
proceeds from the sale of loans to pay down the level of advances. The decrease
in deposits was primarily due to a $4.9 million decrease in certificates of
deposits, money market and NOW accounts to $29.4 million at September 30, 2000,
from $34.7 million at December 31, 1999. This decrease was due to customers
utilizing other investment vehicles with other institutions with higher rates as
the bank has been focusing on other lower cost funding sources. Savings, club
and other accounts increased $2.6 million or 50.3% to $7.7 million at September
30, 2000, from $5.1 million at December 31, 1999, due primarily to a savings
plan the bank offers with very competitive interest rates.
STOCKHOLDERS' EQUITY. Stockholders' equity decreased by $75,000 or 1.6%
from $4.8 million at December 31, 1999, to $4.7 million at September 30, 2000.
Retained earnings decreased $35,000 due to the net loss incurred during the
period while the unrealized loss on available for sale securities increased by
$56,000.
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.
8
<PAGE> 9
The primary investment activity of the Company for the nine months ended
September 30, 2000 was the origination of mortgage and consumer loans. The most
significant sources of funds for the nine months ended September 30, 2000 was
the repayment and sales of mortgage loans, deposit inflows and advances from the
Federal Home Loan Bank.
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
(the "FDIC"). The Bank's liquidity at September 30, 2000 was 1.95%. 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
September 30, 2000 assets qualifying for short term liquidity, including cash
and short term investment, totaled $4.0 million and during the same period of
time the amounts of certificates of deposit scheduled to mature in one year or
less totals $16.1 million. Based upon the Bank's historical experience with
deposit retention, management believes that, although it is not possible to
predict future terms and conditions upon renewal, the bank will be able to
retain most of these deposits as they mature in the next year.
At September 30, 2000, 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 12.29% and 12.60%, respectively.
Comprehensive loss for the nine months ended September 30, 2000 was
$91,000 and $130,000, 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 NINE MONTHS ENDED SEPTEMBER 30, 2000
AND 1999
GENERAL. The Company reported a net loss of $35,000 for the nine months
ending September 30, 2000, which represents a $18,000 increase from the $53,000
of net loss reported for the nine months ended September 30, 1999. The reduction
in net loss for this period compared to the previous period was due to increased
interest earned from the loan portfolio and higher income from the mortgage
corporation operations, offset by higher interest and non-interest expenses,
primarily due to higher market interest rates and more reliance on FHLB
advances.
INTEREST AND DIVIDEND INCOME. Interest and dividend income for the nine
months ended September 30, 2000, was $4.0 million compared to $3.2 million for
the nine months ended September 30, 1999, an increase of $888,000 or 28.2%. The
primary reason for the increase was a $909,000 or 34.2 % increase in interest
earned on loans receivable to $3.6 million for the nine months ended September
30, 2000, from $2.7 million for the nine months ended September 30, 1999, due to
a $13.4 million increase in the average mortgage loans receivable outstanding
9
<PAGE> 10
period to period and an increase in the yield from 7.24% for the period ending
September 30, 1999, to 7.63% for the period ending September 30, 2000. This
increase was due to a combination of the sale of lower yielding mortgage loans
and increasing market interest rates. Other interest and dividend income did not
change materially from the prior nine month period.
INTEREST EXPENSE. Interest expense for the nine months ended September 30,
2000, was $2.9 million compared to $2.1 million for the nine months ended
September 30, 1999, an increase of $800,000 or 38.7% primarily due to a $12.8
million increase in the average balances of interest-bearing liabilities
outstanding period to period. The Bank utilized FHLB advances to fund the asset
growth as the average balance on FHLB advances increased to $31.2 million for
the period ended September 30, 2000 from $19.3 million for the period ended
September 30, 1999, due to higher market interest rates. The Bank also
experienced an increase in the yield on the FHLB advance of 58 basis points due
the increases in market interest rates and the banks' use of short term Federal
Home Loan Bank advance programs. The average balance on deposits decreased by
$964,000, which was offset by an increase in the yield on deposits from 4.59%
for the period ending September 30, 1999 to 4.86% for the period ending
September 30, 2000.
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES. Net interest income
after provision for loan losses increased $75,000 or 7.08% for the nine months
ended September 30, 2000, to $1.13 million from $1.06 million for the nine
months ended September 30, 1999. Such increase was offset by an increase of
$13,000 in the provision for loan losses for the nine months ending September
30, 2000 as compared to the prior period, due to an increase in the loan
portfolio and the inherent risk in lending. The Banks' total loan loss allowance
was $118,000 at September 30, 2000, which represented 0.20% of total loans
outstanding and 32.78% of nonperforming loans compared to an allowance of
$84,000 at September 30, 1999, which represented 0.14% of total loans and
155.56% of nonperforming loans.
OTHER INCOME. Other income increased $96,000 or 51.6% for the nine months
ending September 30, 2000, to $282,000 from $186,000 for September 30, 1999.
This increase was due to the loan sales and fees received by the Mortgage
Corporation, which was fully operational during the three quarters of 2000. The
Mortgage Corporation originates loans to be sold to third parties and to the
Bank.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses
for the nine months ended September 30, 2000, were $1.5 million compared to $1.3
million for the nine months ended September 30, 1999, an increase of $145,000 or
11.0%. The increase in general and administrative expenses was comprised of an
increase of $154,000 in compensation and benefits and an increase of $142,000 in
other expenses, offset by a decrease in occupancy and equipment of $126,000. The
increase in compensation and benefits was due predominately to the additional
expenses relating to the Mortgage Corporation. The increase in other expenses
relate to additional expenses relating to the Mortgage Corporation and higher
professional fees to respond to regulatory and shareholder issues. The decrease
in Occupancy and equipment reflects
10
<PAGE> 11
the additional charges incurred in 1999 to write off leasehold improvements
associated with the former main office of the company.
INCOME TAXES. Income tax credits for the nine months ended September 30,
2000, decreased $8,000 to $10,000 from $18,000 for the three months ending
September 30, 1999, because of the decrease in pretax loss. Net loss before tax
credits was $59,000 for the three months ended September 30, 2000, compared to
$109,000 for the same period ending September 30, 1999.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which established for derivative
instruments, including derivative instruments imbedded in other contracts, and
for hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS No. 133, as amended by SFAS No. 137, is
effective for all fiscal quarters of fiscal years beginning after June 15, 2000.
Management does not believe the adoption of this standard will have an impact on
the Company's financial statement as the Company does not hold any instruments
covered by this standard.
SUPERVISORY AGREEMENT
On August 2, 2000, the Company entered into a Supervisory Agreement with
the Office of Thrift Supervision (the "OTS") that requires, among other things,
the Company to obtain the OTS' prior approval before entering into contracts for
goods and services in excess of $5,000 or making any payments for goods and
services in excess of $2,000 per month. The Company is also restricted in its
ability to borrow money and may not make any changes to its directorate or
executive officer staff unless prior notice has been given to the OTS. The Bank
entered into a Memorandum of Understanding between it, the FDIC and the
Superintendent of Financial Institutions, State of Ohio on February 9, 2000,
which is described in more detail in the Company's Form 10-KSB, Commission File
No. 0-28162, filed with the Securities and Exchange Commission on March 29,
2000.
11
<PAGE> 12
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
-----------------
On June 9, 2000, four stockholders of the Company, including two
members of the Board of Directors and two additional individuals, filed a
complaint for declaratory judgment and preliminary and permanent injunctive
relief against the Company and each of the other three directors individually in
the Court of Common Pleas in Hamilton, Ohio. The plaintiffs allege that four of
the plaintiffs were duly elected to the Board of Directors at the 2000 Annual
Meeting of Stockholders. The plaintiffs seek a declaratory judgment that such
individuals were properly elected and are members of the Board of Directors and
are further attempting to enjoin the Lenox Board of Directors from taking or
approving any action without the participation of such individuals. The Company
in its answer to the complaint has denied the allegations that any board members
were up for election and does not recognize the validity or legal effect of the
nominations of the plaintiffs for director or their election.
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.
----------------------------------------------------
None.
Item 5. Other Information.
-----------------
None.
12
<PAGE> 13
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.
13
<PAGE> 14
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
LENOX BANCORP, INC.
Dated: November 13, 2000 By: /s/ Virginia M. Heitzman
--------------------------------------------
Virginia M. Heitzman
President and Chief Executive Officer
(principal executive officer)
Dated: November 13, 2000 By: /s/ David K. Brown
--------------------------------------------
David K. Brown
Chief Financial Officer and Treasurer
(principal financial and accounting officer)
14
